Deck 16: Motivating Employees

Question 1

France Patterson, Kimbel's CEO, looked at the latest "Sales by Manager" figures on her daily Web-based sales report. What did these up-to-the-minute numbers tell her about the results of Kimbel's trial of straight commission pay for its salespeople?
A regional chain of upscale department stores based in St. Louis, Kimbel's faces the challenge shared by most department stores these days: how to stop losing share of overall retail sales to discount store chains. A key component of the strategy the company formulated to counter this long-term trend is the revival of great customer service on the floor, once a hallmark of upscale stores. Frances knows Kimbel's has its work cut out for it. When she dropped in on several stores incognito a few year ago, she was dismayed to discover that finding a salesperson actively engaged with a customer was rare. In fact, finding a salesperson when a customer wanted to pay for an item was often difficult.
About a year and a half ago, the CEO read about a quiet revolution sweeping department store retailing. At stores such as Bloomingdale's and Bergdorf Goodman, mangers put all salespeople on straight commission. Frances decided to give the system a yearlong try in two area stores.
Such a plan, she reasoned, would be good for Kimbel's if it lived up to its promise of attracting better salespeople, improving their motivation, and making them more customer-oriented. It could also potentially be good for employees. Salespeople in departments such as electronics, appliances, and jewelry, where expertise and highly personalized services paid off had long worked solely on commission, But the majority of employees earned an hourly wage plus a meager 0.5 percent commission on total sales. Under the new scheme, all employees would earn a 7 percent commission on sales. When she compared the two systems, she saw that a new salesclerk in women's wear would earn $35,000 on $500,000 in sales, as opposed to only $18,000 under the old scheme.
Now, with the trial period about to end. Frances notes that while overall sales in the two stores have increased modestly, so also has employee turnover. When the CEO examined the sales-by-manager figures, it was obvious that some associates had thrived and others had not. Most fell somewhere in the middle.
For example, Juan Santore is enthusiastic about the change-and for good reason. He works in women's designer shoes and handbags, where a single item can cost upwards of $1,000. Motivated largely by the desire to make lots of money, he's a personable, outgoing individual with an entrepreneurial streak. Ever since the straight commission plan took effect, he has put even more time and effort into cultivating relationships w ith wealthy customers, and it shows. His pay has increased an average of $150 per week.
It's a different story in the lingerie department, where even luxury items have more modest price tags. The lingerie department head, Gladys Weinholtz, said salespeople in her department are demoralized. Several valued employees had quit, and most miss the security of a salary. No matter how hard they work, they cannot match their previous earnings. "Yes. they're paying more attention to customers," conceded Gladys, "but they're so anxious about making ends meet, they tend to pounce on the poor women who wander into the department." Furthermore, lingerie sales associates are giving short shrift to duties such as handling complaints or returns that don't immediately translate into sales. "And boy, do they ever resent the sales superstars in the other departments," said Gladys.
The year is nearly up. It's time to decide. Should Frances declare the straight commission experiment a success on the whole and roll it out across the chain over the next six months?
What needs are met under the commission system? Are they the same needs in the shoes and handbag department as they are in lingerie? Explain.

Answer 1

Department store K made a change last year to move all of its salespeople to a straight commission compensation plan. This improved the customer service , as anticipated, but has also resulted in increased employee turnover and to large variances in compensation between departments.
Departments with higher-priced items offer the opportunity for higher compensation. The staff of departments with lower-priced items makes less money now than they did before the switch.
The new compensation plan ties in with Maslow's Hierarchy of Needs. Changing the compensation plan gives staff more control over their compensation and recognition for doing a better job of helping customers. These fall into the " esteem " and " self-actualization " portions of Maslow's chart, and should increase job satisfaction and motivation.
Unfortunately though, due to the present commission percentages, only those in higher-priced items departments are ultimately receiving more pay and recognition for better customer service. In the lingerie department, item prices are low enough that even highly effective salespeople are making less money than before, resulting in demotivation for those staff members.

Question 2

One small company recognizes an employee of the month, who is given a parking spot next to the president's space near the front door. What theories would explain the positive motivation associated with this policy?

Answer 2

An "Employee of the Month" designation can be motivating to employees, as it provides perks the employee wouldn't otherwise receive. Theories that explain the motivation from this program include:
• Equity theory: employees feel that there are treated fairly based on their high level of effort as compared to others, and the corresponding recognition.
• Acquired needs theory : employees feel they have accomplished something difficult that sets them apart from others when they receive this designation.

Question 3

France Patterson, Kimbel's CEO, looked at the latest "Sales by Manager" figures on her daily Web-based sales report. What did these up-to-the-minute numbers tell her about the results of Kimbel's trial of straight commission pay for its salespeople?
A regional chain of upscale department stores based in St.Louis, Kimbel's faces the challenge shared by most department stores these days: how to stop losing share of overall retail sales to discount store chains. A key component of the strategy the company formulated to counter this long-term trend is the revival of great customer service on the floor, once a hallmark of upscale stores. Frances knows Kimbel's has its work cut out for it. When she dropped in on several stores incognito a few year ago, she was dismayed to discover that finding a salesperson actively engaged with a customer was rare. In fact, finding a salesperson when a customer wanted to pay for an item was often difficult.
About a year and a half ago, the CEO read about a quiet revolution sweeping department store retailing. At stores such as Bloomingdale's and Bergdorf Goodman, mangers put all salespeople on straight commission. Frances decided to give the system a yearlong try in two area stores.
Such a plan, she reasoned, would be good for Kimbel's if it lived up to its promise of attracting better salespeople, improving their motivation, and making them more customer-oriented. It could also potentially be good for employees. Salespeople in departments such as electronics, appliances, and jewelry, where expertise and highly personalized services paid off had long worked solely on commission, But the majority of employees earned an hourly wage plus a meager 0.5 percent commission on total sales. Under the new scheme, all employees would earn a 7 percent commission on sales. When she compared the two systems, she saw that a new salesclerk in women's wear would earn $35,000 on $500,000 in sales, as opposed to only $18,000 under the old scheme.
Now, with the trial period about to end. Frances notes that while overall sales in the two stores have increased modestly, so also has employee turnover. When the CEO examined the sales-by-manager figures, it was obvious that some associates had thrived and others had not. Most fell somewhere in the middle.
For example, Juan Santore is enthusiastic about the change-and for good reason. He works in women's designer shoes and handbags, where a single item can cost upwards of $1,000. Motivated largely by the desire to make lots of money, he's a personable, outgoing individual with an entrepreneurial streak. Ever since the straight commission plan took effect, he has put even more time and effort into cultivating relationships with wealthy customers, and it shows. His pay has increased an average of $150 per week.
It's a different story in the lingerie department, where even luxury items have more modest price tags. The lingerie department head, Gladys Weinholtz, said salespeople in her department are demoralized. Several valued employees had quit, and most miss the security of a salary. No matter how hard they work, they cannot match their previous earnings. "Yes. they're paying more attention to customers," conceded Gladys, "but they're so anxious about making ends meet, they tend to pounce on the poor women who wander into the department." Furthermore, lingerie sales associates are giving short shrift to duties such as handling complaints or returns that don't immediately translate into sales. "And boy, do they ever resent the sales superstars in the other departments," said Gladys.
The year is nearly up. It's time to decide. Should Frances declare the straight commission experiment a success on the whole and roll it out across the chain over the next six months?
If you were Frances Patterson, would you go back to the previous compensation system, implement the straight commission plan in all Kimbel's stores, or devise and test some other compensation method? If you decided to test another system, what would it look like?

Answer 3

Department store K made a change last year to move all of its salespeople to a straight commission compensation plan. This improved the customer service , as anticipated, but has also resulted in increased employee turnover and to large variances in compensation between departments.
Departments with higher-priced items offer the opportunity for higher compensation. The staff of departments with lower-priced items makes less money now than they did before the switch.
Manager F has a decision to make now; whether to continue with the current compensation system, return to the previous hourly-pay system, or test another method before finalizing the program.
Manager F should analyze the results of the new and original compensation system along with the sales by department, and come up with a modified version that is motivating to all employees.
It might involve a low base pay for all staff along with a commission at a high but lower than commission-only rate, or it might involve paying a low base salary to those in departments with lower-priced items, along with a promise to promote from within for the more lucrative commission-only jobs in the higher-priced items department.

Question 4

Using Hackman and Oldham's core job dimensions, compare and contrast the jobs of these two state employees: (1) Jared, who spends much of his time researching and debating energy policy to make recommendations that will eventually be presented to the state legislature and (2) Anise, who spends her days planting and caring for the flower gardens and grounds surrounding the state capitol building.

Question 5

If an experienced executive assistant discovered that she made the same amount of money as a newly hired janitor, how do you think she would react? What inputs and outcomes might she evaluate to make this comparison?

Question 6

Would you rather work for a supervisor high in need for achievement, affiliation, or power? Why? What are the advantages and disadvantages of each?

Question 7

To keep people motivated in a tough economic environment, some companies have shifted from annual to semiannual bonuses. Do you think offering semiannual bonuses is a good way to motivate the kind of behaviors organizations need to survive the economic downturn? What might be some potential problems with this approach?

Question 8

A survey of teachers found that two of the most important rewards were the belief that their work was important and a feeling of accomplishment. According to Maslow's theory, what needs do these rewards meet?

Question 9

The teachers in question 7 also reported that pay and benefits were poor, yet they continue to teach. Use Herzberg's two-factor theory to explain this finding.
question 7:
A survey of teachers found that two of the most important rewards were the belief that their work was important and a feeling of accomplishment. According to Maslow's theory, what needs do these rewards meet?

Question 10

According to surveys, Gen-Y employees are the most disengaged of ail workers, and 62 percent of employees under the age of 25 say they are unhappy with their jobs. What might be some reasons for this high level of dissatisfaction and disengagement among young people? As a manager, how might you enhance satisfaction and engagement for young employees?

Question 11

How can empowerment lead to higher motivation of employees? Could a manager's empowerment efforts sometimes contribute to demotivation as well? Discuss.

Question 12

France Patterson, Kimbel's CEO, looked at the latest "Sales by Manager" figures on her daily Web-based sales report. What did these up-to-the-minute numbers tell her about the results of Kimbel's trial of straight commission pay for its salespeople?
A regional chain of upscale department stores based in St.Louis, Kimbel's faces the challenge shared by most department stores these days: how to stop losing share of overall retail sales to discount store chains. A key component of the strategy the company formulated to counter this long-term trend is the revival of great customer service on the floor, once a hallmark of upscale stores. Frances knows Kimbel's has its work cut out for it. When she dropped in on several stores incognito a few year ago, she was dismayed to discover that finding a salesperson actively engaged with a customer was rare. In fact, finding a salesperson when a customer wanted to pay for an item was often difficult.
About a year and a half ago, the CEO read about a quiet revolution sweeping department store retailing. At stores such as Bloomingdale's and Bergdorf Goodman, mangers put all salespeople on straight commission. Frances decided to give the system a yearlong try in two area stores.
Such a plan, she reasoned, would be good for Kimbel's if it lived up to its promise of attracting better salespeople, improving their motivation, and making them more customer-oriented. It could also potentially be good for employees. Salespeople in departments such as electronics, appliances, and jewelry, where expertise and highly personalized services paid off had long worked solely on commission, But the majority of employees earned an hourly wage plus a meager 0.5 percent commission on total sales. Under the new scheme, all employees would earn a 7 percent commission on sales. When she compared the two systems, she saw that a new salesclerk in women's wear would earn $35,000 on $500,000 in sales, as opposed to only $18,000 under the old scheme.
Now, with the trial period about to end. Frances notes that while overall sales in the two stores have increased modestly, so also has employee turnover. When the CEO examined the sales-by-manager figures, it was obvious that some associates had thrived and others had not. Most fell somewhere in the middle.
For example, Juan Santore is enthusiastic about the change-and for good reason. He works in women's designer shoes and handbags, where a single item can cost upwards of $1,000. Motivated largely by the desire to make lots of money, he's a personable, outgoing individual with an entrepreneurial streak. Ever since the straight commission plan took effect, he has put even more time and effort into cultivating relationships w ith wealthy customers, and it shows. His pay has increased an average of $150 per week.
It's a different story in the lingerie department, where even luxury items have more modest price tags. The lingerie department head, Gladys Weinholtz, said salespeople in her department are demoralized. Several valued employees had quit, and most miss the security of a salary. No matter how hard they work, they cannot match their previous earnings. "Yes. they're paying more attention to customers," conceded Gladys, "but they're so anxious about making ends meet, they tend to pounce on the poor women who wander into the department." Furthermore, lingerie sales associates are giving short shrift to duties such as handling complaints or returns that don't immediately translate into sales. "And boy, do they ever resent the sales superstars in the other departments," said Gladys.
The year is nearly up. It's time to decide. Should Frances declare the straight commission experiment a success on the whole and roll it out across the chain over the next six months?
What theories about motivation underlie the switch from salary to commission pay?

Question 13

In response to security threats in today's world, the U.S. government federalized airport security workers. Many argued that simply making screeners federal workers would not solve the root problem: bored, low-paid, and poorly trained security workers have little motivation to be vigilant. How might these employees be motivated to provide the security that travel threats now demand?

Question 14

To Renege or Not to Renege? 73
Federico Garcia, vice president of sales for Puget Sound Building Materials, a company based in Tacoma, Washington, wasn't all that surprised by what company president Michael Otto and CFO James Wilson had to say during their meeting that morning.
Last year, launching a major expansion made sense to everyone at Puget, a well-established company that provided building materials as well as manufacturing and installation services to residential builders in the Washington and Oregon markets. Puget looked at the record new housing starts and decided it was time to move into the California and Arizona markets, especially concentrating on San Diego and Phoenix, two of the hottest housing markets in the country. Federico carefully hired promising new sales representatives and offered them hefty bonuses if they reached the goals set for the new territory over the following 12 months. All the representatives had performed well, and three of them had exceeded Puget's goal-and then some. The incentive system he'd put in place had worked well. The sales reps were expecting handsome bonuses for their hard work.
Early on, however, it became all too clear that Puget had seriously underestimated the time that it would take them to build new business relationships and the costs associated with the expansion, a mistake that was already eating into profit margins. Even more distressing were the most recent figures for new housing starts, which were heading in the wrong direction. As Michael said, "Granted, it's too early to tell if this is just a pause or the start of a real long-term downturn. But I'm worried. If things get worse, Puget could be in real trouble."
James looked at Federico and said, "Our lawyers built enough contingency clauses into the sales reps' contracts that we're not really obligated to pay those bonuses you promised. What would you think about not paying them?" Federico turned to the president, who said, "Why don't you think about it, and get back to us with a recommendation?"
Federico felt torn. On the one hand, he knew the CFO was correct. Puget wasn't, strictly speaking, under any legal obligation to pay out the bonuses, and the eroding profit margins were a genuine cause for concern. The president clearly did not want to pay the bonuses. But Federico had created a first-rate sales force that had done exactly what he'd asked them to do. He prided himself on being a man of his word, someone others could trust. Could he go back on his promises?
What Would You Do?
1. Recommend to the president that a meeting be arranged with the sales representatives entitled to a bonus and tell them that their checks were going to be delayed until Puget's financial picture clarified. The sales reps would be told that the company had a legal right to delay payment and that it may not be able to pay the bonuses if its financial situation continues to deteriorate.
2. Recommend a meeting with the sales representatives entitled to a bonus and tell them the company's deteriorating financial situation triggers one of the contingency clauses in their contract so that the company won't be issuing their bonus checks. Puget will just have to deal with the negative impact on sales rep motivation.
3. Recommend strongly to the president that Puget pay the bonuses as promised. The legal contracts and financial situation don't matter. Be prepared to resign if the bonuses are not paid as you promised. Your word and a motivated sales team mean everything to you.