In a Nutshell
Motivating others is complicated.
The closest we can come to a hard-and-fast rule in the realm of motivation
is that specific, difficult goals lead to higher levels of productivity
than no goals, vague goals, or easy goals. Of course, rewards can also promote productivity, but the rewards have to be (a) appealing
and (b) contingent on performance achievements. When you put together
goals and rewards ... then you've got something!
In This Issue
Bonuses Cause a Morgan Stanley Division Head to Earn More than the CEO
Earlier this year, it was reported that Morgan Stanley's head of world-wide fixed income, foreign exchange and securities, Zoe Cruz, earned $16.1 million dollars during 2003 due in large part to a $7.9 million bonus. Consequently, her total compensation exceeded that of CEO Philip Purcell by about $1 million. Cruz was paid the massive bonus because her division was a major reason for Morgan Stanley's annual profit of $3.8 billion. Although the Morgan Stanley example is somewhat unusual, there is a trend toward a larger percentage of compensation being tied to achievement of performance goals.1
A Framework for
Motivating Your Staff
Debunking
the myth. Don't believe the myth that "a happy worker
is a productive worker." Based on dozens of studies of the relationship
between job satisfaction and job performance that involved thousands of
research subjects, management researchers have concluded that there's virtually
no relationship between a person's job satisfaction and productivity.
In other words, some "happy workers" are productive, but about an equal
number are not!
That's not to say that job
satisfaction and morale don't matter. On the contrary, people with
high levels of job satisfaction are less likely to be absent or quit, and
they are more likely to do things that aren't even in their job descriptions
in order to help the firm.
The point is this: Since
satisfaction and productivity are essentially unrelated, managers cannot
boost the productivity of their staff by simply making them happy.
To motivate your staff, I recommend that you use SMART goals and contingent
rewards that your staff values.
SMART
goals. In general, goals that are specific, measurable,
aligned, reachable, and time-bound lead to the highest levels of performance.
Specific goals actually lead to higher
performance than "do your best" as a goal. Vague goals can cause
inertia or misdirection. Measurable
goals are an alternative to abstract or intangible goals, and they are
normally expressed in numerical terms (i.e., units to produce). Goals
should also be Aligned with the overall
strategy and priorities of the organization in order to avoid conflict
or efforts that are counterproductive to the organization. Goals
should be challenging but Reachable
because they will fail to motivate effort if there's no chance of successfully
achieving them. Finally, a Time
limit for accomplishing goals should also be specified.
By setting SMART goals for
your staff, you clarify standards and focus attention and energy in the
direction that you desire. In many instances, you will want to have
your staff members participate in defining the goals in order to benefit
from their insights and to promote their commitment to the goals.
However, unilaterally assigning goals to them can also be effective.
Contingent
rewards. Rewards should
be given to staff members when they earn them--that's the principle of
contingent rewards. Fat, happy rats don't run mazes.
B. F. Skinner had no success teaching lab rats to run mazes by stuffing
them with cheese beforehand. A fundamental principle of motivation
is to use rewards to reinforce desired behaviors if they occur. When
they don't occur (i.e., performance is poor), withhold the rewards.
The trend in the U.S. is
toward a larger portion of employees' compensation to be provided in the
form of "variable pay" such as bonuses and equity-based compensation (e.g.,
stock options and grants of stock). That trend is consistent with
the principle of contingent rewards. You have to deliver results
to get variable pay (at least in theory).
I predict that there will
be a limit to the growth of variable pay as a proportion of total compensation.
Very few of us are comfortable having most of our compensation directly
contingent on our short-term performance. A few salespeople and entrepreneurs
thrive on having their income directly tied to their performance.
However, the rest of us are uncomfortable with having a large amount of
our income at risk. After all, our compensation may be variable,
but our house and car payments are fixed. Excessive worrying about
money can cause stress that interferes with performance. So, a straight
commission-type compensation package may not be the best reward system
for motivating most people.
Valued
rewards. I used pay to illustrate the principle of
contingent rewards, but we seek much more than pay in exchange for our
successes at work. In my research on employee suggestion systems,
I had a conversation with a consultant who helps firms operate suggestion
systems effectively. He has found that in some organizations "face
time" (e.g., a lunch meeting) with the CEO is a stronger motivator of good
suggestions than pay. Some organizations offer 10% of the value of
a suggestion as a reward, but in organizations where employees tend to
be ambitious, face time with an executive may be perceived as more valuable.
In other organizations, public recognition is valued more than pay.
I regularly see notes in the Wall Street Journal that report surveys
indicating that busy professionals prefer personal services or more time
with their families to bonuses.
As one manager aptly put
it, "You have to know what makes your people tick." Theorists such
as Maslow, McClelland, and Shutz (of FIRO-B fame) have identified lists
of psychological needs that people try to satisfy through their work experiences.
Which rewards do your staff members value? They value the ones that
satisfy their particular needs. Fortunately, you don't have to psychoanalyze
them to discover which rewards they value. As long as your relationship
with them is characterized by trust and open communication, they'll tell
you what their needs are. Bottom line: Don't assume that everyone
is motivated to obtain the same kinds of rewards.
Practicing This Management
Skill
SMART
goals. One of the most effective ways to use SMART
goals is within the context of a personal management interview program.
Personal management interviews are regularly scheduled, one-on-one meetings
between a supervisor and a subordinate. In those meetings, broad
goals can be defined as well as specific steps toward goal attainment.
At the close of each meeting, the subordinate should have an "action plan"
of things to achieve prior to the next meeting. Although it is the
manager's responsibility to set standards and align the subordinate's efforts
with the needs of the work unit and organization, it's important that the
manager practice constructive
communication and effective
listening during performance management interviews.
Contingent
rewards. The organization
itself (i.e., policies and culture) can be your biggest obstacle to offering
contingent rewards. Many organizations have a tradition of basing
rewards on rank and tenure rather than performance. If the compensation
system of your organization doesn't support contingent pay, you'll have
to come up with creative ways to provide rewards. 1001 Ways to
Reward Employees, by Bob Nelson presents a great set of innovative
ways to provide rewards (it's not really a list of 1001 unique ideas though).
Valued
rewards. To know which
rewards your staff members value, you have to have open communications
with them. To promote open communication, you need to be a constructive
communicator, an effective listener, and to build trust. In the absence
of trust, your staff members may not be comfortable discussing personal
things such as their ambitions or their desire to spend less time at work
and more time with their families.
"Building
and Repairing Trust" LeaderLetter
"Constructive
Communication" LeaderLetter
"Effective
Listening" LeaderLetter
Note
1. Costello, M. (2004). Morgan Stanley's fixed-income head paid more than Purcell. eFinancialNews, March 5, 2004, access through LexisNexis on December 21, 2004.
About the Photo
AFP Photo/Aamir Qureshi; e-mailed to me
December 21 from Yahoo!
News (http://news.yahoo.com).
Sources
Iaffaldano, M. T. &
Muchinsky,
P. M. (1985). Job satisfaction and job performance: A meta-analysis.
Psychological Bulletin, 97(2): 251-273.
Whetten, D. A., & Cameron,
K. S. (2002). Developing management skills, (5th ed.).
Upper Saddle River, NJ: Prentice-Hall.
About the Newsletter
and Subscriptions
LeaderLetter is written by Dr. Scott Williams, Department of
Management, Raj Soin College of
Business, Wright State University, Dayton, Ohio. It is a supplement to my
MBA 751 - Managing People in Organizations class. It is intended to reinforce
the course concepts and maintain communication among my former MBA 751 students,
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IRAQI ELECTIONS DELAYED TO ALLOW TIME FOR NEGATIVE ADS
Swift Boat Veterans Parachute into Baghdad
The Iraqi elections, originally set for January 2005, have been delayed six
months to give the Iraqi people enough time to produce and air negative
political ads, the White House announced today.
“The purpose of these elections is to foster democracy in Iraq, but without
negative ads, there is no democracy,” said White House spokesman Scott
McClellan.
The decision to delay the Iraqi vote was the brainchild of White House political
strategist Karl Rove, who said he was “dismayed” by the state of Iraqi’s
negative advertising infrastructure.
“Their understanding of how to use distortions, unflattering photographs and
scary-sounding announcers is rudimentary at best,” Mr. Rove said. “If the
elections were to go forward without professionally-produced attack ads, the
whole process would be seen as a sham.”
In order to teach the Iraqi people how to make corrosive, below-the-belt
television spots, Mr. Rove has ordered the Swift Boat Veterans for Truth, a
group whose ads proved particularly effective during the 2004 presidential
campaign, to parachute into Baghdad at once.
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