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Concern over the level of motivation in small business in Newfoundland
& Labrador
November, 2009
The Newfoundland and Labrador Employer’s council (NLEC) is hosting a conference
this fall titled “The Disappearing Work Ethic: Fact or Fiction?”. While the conference
does plan to hold a short talk on improving work ethic by means of non-financial
motivational techniques, I believe the agenda does not include topics which I believe are
very relevant for local owners of small business. Given that the ultimate goal for a
business owner is to keep employees working at full potential, a discussion on topics
such as motivation in knowledge-centric jobs, and best practices for corporate leaders
regarding motivation and job performance, is pertinent.
As our business climate has become more knowledge-based, the tactics for motivating
employees have changed. As in the past, when a company is manufacturing well defined
widgets (e.g. manufactured device, or developed product), fear-motivation was easy and
worked well because an employees’ productivity was easily measured and compared to
minimum standard. Move forward to today when the things created by knowledgeworkers are far more difficult to define, at least in terms of the expected productivity. If
the worker is building for example, the next release of a software program, there is no
way to reliably estimate how long the task should take as it is unique. Employers of
knowledge workers then can no longer set minimum standards on an employees’
productivity and therefore have to turn to methods of motivation in the hopes of
maximizing work ethic.
WHAT MOTIVATES, AND WHAT COULD BE DONE BETTER
Factors that motivate employees include money and other forms of financial-based
compensation, work-family balance, intellectual challenge, upward mobility, stretch
goals, and among others, company brand. Employers typically incorporate many of these
into their human resources plan however, their methods are often based not on best
practices emerging from academia but rater based on common sense approaches and on
their own personal experience perhaps with former employers.
Wages have been shown to have a motivating effect on workers particularly if the firm
pays more than the market rate. If a company pays only the going market rate of wages
however, then employees have little motivation to work hard because if fired, they can
easily find alternative jobs paying roughly the same. Those firms paying less than the
market wage may encounter a productivity decline that more than offsets the savings on
direct compensation.
The use of stock options is another example of financial-based compensation. In large
companies, there is growing evidence that stock options have little impact on motivation
as the employee does not perceive a link between her performance and the reward. In
small companies, more experienced employees are “wise” to the pitfalls with this method
of financial compensation. Employers seldom provide information regarding the total
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outstanding common shares of the company, and thus the value of the stock option
cannot be determined. Even if this information is known, the path to getting acquired or
going public represents a long term commitment of the employee to a company that may
not stack up well to other employment prospects. Further, employers have the ability to
issue themselves common shares at will and thus dilute the value of the employees’ stock
option. In effect, stock option compensation has negligible effect on motivation for
employees. Gain sharing programs are an alternative method of compensation that better
links an employees actions to rewards as long as the behaviours and benefits are clearly
defined. There is an added benefit in that employees are incented to behave in a team
manner and avoid competitive behaviors.
Levels of education, combined with the requirements of the job itself, are an important
considering when hiring knowledge-workers. Employees coming to a company with
high levels of education often want to make use of that education in their job. If the two
line up, the employee is likely to be motivated and thus display a strong sense of work
ethic. A graduate of a business marketing program for example, may not be particularly
motivated for example, if the marketing position they were hired for turned out to be
more of a sales position in practice. Employers should consider established job design
techniques in order to maximize the productivity of knowledge workers.
Various leadership styles have been demonstrated to have positive effects on motivation
and work ethic. For those who cannot duplicate the leadership style of charismatic CEOs
such as Herbert Kelleher of Southwest Airlines, a democratic management style has been
shown to result in subordinate motivated behaviour in the absence of the leader.
Conversely, autocratic leadership styles result in motivated behaviour only when the
leader is present.
WHAT DEMOTIVATES EMPLOYEES & HOW TO AVOID
While the conference is expected to address some aspects of work ethic and motivation
such as how it could be improved using non-compensatory techniques, it appears that it
will not address aspects of demotivation. Some factors that de-motivate staff include
micromanagement, misuse of trust and organizational (in)justice, lack of delegation, lack
of upward mobility, and organizational insecurity.
Employees are sensitive to organizational justice and perceived inequity in the
workplace. Being treated in a manner that perceived to be unfair negatively affects work
ethic; being demoted, reassigned, treated poorly or unfairly has affects on job
performance and sometimes on the employees health (thus multiplying the negative
effect on job performance). Perceived inequity may also occur when people believe they
are not receiving fair returns for their efforts and other contributions; perceived
unfairness is possible when for example, more junior persons in the organization are
compensated better, when compensation agreements are not honored by management, or
when typical compensation for your job is higher than what you are making.
Organizational insecurity (i.e. insecurity over one’s job or role within the company) can
contribute negatively to levels of motivation and work ethic. People who feel that their
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organizational security is threatened may be subject to reduced self esteem and reduced
work effort. It often comes in the form of what I have come to call a Hot Potato Culture employees will spend considerable effort passing the buck and avoiding issues that attract
attention. High performance under such circumstances might earn you a pretty plaque, or
if you are lucky a small bonus. That potential benefit however, is not worth the price that
you pay if you garner negative attention which may result in job loss. There are methods
by which leaders can address this issue: take a coaching attitude when things go wrong
instead of blaming employees; also firms can avoid multiple rounds of job cuts when
layoffs are necessary - when employees see colleagues disappearing every other week,
they have a tendency to pass the “Hot Potato”.
Other factors that are negatively correlated with employee motivation and work ethic are
overly ambitious schedules, lack of delegation, and lack of insight into corporate goals
and strategy.
MEASUREMENT
Employers expend significant effort trying to motivate employees, yet how many
employers actually measure the motivation or morale of their staff? It is perhaps the
simplest and most reliable method of measuring productivity in a knowledge-based
industry yet many small business employers avoid it. Even more established businesses
with seasoned leaders have human resources practices which avoid the measurement of
motivation until the employee chooses to leave. As it is difficult to improve on something
if progress is not measured, managers should take steps to ensure that their programs do
objectively measure the motivation and work ethic of their workforce.
Christopher O’Brien, B. Eng, MBA
Principal Consultant
O’Brien Consulting
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