Departments Doing Equal Contribution Commerce Essay Example

contributions to the organization due to the diminishing job security.

The text discusses the importance of employee motivation and the role of HR professionals in developing strong employee-organization relationships. It emphasizes the need for companies to engage employees' bodies, minds, and souls in order to increase productivity with limited resources. The main focus is on utilizing performance-based incentives to motivate various individuals within an organization, including employees at different levels and professionals in different roles.

The Relationship between Motivation and Incentives

Every business wants motivated employees who are more effective, efficient, and produce optimal results. While monetary incentives, benefits, and rewards can improve motivation, managers should consider that different people respond differently to various incentives when designing incentive programs.

According to a theory, individuals with high Positive Affective (PA) are described as energetic, active, and alert, and they respond well to non-incentive programs. Conversely, individuals with low PA are characterized as listless, unenergetic, and apathetic. They tend to react more favorably to merit raises compared to those with high PA. There are two types of incentive plans: Fiscal Incentives or benefits and Non-Financial Incentives or benefits.

Fiscal incentives refer to monetary rewards given to workers who surpass a predetermined criterion. This approach was promoted by Frederick Taylor as part of the scientific management movement which focused on improving work methods through observation and analysis. Taylor also popularized the use of incentive programs. Merit Pay or Merit raise refers to a salary increase awarded based on an individual employee's performance while a bonus is a one-time payment.

The subject of merit wage is debated; some believe that performance-based wages can motivate improved performance while others argue it can lead to a "free-ride

situation" (discussed later). A case study example illustrating this debate is the "$65 incentive" implemented by Continental Airlines in 1994. At that time, the company faced crisis due to its worst-ever performance resulting in a net loss of $613 million.Continental has implemented a group incentive strategy to enhance performance. Under this strategy, once the airline attains a top 5 industry ranking, all 35,000 employees will receive a monthly bonus of $65.

Despite the free-rider problem, this plan was successful and led to increased effort from employees. As a result, planes took off on time and Continental's net income reached $385 million by 1997.

Merit raises are commonly used by managerial employees as a financial incentive. According to studies, around 90% of large public and private sector companies implement merit wage programs for their employees. These raises are given based on performance requirements, serving as an incentive.

Merit rise is based on:

• Employee's performance in a specific quarter or term.
• The employee's position in the wage range.
• The length of time since the last wage rise.

Employers provide monetary incentives in direct or indirect ways. Direct methods include higher salaries and wages, profit-sharing plans, employee stock ownership plans (ESOP), commission, Scanlon program, gain sharing, annual bonus, and merit plans. Indirect methods include provisions for housing, subsidized food, telephone, and transportation vehicles.

[Source: Bohlander and Snell, (2007), Managing Human Resources, Thomson/South Western, 14th Edition.]

Organizational Incentive Plans- Organizational incentive plans are programs that allow all or most employees to participate. These programs generally link wages to companywide performance and often include financial incentives. Profit sharing, which involves distributing a portion of the company's annual profit to employees, is a common

form of organizational incentive plan. While profit sharing can increase productivity and morale, its impact on profits is generally insignificant once the program's costs are taken into account. The practice of sharing profits with employees began in 1916 when Pillsbury and General Foods started distributing a percentage of their profits as a bonus. Profit-sharing programs have been used by many companies, particularly during periods of economic hardship when guaranteed rewards are not feasible.

On May 26, 2009, Tesco, the largest supermarket in the UK, announced that it had a net income of ?3bn and would be distributing ?98m in bonuses to over 207,000 employees. This bonus program was designed to incentivize both part-time and full-time staff members for their exceptional performance. The Guardian newspaper dated May 26, 2009 provided this information.

In a similar fashion, on January 18, 2005, Chrysler Corporation achieved record profits and rewarded each employee with a profit-sharing amount of $8000. This was particularly noteworthy as the average profit-sharing amount in the US was $4,300. Robert J. Eaton, President of Chrysler expressed that this initiative served as an excellent way to acknowledge and motivate their workforce while recognizing their hard work and dedication.

The New York Times published an article on January 19, 1995, which discussed ESOP (Employee Stock Ownership Plan) programs. These programs involve a corporation contributing stock or cash to a trust, which is then used to buy company stock for employees. The company's contribution depends on the total employee compensation and has a maximum limit of 15%. Providing incentives to participants in the program is beneficial as it motivates employees who become stockholders. There are two types of ESOPs: leveraged and nonleveraged.

In leveraged ESOPs, the program borrows money from a bank or lender to purchase stock, while in nonleveraged ESOPs, the company directly provides stock or cash for buying shares. The ESOP holds onto the stock on behalf of employees and periodically informs them about their ownership and share value.

According to Perry Phillips, president of ESOP Builders, the need for ESOP in the federal government has been highlighted due to a lack of knowledge workers and increasing demand for high-tech employees in the US. ESOP, an incentive program created by Joseph Scanlon in 1937, aims to involve workers in decision-making and profit-sharing to boost productivity. In the Scanlon Plan, management is required to openly discuss financial and non-financial issues with workers and unions. Workers are promised a bonus from savings without disrupting their pay structure, thus motivating them to work together towards common goals instead of opposing each other. Both the union and management work together to control production costs and maintain system production.

Addition Sharing

The new concept known as Scanlon Plan involves all employees in a collective effort to achieve the productivity goals of the company. If this leads to cost savings, the resulting benefits are shared among the employees and the company. In the healthcare industry, "Gain sharing" has had mixed results. It generally refers to an agreement where hospitals give doctors a share of the savings in patient care costs that are partially attributed to their efforts. Other perks include company cars, pension plans, sick pay, mobile expenses, and subsidized travel and meals. These perks are collectively referred to as fringe benefits.

These are considered essential for promoting qualified

applicants for certain types of jobs, such as company cars for sale. Governments also promote fringe benefits, as seen in the example of the Australian government, which encourages fringe benefits through a tax called the "Fringe Benefit Tax." This tax is paid by employers on certain benefits provided to employees and is based on the taxable value of various fringe benefits. This type of incentive has a strong impact on employee behavior and attitude.

• Impact on Behaviors - It improves performance and assists with cultural and organizational change.
• Impact on Attitudes - It fosters a sense of self-importance and employee ownership, while increasing awareness levels.

In January 2005, IBM, a computer hardware conglomerate, made the decision to terminate its pension program for both new and existing employees. Instead, they offered them the 401(K) benefit program. Following this trend, telecommunications giant Verizon also announced that their pension program is now outdated.

"Facing fierce competition and the need to downsize following multiple mergers, the company required a strategy to incentivize countless employees to opt for early retirement. Their solution aimed at tackling various crucial concerns. Initially, it offered employees the benefit of accessing their rewards promptly, eliminating lengthy waiting periods. Additionally, it assisted in controlling the expenses associated with the pension fund. Although money alone may not be sufficient to motivate employees, its significance in their objectives is recognized."

While financial incentives are often perceived as temporary and ineffective in inducing lasting changes in employee behavior, non-financial incentives such as challenging work, variety, and creativity are commonly

regarded as genuine motivators. It is not uncommon for individuals to consider themselves above average, and the absence of incentives or rewards can have a demoralizing effect. The perception of merit-based rewards being unjustly allocated relative to their level of performance can lead to frustration among many employees.

The Free Rider Problem refers to the issue of large companies inducing their employees with benefits and rewards, regardless of their individual performance. This can be a letdown as it means that the population as a whole will receive these benefits, regardless of their contribution. Supervisors may raise wages for most employees to cover their living expenses or to avoid alienating some employees. However, providing merit pay every year can worsen the situation as employee expectations for incentives and raises increase each year, causing financial concerns for management. Nevertheless, merit pay can be successful if implemented with proper analysis and measures. It is important to design merit raises rather than eliminate them altogether.

Conclusion

Corporate Social Responsibility (CSR) - The ideas regarding incentives will continue to evolve with changes in management and employee beliefs over time.

To address the challenges faced in constructing the inducement program, it is important to consider the perspectives of both directors and employees. Ultimately, the company's benefit should be the top priority, as it exists because of them and they exist because of the company (Beardwell, Ian, 2007; Brewster, Sparrow, Vernon, 2007; Bohlander and Snell, 2007; Campbell et al., 1998; Dessler, Gary, 2008; Ulrich, Dave, 1997).On pages 125 and 126, the text mentions the book "Leveraged ESOPs and Employee Buyouts, Fifth Edition" written by a group of authors including Corey Rosen, Luis Granados, Scott S. Rodrick,

Kenneth E. Serwinski, Mary Sullivan Josephs, Richard C. May, Robert L. McDonald, David C. Light, Rebecca J. Miller, Deborah Groban Olson, and Laurence A.

Goldberg.

• Price, A (2007) "Human Resource Management'', (3d edn) Thomson Learning.
• Sisson, K and Storey, J (2000) The Realities of Human Resource Management: Managing the Employee Relationship. Open University Press
• 1 Steven Etkind, "ESOPs Create Liquidity for Shareholders and Help Diversify Their Assets,'' Estate Planning21, no. 4 (May 1998). Pg. 158-165.