Fluent Essays

a. Read the provided materials b. Textbook reading chapters (Optional): Robbins, S. P., & Judge, T. A. (2017). Essentials of Organizational Behavior (14th Edition). Pearson Education (US) Chapter 3 - Attitudes & Job Satisfaction, Chapter 7 - Motivation Concepts, and Chapter 8 - Motivation: From Concepts to Applications c. Questions: The selection ends with the following assertion by Drucker:  “Each of these requirements—except perhaps the last one—is almost the exact opposite of what is needed to increase the productivity of the manual worker.”  If one considers that Drucker held the Scientific Management view of job design, this could be true.    But now, consider the Jobs Characteristics Model (JCM) of Hackman and Oldham (see Chapter 8 of Robbins and Judge).    How does JCM differ from the “scientific management approach” of Frederick Taylor?  If factory jobs were designed according to JCM, what attributes of “knowledge work” would apply to them?    Would Drucker’s assertion still be valid?   Are professional degreed individuals the only ones who can be identified as knowledge workers?  Why or why not?   Other requirements: 1. Be sure to read the provided materials in Lesson 3 carefully before you address this topic.    2. The paper should be 5 pages long (not including the title page and References) Papers need to be formatted in proper APA 7th Edition style. 3. Each paper requires a minimum of at least three outside peer-reviewed sources for your references (unless stated otherwise in the guidance above). MGT 501 Lesson 3 Motivation, Job Design, and Implications for the Work of Managing Objectives of This Presentation Motivation Theories Principles of Job Design, and Their Underlying Justification Implications for the Work of Management Motivation Theories From the text (Chapter 7), here are the three key elements of motivation: Intensity: How hard a person tries Direction: What is the person exerting his or her efforts to do? (Is this effort productive or not, relative to an organization’s goals?) Persistence: Given the intensity of a person’s effort, how long can he or she keep it up? If we define productive effort as effort that is directed to the goals of an organization, then we see that “motivation” as defined here is “motivation to supply productive effort.” Motivation Theories Some classical theories of motivation include: Maslow (“hierarchy of needs”) Herzberg (“hygiene” vs. “motivational” needs) McClelland (needs for achievement, power, and affiliation dominate human motivation at work) After reviewing these and some contemporary theories, the authors write (see next slide): Motivating Factors Hygiene Factors Motivation Theories “What does all this mean? For individuals, it means you should choose your job for reasons other than extrinsic rewards. For organizations, it means managers should provide intrinsic as well as extrinsic incentives. Managers need to make the work interesting, provide recognition, and support employee growth and development. Employees who feel that what they do is within their control and a result of free choice are likely to be more motivated by their work and committed to their employers.” (Robbins and Judge 2018 105) In the remainder of this presentation, we will focus on what managers need to do to “make the work interesting.” This leads to the issue of job design... Principles of Job Design and Their Justification Once we have taken care of the “hygiene” issues of living, what matters to us as human beings? We want to belong We want to be respected We want our achievements to be recognized Behind these wants is a set of even more basic wants: We want to “look good” (or at least not “bad”) to other people We want to “look good” (or at least not “bad”) to ourselves Principles of Job Design and Their Justification When we give other people praise (or blame) for their actions, we assume that They had the intention to perform the action (that is, they had a plan) They had control over how they executed the action If either planning or control is limited (or removed) from the performer of a task, will he or she be praised or blamed (if the action is a “bad” one)? Why is this important to job design? Principles of Job Design and Their Justification Frederick Taylor and “Scientific Management” In the early 1900s, Frederick Taylor performed experiments and published his ideas on “scientific management.” (Taylor, 1912) Here are the fundamental principles of “scientific management”: There is “one best way” to perform any task But people who do the work are not generally inclined to seek this “one best way” Therefore, the design of work processes should be taken from the worker and handed over to professionals, who specialize in job design They used to be called “efficiency experts,” or “industrial engineers.” Nowadays their work is often called “process engineering.” Principles of Job Design and Their Justification The result of Taylor’s philosophy was the removal, over much of the 20th century, of the “planning” element of the jobs of people who do physical (and even clerical) work Now, in order to be “intrinsically” motivated, we need at minimum to be able to take pride in our work, which means we need to be able to say to ourselves “I am proud of what I just did because I designed and then executed what I just did. I am not just a pair of hands without a brain.” If the planning part of a task is taken from them, they will not be able to claim responsibility for their performance, except for one thing... But before we determine what that “one thing” is, let’s consider an example. Principles of Job Design and Their Justification Example of Taylor’s Principles Gone Too Far: The Automatic Brush Welding Machine Operator* The only decision left for the incumbent of this job is to stay awake! For “over-engineered” jobs, the only decision the person doing the work may have left is that of how much effort to supply. Consider: How could the operator take “pride” in a job like this? Over-engineering jobs will reduce the productive effort supply of workers (as was discovered during the last half of the 20th century); this is illustrated in the next slide... *Note: This is described in the video for this lesson. 10 Principles of Job Design and Their Justification This diagram is from Figure 15-2, Chapter 15 of Robbins and Judge (2018) 11 Principles of Job Design and Their Justification The movie, “Modern Times” (1936), starring the legendary comic, Charlie Chaplin, illustrates what we have been discussing here. For your entertainment and enlightenment, you can follow the link below and watch it for few minutes... https://www.youtube.com/watch?v=HPSK4zZtzLI The theme of this movie is...?* *Note: What is the “human cost” of Scientific Management? 12 Principles of Job Design and Their Justification Hackman and Oldham’s (1980) Job Characteristics Model (JCM) was an attempt to fix the problems created by too much “Taylorism” by re-designing jobs so they would be more suitable to human beings. Here are their 5 elements of job design (see Ch. 8, section 1, p. 121): Skill variety Task identity Task significance Autonomy Feedback Principles of Job Design and Their Justification Comments on Hackman and Oldham’s JCM They at least understood that people need to take pride in their work—that we are not meant to be “just a set of hands” that exist just do the bidding of others And while their model opens up a great conversation, it is possible to find flaws in it (this might be a good exercise for you) Having read the book the year it was published (and then trying to apply to a real factory), here is what I learned about job design: Principles of Job Design and Their Justification A person will be motivated to maximize productive effort if He understands and can explain, if asked, the connection between his daily work routines and the company’s mission, relative to its customers. He believes the company’s products and services are worthy of his best efforts. He understands how his actions affect those of other people who work for the company. He gets to participate, up to his level of competence, in the design of work processes in his work unit.* He sees himself not just as he is, but as what he is “becoming.” These principles, if you think about them, contain almost everything mentioned in Chapter 8. *Note: This can be called the “Fundamental Principle of Engagement.” We will return to this as the course goes on. 15 Implications for Management Work The work of management is to help subordinates to make the connections listed on the previous slide. It involves investment of time and effort on management’s part, but the investment pays off, as is indicated by the Gallup Report of 2013 (see Chapter 7, section 5) In order for this investment to be efficient, management has to have the “trust” of employees (more on this next lesson...) In addition, there are “structural” decisions a management team can make that help attain these objectives: Job rotation The creation of “job families” (Levels of expertise are rewarded by offering higher classifications for employees who attain them)—see Chapter 8 section 5 (8.5) Involvement in continuous process improvement activities (more on this later in the course) 16 Implications for Management Work Every teacher knows this about students: “If you do not care about me, I won’t care about what you teach.” Every manager needs to know this too: “If you don’t care about me, why should I care about your goals?” But if I believe you care,* I will “trust” you. And if I trust that you care, I will provide the gift of “extra” productive effort (by the Norm of Reciprocity). Consider this... To what extent does it apply to you? See you in the next lesson. *Note: If I am a manager and I care about you, then your well-being becomes a factor in my decision-making. That is, if your well-being decreases, I will feel bad. 17 End of Lesson 3—Thank You! References Gallup, Inc. (2013). State of the American workplace. Gallop.com. Hackman, J. Richard, and Greg R. Oldham (1980). Work redesign. Reading, Massachusetts: Addison-Wesley Publishing Company. Krone, Charles G. (1975). Open systems redesign. From John D. Adams (ed.) (1975). New Technologies in Organizational Development: 2. La Jolla. California: University Associates. Mead, George Herbert (1934). Mind, self, and society. Chicago: University of Chicago Press. Robbins, S. P., & Judge, T. (2018). Essentials of organizational behavior. New York, NY : Pearson Taylor, Frederick Winslow (1912). Scientific Management. Hanover, New Hampshire: Dartmouth College. Essentials of Organizational Behavior Fourteenth Edition Chapter 3 Attitudes and Job Satisfaction Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 1 After reading this chapter you should be able to: Contrast the three components of an attitude. Summarize the relationship between attitudes and behavior. Compare the major job attitudes. Identify the two approaches for measuring job satisfaction. Summarize the main causes of job satisfaction. Identify three outcomes of job satisfaction. Identify four employee responses to dissatisfaction. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 2 Attitudes Attitudes: Evaluative statements – either favorable or unfavorable – concerning objects, people, or events Reflect how one feels about something Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Attitudes are statements that make an evaluation about objects, people, or events. They offer a favorable or unfavorable view that reflects how one feels about something. 3 Three Main Components of Attitudes Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Attitudes are made up of three components. The cognitive component is composed of the belief in the way things are. The affective component is the more critical part of the attitude, as it calls upon the emotions or feelings. The behavioral component describes the intention to behave in a certain way toward someone or something. These three components work together to aid in our understanding of the complexity of an attitude. 4 Attitudes Follow Behavior: Cognitive Dissonance Cognitive dissonance: any inconsistency between two or more attitudes, or between behavior and attitudes Individuals seek to minimize dissonance Desire to reduce dissonance is determined by: The importance of the elements creating the dissonance The degree of influence the individual believes he or she has over the elements The rewards that may be involved in dissonance Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Sometimes we observe people who will change what they say so it doesn’t contradict their behavior. When attitudes and behaviors don’t line up, individuals will experience cognitive dissonance. This incongruity is uncomfortable, and individuals will seek to reduce the dissonance to find consistency. People are willing to live with some discomfort, but the degree to which this is true depends upon the importance of the elements, how much influence the individual has in the situation, and the rewards that are available. 5 Behavior Follows Attitudes: Moderating Variables The most powerful moderators of the attitude-behavior relationships are: Importance Correspondence to behavior Accessibility Social pressures Direct personal experience Knowing attitudes helps predict behavior Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Some variables do moderate the relationship between attitude and behavior. These factors include the importance of the attitude, the correspondence of the attitude to the behavior, the accessibility of the attitude, the existence of social pressures on behavior and the personal and direct experience of the attitude. These variables will impact the ability to estimate how a certain attitude will predict behavior. 6 Major Job Attitudes Job satisfaction Job involvement Psychological empowerment Organizational commitment Affective commitment Continuance commitment Normative commitment Perceived organizational support Employee engagement Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The field of organizational behavior focuses on how attitudes will influence the work place. There are several major job attitudes we will look at throughout the book. The first is job satisfaction, which is the positive feeling about the job resulting from an evaluation of its characteristics. The second is job involvement. Job involvement looks at the degree of psychological identification with the job. An additional job attitude is psychological empowerment, the belief in the degree of influence over the job, competence in the job, and job meaningfulness. A very important job attitude is organizational commitment or identifying with a particular organization and its goals. There are three dimensions to this job attitude – affective, continuance, and normative. Organizational commitment has been found to have some relationship to performance and in particular for new employees. Over the years this may be losing importance as people are tending to be more loyal to their profession than to a given employer. Employees also respond to how they perceive the organization supports them or POS. The more support they believe they are receiving, the more positive their job attitude will be. Engagement is beginning to be linked to many positive work outcomes. Evidence suggests these attitudes are highly related, perhaps to a troubling degree that makes one wonder whether there are useful distinctions to be made among them. There is some distinctiveness among attitudes, but they overlap greatly for various reasons, including the employee’s personality. If you as a manager know someone’s level of job satisfaction, you know most of what you need to know about how that person sees the organization. Recent research suggests that managers tend to identify their employees as belonging to one of four distinct categories: enthusiastic stayers, reluctant stayers, enthusiastic leavers, and reluctant leavers. 7 Measuring Job Satisfaction (1 of 2) Job satisfaction: a positive feeling about a job resulting from an evaluation of its characteristics Measuring job satisfaction: Single global rating method Only a few general questions Remarkably accurate Summation score method Identifies key elements in the job and asks for specific feeling about them Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Discussing job satisfaction is intuitively a good thing in an organization, as it is a concept people understand, and it is important to recognize because of its bottom line impact. However, job satisfaction is something that is not easy to measure. One method for measure is the Single Global Rating method. This method asks one question such as “How satisfied are you with your job?” and gives options such as extremely satisfied to extremely dissatisfied. It does not go into the many facets of a job, so it does not help the organization break down where the problems are. The Summation Score Method is more sophisticated in that it asks about the various job components and breaks down how employees are specifically feeling about the different aspects of the job; thus it offers a more comprehensive look at job satisfaction. 8 Measuring Job Satisfaction (2 of 2) Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Average Job Satisfaction by Facets 9 Job Satisfaction by Country Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Evidence suggests that employees in Western cultures have higher levels of job satisfaction than those in Eastern cultures. 10 What Causes Job Satisfaction? The Work Itself – the strongest correlation with overall satisfaction Social Component – there is a strong correlation with how people view the social context of their work Pay – not correlated after individual reaches a level of comfortable living Corporate Social Responsibility – it’s good for the planet and good for people Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The type of work people do and their desire to do that type of work has the strongest correlation with job satisfaction. There is also a strong link between the social context of the work place and how people view their work. The more they enjoy the social aspects of their job, the more satisfied they are with the job. Pay has an influence on job satisfaction but not as much as one might think. Typically, once a worker exceeds $40,000 a year, pay has limited impact on the level of satisfied workers. Corporate social responsibility also plays a role in job satisfaction, especially for millennials. In general, if an employee’s personal values fit with those of the organization, the employee is usually satisfied. 11 Impact of Job Dissatisfaction Exit: directs behavior toward leaving the organization Voice: includes actively and constructively attempting to improve conditions Loyalty: passively but optimistically waiting for conditions to improve Neglect: passively allows conditions to worsen Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. When employees are dissatisfied with their jobs, they have four basic responses they can utilize. These options are divided into active and passive choices. The active options are exit and voice. If employees select to exit, they choose to leave or move in a direction of leaving the organization. In voice, the employees will work toward active and constructive attempts to improve conditions. The passive options are neglect and loyalty. Employees may choose to neglect their work and just allow conditions to worsen, or they may choose to remain loyal to the organization and just wait for change. 12 Counterproductive Work Behavior CWB: deviant behavior in the workplace, or simply withdrawal behavior Job dissatisfaction predicts CWB Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Managers can try to mitigate CWB, using techniques such as polling to find out about employee attitudes. Avoiding mismatches between the job and the employee’s abilities and values should increase job satisfaction. 13 The Benefits of Satisfaction Better job and organizational performance Better organizational citizenship behaviors (OCB – Discretionary behaviors that contribute to organizational effectiveness but are not part of employees’ formal job description) Greater levels of customer satisfaction Generally lower absenteeism and turnover Decreased instances of workplace deviance Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. When employees are satisfied with their work, there are many positive outcomes in the workplace. However, the inverse is true as well; if employees are dissatisfied in their work, these same job outcomes will be negatively impacted. Satisfied workers tend to have stronger performance and are more in tune with the organization’s mission and goals. As a result of that they tend to serve customers better, which translates into strong customer satisfaction. Satisfied workers remain in the job for a longer period of time than dissatisfied workers. However, as we have seen recently, workers are willing to stay in jobs where they are not satisfied because the job market is tight due to tough economic conditions. Dissatisfied workers are more likely to cause problems in the workplace by stealing, absenteeism, limiting productivity, and other negative work outcomes. 14 Implications for Managers Pay attention to your employees’ job satisfaction levels as determinants of their performance, turnover, absenteeism, and withdrawal behaviors. Measure employee job attitudes objectively and at regular intervals in order to determine how employees are reacting to their work. To raise employee satisfaction, evaluate the fit between the employee’s work interests and the intrinsic parts of the job to create work that is challenging and interesting to the individual. Consider the fact that high pay alone is unlikely to create a satisfying work environment. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Attitudes are important components of the workplace and definitely influence behaviors. Managers should be aware of job attitudes and their influence on job satisfaction. The most effective way to do this is to focus on making work challenging and interesting, especially at higher-level jobs where pay is not enough to satisfy workers. 15 Copyright Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 16 Essentials of Organizational Behavior Fourteenth Edition Chapter 8 Motivation: From Concepts to Applications Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. After studying this chapter you should be able to: Describe how the job characteristics model (JCM) motivates by changing the work environment. Compare the main ways that jobs can be redesigned. Explain how specific alternative work arrangements can motivate employees. Describe how employee involvement measures can motivate employees. Demonstrate how the different types of variable-pay programs can increase employee motivation. Show how flexible benefits turn benefits into motivators. Identify the motivational benefits of employee recognition programs. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Motivating by Job Design: The Job Characteristics Model Job characteristics model: jobs are described in terms of five core dimensions: Skill variety Task identity Task significance Autonomy Feedback Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The job characteristics model looks at describing any job in terms of five core job dimensions. These job dimensions include skill variety, which is the degree to which the job incorporates a number of different skills and talents. Task identity is another dimension that looks at the degree to which the job requires the completion of a whole and identifiable piece of work. Task significance is included and looks at how the job impacts the lives of others. Autonomy, the fourth dimension, identifies how much freedom and independence workers have over their jobs. And finally, feedback is how much the job generates direct and clear information about the worker’s performance. 3 The Job Characteristics Model Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Much evidence supports the JCM concept that the presence of a set of job characteristics—variety, identity, significance, autonomy, and feedback—does generate higher and more satisfying job performance. 4 Designing Motivational Jobs JCM-designed jobs give internal rewards Individual’s growth needs are moderating factors Motivating jobs must: Be autonomous Provide feedback Be meaningful Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. JCM creates motivational jobs, as they are designed to give internal rewards. Positive outcomes are moderated by individual growth needs, as each individual will respond differently. In order for the jobs to increase motivation, there should be a high degree of autonomy, feedback, and a least one meaningfulness factor such as significance, identity, or variety. Note that because the JCM is relatively individualistic, job enrichment strategies might not have the same effect in collectivistic cultures as they do in individualistic cultures like the United States. 5 Redesigning Jobs: Job Rotation Job Rotation The periodic shifting of an employee from one task to another Also called cross-training Increases job satisfaction and organizational commitment Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. There are some helpful ways to redesign a job to increase the motivation of the employees. In job rotation, which is also called cross-training, an organization will shift the employee to different tasks with similar skill requirements but all at the same organizational level. Research shows that job rotation increases job satisfaction and organizational commitment. However, it can decrease the efficiency of decision making, increase training costs, reduce overall productivity, and require more involvement from supervisors. 6 Redesigning Jobs: Relational Job Design Relational Job Design Designing work so employees are motivated to promote the well-being of the organization’s beneficiaries Relate stories from customers who have benefited from the company’s products or services Connect employees directly with beneficiaries Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Contemporary research is focusing on how to make jobs more prosocially motivating to people. In other words, how can managers design work so employees are motivated to promote the well-being of the organization’s beneficiaries – their customers, clients, patients, or employees? 7 Using Alternative Work Arrangements to Motivate Flextime Some discretion over when worker starts and leaves Job Sharing Two or more individuals split a traditional job Telecommuting Work remotely at least two days per week Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. There are some alternative work arrangements that have been successful in helping increase the motivation of workers. These arrangements give workers more control over their work and thereby can increase their level of motivation. An example of this is flextime. Flextime is short for flexible work hours and allows workers to choose what hours they work within a set time period. So, for example, if the worker needs to work 8 hours a day, the manager may say he or she can choose 8 hours between 6am and 8pm. That flexibility may allow a mom to be home when her kids are coming home from school. Flextime has become popular both within and outside the United States. Another alternative work arrangement is job sharing, where two workers split a job and each works part time. This is becoming more popular in Japan where it allows employers to avoid layoffs due to overstaffing. Telecommuting is another alternative work arrangement that has been utilized. This allows employees to work from home at least 2 days a week. 8 Employee Involvement Employee involvement: A participative process that uses the input of employees to increase their commitment to the organization’s success Two types: Participative management Representative participation Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Employee involvement is defined as a participative process that uses employees’ input to increase their commitment to the overall success of the organization. Depending on the country involved, it may be necessary to modify employee involvement programs to reflect the local culture. Some examples of programs that help with employee involvement are participative management and representative participation. 9 Participative Management Participative management: Subordinates share a significant degree of decision-making power with superiors To be effective: Followers must have confidence and trust in leaders Leaders should avoid coercion and stress organizational consequences of decisions Only a modest influence on productivity, motivation, and job satisfaction Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Participative management occurs when managers include employees in the decision-making process. Participative management has, at times, been considered a panacea for poor morale and low productivity. In reality, for participative management to be effective, followers must have trust and confidence in their leaders. Leaders should refrain from coercive techniques and instead stress the organizational consequences of decisions to their followers. This type of employee involvement program has shown itself to have limited impact on productivity, motivation, and job satisfaction. 10 Representative Participation Representative participation: Workers are represented by a small group of employees who participate in decisions affecting personnel Works councils Board membership Redistribute power within an organization Does not appear to be very motivational Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Representative participation tries to redistribute power by putting labor on a more equal footing with the interests of managers and stockholders. This is achieved by letting workers be represented by small groups of employees who participate in decisions. Nearly every country in Western Europe requires companies to practice representative participation. 11 Using Pay to Motivate Employees Major strategic rewards decisions: What to pay employees How to pay individual employees Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. As we saw in previous chapters, money is not the primary driver for job satisfaction. However, it does motivate individuals, and companies often underestimate its impact in keeping top talent. It is critical to figure out what to pay and to establish a pay structure that makes sense for your industry and organization. Then it is imperative that the organization utilizes this pay system and applies it to the pay of individual employees. 12 What to Pay Establishing a pay structure Balance between: Internal equity – the worth of the job to the organization External equity – the external competitiveness of an organization’s pay relative to pay elsewhere in its industry A strategic decision with trade-offs Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Setting pay levels can be complex and requires a balance of internal and external pay equity. Internal equity looks at the worth of the job to the organization and compares it with what others are making within the organization. External equity looks at external competitiveness of an organization’s pay relative to pay elsewhere. 13 How to Pay Variable-Pay Programs Base a portion of the pay on a given measure of performance Piece-rate pay plan Merit-based pay Bonuses Profit-sharing plans Employee-stock ownership plan (ESOP) Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Some types of variable-pay programs include piece-rate, merit-based, bonuses, profit-sharing, and employee-stock ownership plans. Globally, about 80 percent of companies offer some type of variable-pay plan. 14 Variable-Pay Programs Piece-Rate Pay: workers are paid a fixed sum for each unit of production completed Merit-Based Pay: pay is based on individual performance appraisal ratings Bonuses: rewards employees for recent performance Employee Stock Ownership Plans (ESOPs) – plans in which employees acquire stock, often at below-market prices Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Some types of variable-pay programs include piece-rate, merit-based, bonuses, and skill-based pay. Piece-rate pay plans pay a fixed amount of money for each unit of production. Merit-based pay plans are similar, paying based on performance. However, it is not necessarily tied to production because in some jobs, output is not as easy to measure. Bonuses are another method that is becoming increasingly popular. Bonuses are a lump sum at the end of a set period of time. The amount of the bonus is typically dependent upon the performance of the individual or the organization or some combination of both. Finally, ESOPs are a method used to motivate the employees toward the organizational goals. As part of their benefits package they are able to earn or purchase company stock, often at below-market rates. This encourages them to work toward the overall profitability of the organization, as they have ownership in it and will gain as the company gains. It is important to remember that while it is often thought that pay increases productivity, it is not true that everyone responds positively to variable-pay plans. 15 Using Benefits to Motivate Benefits are both an employee provision and an employee motivator Individual employees value the components of benefits packages differently A flexible benefits program turns the benefits package into a motivational tool Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Flexible benefits allow employees choices between different benefits. This allows them to customize their options and create a plan that best meets their needs and situation. This increases their motivation because they realize the organization has their best interest in mind. 16 Using Intrinsic Rewards to Motivate Employee recognition programs Can be as simple as a spontaneous comment Can be formalized in a program Recognition is the most powerful workplace motivator – and the least expensive – but fairness is important Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. A method of motivation that has been highly successful is employee recognition programs. This idea recognizes the importance of coupling extrinsic and intrinsic methods to help motivate employees. Recognition is an intrinsic motivation technique that can range from giving an employee the proverbial pat on the back to a more public recognition ceremony. Recognition programs are highly effective and cost very little to administer. There are critics of such programs, however, who say that they can be politically motivated and if the perception is that they are applied unfairly, they can cause more harm than good. 17 Implications for Managers Recognize individual differences Use goals and feedback Allow employees to participate in decisions that affect them Link rewards to performance Check the reward system for equity Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The motivational theories presented in this chapter and the last chapter set forth the following overarching ideas. It is important to recognize individual differences when designing and applying motivational programs. Managers will get better results if they use goals and feedback and allow employees to participate in the decisions that impact them. Finally, by linking rewards to performance and making sure the system is equitable, better results will follow. 18 Copyright Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Essentials of Organizational Behavior Fourteenth Edition Chapter 7 Motivation Concepts Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 1 After studying this chapter you should be able to: Describe the three key elements of motivation. Compare the early theories of motivation. Contrast the elements of self-determination theory and goal-setting theory. Demonstrate the differences between self-efficacy theory, reinforcement theory, equity theory, and expectancy theory. Identify the implications of employee job engagement for managers. Describe how the contemporary theories of motivation complement one another. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 2 What Is Motivation? Motivation: The processes that account for an individual’s intensity, direction, and persistence of effort toward attaining an organizational goal Intensity: the amount of effort put forth to meet the goal Direction: efforts are channeled toward organizational goals Persistence: how long the effort is maintained Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. It is easy to see that some individuals are more motivated than others. However, the reasons for that motivation are more difficult to determine. When defining motivation, it is important to look at the interaction between the individual and the situation. There are three key elements that help us define motivation. The first is intensity, or how hard the person tries to accomplish the task. The second is direction, or the effort that is channeled toward organizational goals. The final element is persistence, or how long a person can maintain the effort. 3 Early Theories of Motivation Maslow’s Hierarchy of Needs Theory Herzberg’s Two-Factor (Motivation-Hygiene) Theory McClellan’s Theory of Needs (Three Needs Theory) Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. There are a number of theories of motivation that help us gain a better understanding of the concept. Some of the earlier theories are not entirely valid anymore, but they are still used by many managers. 4 Hierarchy of Needs Theory (1 of 2) Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Hierarchy of Needs Theory was developed by Abraham Maslow in the 1950s. His theory states that with every individual there is a hierarchy of five needs. As each need is met or satisfied, the next need becomes dominant. His theory posits that individuals are stuck in their existing need level until it is satisfied, and then they can move on to the next level. For example, until their safety needs are met they will not be able to move on to the social level. The organization of these need levels may vary across cultures. 5 Two-Factor Theory Not Dissatisfied Dissatisfied Satisfied Not Satisfied Quality of supervision Pay Company policies Physical working conditions Relationships Job security Hygiene Factors Promotional opportunities Opportunities for personal growth Recognition Responsibility Achievement Motivation Factors Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Herzberg’s Two-Factor theory is another one of the earlier developed theories. This theory sets forth that satisfaction and dissatisfaction are not opposites, but two separate ideas. There is a set of factors that when present will help to avoid dissatisfaction in workers. This elements of this group are called hygiene factors and include such things as salary, working conditions, and company policies. There is another set of factors that will help to cause satisfaction in workers. The elements of this group are called motivators and include things such as growth, responsibility, and achievement. These sets are distinct, and the presence of hygiene factors does not cause satisfaction; it just helps avoid dissatisfaction. 6 Hierarchy of Needs Theory (2 of 2) Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The opposite of “satisfaction” is “no satisfaction,” and the opposite of “dissatisfaction” is “no satisfaction.” 7 McClellands Theory of Needs Need for Achievement (nAch) The drive to excel Need for Power (nPow) The need to make others behave in a way they would not have behaved otherwise Need for Affiliation (nAff) The desire for friendly and close interpersonal relationships Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The final earlier theory of needs we will look at is McClelland’s need theory. He bases his theory on the idea that people are motivated in the workplace by three main needs. The first need is the need for achievement or the drive to excel in relation to a set of defined standards. The second is the need for power, to make others behave in a way that they would not have behaved otherwise. The final need addressed in this theory is the need for affiliation. Affiliation looks at the relationship aspect and the desire for close relationships. People will have varying levels of these needs, which makes this theory difficult to measure. 8 McClellands High Achievers High achievers prefer jobs with: Personal responsibility Feedback Intermediate degree of risk (50/50) High achievers are not necessarily good managers High nPow and low nAff is related to managerial success Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The need that has received the most attention by researchers is the need for achievement. Achievers will carefully measure the odds and try to take on activities that are challenging, but not too high risk. They tend to be motivated in jobs that are more individualistic in nature and provide regular and effective feedback. Achievers tend to not make good managers because they have more of a personal focus. Strong managers have a higher level of need for power and a lower level of need for affiliation as they are trying to motivate a team to move toward a given direction. The view that a high achievement need acts as an internal motivator presupposes two cultural characteristics – willingness to accept a moderate degree of risk and concern with performance. This combination is found in Anglo-American countries such as the United States, Canada, and Great Britain, and much less in more collectivistic societies like Chile and Portugal. Of the early theories on motivation, McClelland’s theory has the best research support, but it has less practical effect than the others. 9 Contemporary Theories of Motivation Self-Determination Theory Goal-Setting Theory Management by Objectives Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. There are a number of contemporary theories of motivation that have utilized the older theories to provide us with a deeper understanding of motivation in the workplace. 10 Self-Determination Theory Self-determination theory: People prefer to have control over their actions so when they feel they are forced to do something they previously enjoyed, motivation will decrease Cognitive evaluation theory: Proposes that the introduction of extrinsic rewards for work (pay) that was previously intrinsically rewarding tends to decrease overall motivation Self-concordance: Considers how strongly people’s reasons for pursuing goals are consistent with their interests and core values Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The self-determination theory states that people prefer to have control over their actions. So, anything that makes a previously enjoyed task feel more like an obligation than a freely chosen activity will diminish their motivation. Cognitive evaluation theory sets forth that in the workplace intrinsic and extrinsic rewards are not independent of one another. In fact, the presence of extrinsic rewards may decrease the intrinsic rewards. In addition to extrinsic rewards, managers need to realize the importance of using goal setting and verbal rewards as a method to increase motivation. Self-concordance considers how strongly people’s reasons for pursuing goals are consistent with their interests and core values. Across cultures, if individuals pursue goals because of intrinsic interest, they are more likely to attain goals, are happier when they do, and are happy even when they do not. 11 Goal-Setting Theory Goals increase performance when goals are: Specific Difficult, but accepted by employees Accompanied by feedback: self-generated feedback is best Contingencies in goal-setting theory Goal commitment: public goals better Task characteristics: simple and familiar is better National culture: Western culture suits best Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Edwin Locke developed what is called the goal-setting theory. The idea behind this theory is that goals that are specific and effectively difficult can lead to higher performance if they include self-generated feedback. A difficult goal will help the individual to focus and direct attention as well as energize them to work harder. The difficulty of the goal will increase persistence and force people to be more effective and efficient. The relationship between goals and performance depends on how committed the individual is to the goal as well as how specific the tasks are. Most of the research has been done in the United States so the applicability of this theory to other cultures is suspect. 12 Management by Objectives Management by objectives (MBO): Converts overall organizational objectives into specific objectives for work units and individuals Common ingredients: Goal specificity Explicit time period Performance feedback Participation in decision making Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. An implementation of the goal-setting theory is Management by Objectives, better known as MBO. MBO is a systematic way to utilize goal-setting theory in which goals are set jointly by managers and employees. The goals must be tangible, verifiable, and measurable in order to be effective. The manager helps to break down the organizational goals into smaller, more specific goals for the employee. In order for MBO to be effective, the goals must be specific, the employees must participate in the goal setting, there must be a defined time period, and feedback must be incorporated into the process. 13 Cascading of Objectives Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. This exhibit shows the organization’s overall objectives translated into specific objectives for each level (divisional, departmental, individual). 14 Other Contemporary Theories of Motivation Self-Efficacy Theory Reinforcement Theory Equity Theory Organizational Justice Expectancy Theory Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 15 Self-Efficacy Theory (1 of 2) Self-efficacy theory: An individual’s belief that he or she is capable of performing a task Also known as social cognitive theory or social learning theory Self-efficacy increased by: Enactive mastery: gain experience Vicarious modeling: see someone else do the task Verbal persuasion: someone convinces you that you have the skills Arousal: get energized Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Another theory of motivation is the self-efficacy theory developed by Albert Bandura. This theory is based on an individual’s belief that he or she is capable of performing a task. This theory is a complement to the goal-setting theory, as it incorporates goals into the process. Higher efficacy is related to greater confidence, greater persistence in the face of difficulties, and responding to negative feedback by working harder, not shutting down. 16 Self-Efficacy Theory (2 of 2) Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Goal-setting theory and self-efficacy theory don’t compete; they complement each other. As this exhibit shows, employees whose managers set difficult goals for them will have a higher level of self-efficacy and set higher goals for their own performance. Why? Setting difficult goals for people communicates your confidence in them. 17 Reinforcement Theory Reinforcement theory: Behavior is a function of consequences Operant conditioning theory Behaviorism Social- learning theory and reinforcement Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. In contrast to goal setting, reinforcement theory suggests that behavior is a function of consequences. Reinforcement strengthens a behavior and increases the chances it will be repeated. The most relevant component of reinforcement theory, is operant conditioning theory which argues that people learn to behave a certain way to either get something they want or to avoid something they don’t want. The view that we can learn by observing and direct experience is called social-learning theory. 18 Equity Theory (1 of 2) Equity theory: Employees weigh what they put into a job situation (input) against what they get from it (outcome) They compare their input-outcome ratio with the input-outcome ratio of relevant others Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Adam’s equity theory utilizes the perception theory that we looked at in previous chapters. The idea is that employees compare their ratios of outcomes to inputs of others they see as relevant. When they see the ratios as equal, there is a perceived state of equity and no tension arises. However, when they perceive the ratios to be unequal, they may experience anger or guilt depending on the result of the equity analysis, and then tension can arise. This tension can motivate people to act in a way that brings the situation into a more equitable state. 19 Equity Theory (2 of 2) Equity theory suggests employees who perceive inequity will make one of six choices: Change inputs Change outcomes Distort perceptions of self Distort perceptions of others Choose a different referent Leave the field Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Some of these propositions have been supported, but others haven’t. First, inequities created by overpayment do not seem to significantly affect behavior in most work situations. Second, not everyone is equity-sensitive. 20 Model of Organizational Justice Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Increasingly, we think of equity as organizational justice, a larger perception of what is fair in the workplace. Employees perceive their organizations as just when they see that what they receive matches what they have put in. One key element of organizational justice is distributive justice. Employees tend to perceive their outcomes are fairest when they are distributed equitably. Procedural justice examines the perceived fairness of the process used to determine the distribution of rewards. Beyond outcomes and procedures, research shows that employees care about two other forms of fairness that have to do with the way they are treated during interactions with others. The first type is informational justice, which reflects whether managers provide employees with explanations for key decisions and keep them informed of important organizational matters. The second type is interpersonal justice, which reflects whether employees are treated with dignity and respect. These three components make up an individual’s view of justice within the organization. Equity theory is popular in the United States because U.S. style reward systems assume that employees are highly sensitive to equity in reward allocation. Research shows, however, that in other cultures inputs and outputs may be valued differently. Managers need to determine what is considered “fair” in a particular culture. Managers need to be transparent, consistent, and unbiased in their decision making. 21 Expectancy Theory (1 of 2) Three key relationships: Effort-performance: perceived probability that exerting effort leads to successful performance Performance-reward: the belief that successful performance leads to desired outcome Rewards-personal goals: the attractiveness of organizational outcome (reward) to the individual Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The most commonly used and widely accepted theory of motivation is Victor Vroom’s Expectancy Theory. This theory argues that the strength of a tendency to act in a certain way is dependent on the strength of the expectation that they will receive a given outcome and that the outcome is desired. Employees are willing to work harder if they believe that their actions will get them an outcome they desire. For example, employees are willing to work long and hard hours if they know that they will be rewarded through promotion, recognition, or pay in response to their hard work. 22 Expectancy Theory (2 of 2) Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Expectancy theory helps explain why a lot of workers aren’t motivated on their jobs and do only the minimum necessary to get by. Questions employees need to answer in the affirmative if their motivation is to be maximized: If I give a maximum effort, will it be recognized in my performance appraisal? If I get a good performance appraisal, will it lead to organizational rewards? If I’m rewarded, are the rewards attractive to me? 23 Job Engagement Job Engagement: The investment of an employee’s physical, cognitive, and emotional energies into job performance Organizations where employees are highly engaged have: Higher levels of productivity Fewer safety incidents Lower turnover Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Research shows that highly successful organizations tend to have more engaged employees than average organizations. Highly engaged employees believe it is meaningful to work, are inspired by their leaders, and have similar values to those of the organization. 24 Integrating Theories Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. This exhibit integrates much of what we know about motivation. 25 Implications for Managers Make sure extrinsic rewards for employees are not viewed as coercive, but instead provide information about competence and relatedness. Consider goal-setting theory. Clear and difficult goals often lead to higher levels of employee productivity. Consider reinforcement theory regarding quality and quantity of work, persistence of effort, absenteeism, and accident rates. Consult equity theory to help understand productivity, satisfaction, absence, and turnover variables. Expectancy theory offers a powerful explanation of performance variables such as employee productivity, absenteeism, and turnover. Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 26 Copyright Copyright © 2018, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 27 STATE OF THE AMERICAN WOR KPLACE EMPLOYEE ENGAGEMENT INSIGHTS FOR U.S. BUSINESS LEADERS TO WIN CUSTOMERS — and a bigger share of the marketplace — companies must first win the hearts and minds of their employees. If you are a business leader serious about implementing proven engagement strategies for growth at your organization, contact Stephanie Holgado at +1-202-715-3101 or [email protected] COPYRIGHT AND TRADEMARK STANDARDS This document contains proprietary research, copyrighted materials, and literary property of Gallup, Inc. It is for your guidance only and is not to be copied, quoted, published, or divulged to others. All of Gallup, Inc.’s content, unless otherwise noted, is protected by copyright © 2013. All rights reserved. This document is of great value to Gallup, Inc. Accordingly, international and domestic laws and penalties guaranteeing patent, copyright, trademark, and trade secret protection safeguard the ideas, concepts, and recommendations related within this document. No changes may be made to this document without the express written permission of Gallup, Inc. Gallup®, Q12®, Clifton StrengthsFinder®, StrengthsFinder®, Engagement Creation Index™, HumanSigma®, Gallup Panel™, Gallup-Healthways Well-Being Index®, and CE11® are trademarks of Gallup, Inc. All rights reserved. All other trademarks and copyrights are the property of their respective owners. The Q12 items are protected by copyright of Gallup, Inc., 1993-1998. All rights reserved. ABOUT THIS REPORT The State of the American Workplace: Employee Engagement Insights for U.S. Business Leaders report highlights findings from Gallup’s ongoing study of the American workplace from 2010 through 2012. This is a continuation of Gallup’s previous report on the U.S. workplace covering 2008 through 2010. This latest report provides insights into what leaders can do to improve employee engagement and performance in their companies. It includes an overview of the trend in U.S. employee engagement, a look at the impact of engagement on organizational and individual performance, information about how companies can accelerate employee engagement, and an examination of engagement across different segments of the U.S. working population. Leaders, Here’s something they’ll probably never teach you in business school: The single biggest decision you make in your job — bigger than all of the rest — is who you name manager. When you name the wrong person manager, nothing fixes that bad decision. Not compensation, not benefits — nothing. At Gallup, we’ve studied the impact of human nature on the economy for decades. We’ve now reviewed more than 25 million responses to our employee engagement survey, the Q12. And what we found out about managers and employees has serious implications for the future of American companies and the world. Of the approximately 100 million people in America who hold full-time jobs, 30 million (30\%) are engaged and inspired at work, so we can assume they have a great boss. At the other end of the spectrum are roughly 20 million (20\%) employees who are actively disengaged. These employees, who have bosses from hell that make them miserable, roam the halls spreading discontent. The other 50 million (50\%) American workers are not engaged. They’re just kind of present, but not inspired by their work or their managers. Here’s what you need to know: Gallup research has found that the top 25\% of teams — the best managed — versus the bottom 25\% in any workplace — the worst managed — have nearly 50\% fewer accidents and have 41\% fewer quality defects. What’s more, teams in the top 25\% versus the bottom 25\% incur far less in healthcare costs. So having too few engaged employees means our workplaces are less safe, employees have more quality defects, and disengagement — which results from terrible managers — is driving up the country’s healthcare costs. FROM THE CEO 4 Gallup research also shows that these managers from hell are creating active disengagement costing the U.S. an estimated $450 billion to $550 billion annually. If your company reflects the average in the U.S., just imagine what poor management and disengagement are costing your bottom line. On the other hand, imagine if your company doubled the number of great managers and engaged employees. Gallup finds that the 30 million engaged employees in the U.S. come up with most of the innovative ideas, create most of a company’s new customers, and have the most entrepreneurial energy. When leaders in the United States of America — or any country for that matter — wake up one morning and say collectively, “Let’s get rid of managers from hell, double the number of great managers and engaged employees, and have those managers lead based on what actually matters,” everything will change. The country’s employees will be twice as effective, they’ll create far more customers, companies will grow, spiraling healthcare costs will decrease, and desperately needed GDP will boom like never before. This isn’t impossible. It’s doable. And Gallup is working with some of the world’s biggest and best companies to make it happen. Jim Clifton Chairman and CEO 5 TABLE OF CONTENTS EXECUTIVE SUMMARY Although the state of the U.S. economy has changed substantially since 2000, the state of engagement within the American workplace has not. Engaged employees provide the vital competitive advantage U.S. companies need to regain their stature in the global marketplace. U.S. WORKFORCE ENGAGEMENT STAGNANT — HOLDING BACK ECONOMY Seven in 10 American workers are “not engaged” or “actively disengaged” in their work, meaning they are emotionally disconnected from their workplaces and less likely to be productive. A CLOSER LOOK AT UNEMPLOYMENT IN THE U.S., 2010-2012 Gallup began measuring employment trends daily in 2010 and developed a unique metric to track full-time employment among the U.S. adult population that is unaffected by shifts in the nation’s workforce size. HOW GALLUP MEASURES EMPLOYEE ENGAGEMENT Gallup’s Q12 metric shows that employee engagement is measurable, manageable, and improvable. HOW EMPLOYEE ENGAGEMENT DRIVES GROWTH Gallup’s recent meta-analysis confirms employee engagement’s well-established links to nine essential performance outcomes, and additional research connects employee engagement to higher earnings per share. WORKPLACE PERKS NO SUBSTITUTE FOR ENGAGEMENT Engagement has a greater impact on employees’ wellbeing than perks such as vacation time and flexible hours. 8 12 16 18 24 27 6 EMPLOYEES ALLOWED TO WORK REMOTELY ARE MORE ENGAGED When workers have the opportunity to work off-site, they are slightly more engaged and log more hours at work each week. MAGIC NUMBERS: HOW ORGANIZATION SIZE AND TEAM SIZE AFFECT ENGAGEMENT Employee engagement flourishes in smaller, tight-knit environments. DIFFERENT TYPES OF WORKERS DEMAND DIFFERENT ENGAGEMENT STRATEGIES Learn how occupation, tenure, age, education, and gender play a role in employees’ engagement levels. THREE WAYS TO ACCELERATE EMPLOYEE ENGAGEMENT Gallup helps organizations boost engagement levels with strategies to hire the right employees, develop their strengths, and enhance their wellbeing. 1. Select the Right People 2. Develop Employees’ Strengths 3. Enhance Employees’ Wellbeing LINKING EMPLOYEE ENGAGEMENT TO CUSTOMER GROWTH Employee engagement is not an end in itself. The moment an employee connects with a customer is a source of untapped power that has profound implications for a company’s profitability. WHAT THE BEST DO DIFFERENTLY Despite a challenging business environment and stagnant engagement levels nationally, many organizations that partner with Gallup are finding success by making employee engagement the focus of their growth strategies. 29 31 32 43 54 59 7 While the state of the U.S. economy has changed substantially since 2000, the state of the American workplace has not. Currently, 30\% of the U.S. workforce is engaged in their work, and the ratio of engaged to actively disengaged employees is roughly 2-to-1, meaning that the vast majority of U.S. workers (70\%) are not reaching their full potential — a problem that has significant implications for the economy and the individual performance of American companies. Gallup’s research shows that employee engagement remains flat when left unmanaged. However, there are pockets of organizations in the U.S. that have figured out engagement, and some, like Gallup’s Great Workplace Award winners, are reaping the benefits of having more than five times the ratio of engaged to actively disengaged employees. This report includes an overview of the trend in U.S. employee engagement, a look at the impact of engagement on organizational and individual performance, information about how companies can accelerate employee engagement, and an examination of engagement across different segments of the U.S. population. Findings from what the strongest organizations do differently provide insights into what any company can do to improve employee engagement and performance. Through decades of research with hundreds of organizations and more than 25 million employees, Gallup leads the world in its unparalleled understanding of engagement’s impact on the workplace. EXECUTIVE SUMMARY STATE OF THE AMERICAN WORKPLACE E M P L O Y E E E N G A G E M E N T I N S I G H T S F O R U . S . B U S I N E S S L E A D E R S 8 ENGAGEMENT MAKES A DIFFERENCE TO THE BOTTOM LINE • Engaged workers are the lifeblood of their organizations. Work units in the top 25\% of Gallup’s Q12 Client Database have significantly higher productivity, profitability, and customer ratings, less turnover and absenteeism, and fewer safety incidents than those in the bottom 25\%. • Organizations with an average of 9.3 engaged employees for every actively disengaged employee in 2010-2011 experienced 147\% higher earnings per share (EPS) compared with their competition in 2011-2012. In contrast, those with an average of 2.6 engaged employees for every actively disengaged employee experienced 2\% lower EPS compared with their competition during that same time period. • Gallup estimates that active disengagement costs the U.S. $450 billion to $550 billion per year. MANAGERS AND LEADERS PLAY A CRITICAL ROLE • Managers and executives emerged from the Great Recession with the most momentum in the workplace. More than one-third (36\%) of managers and executives were engaged in 2012, up 10 percentage points from 2009. By contrast, professional workers overall saw a modest two-point increase in engagement levels from 2009 to 2012. • Gallup has found that managers who focus on their employees’ strengths can practically eliminate active disengagement and double the average of U.S. workers who are engaged nationwide. DIFFERENT TYPES OF WORKERS NEED DIFFERENT ENGAGEMENT STRATEGIES • The generations near the end of their careers tend to be more engaged than those at the beginning of their careers, according to Gallup’s research. • Millennials are most likely of all generations to say they will leave their jobs in the next 12 months if the job market improves. • Women have slightly higher overall engagement than men. • Employees with a college degree are not as likely as those with less education to report having a positive, engaging workplace experience. SOME OF GALLUP’S MOST IMPORTANT FINDINGS INCLUDE: STATE OF THE AMERICAN WORKPLACE E M P L O Y E E E N G A G E M E N T I N S I G H T S F O R U . S . B U S I N E S S L E A D E R S 9 ENGAGEMENT HAS A GREATER IMPACT ON PERFORMANCE THAN CORPORATE POLICIES AND PERKS • Although certain policies such as hours worked, flextime, and vacation time do relate to employee wellbeing, engagement levels in the work environment eclipse corporate policies. • Despite not always having a manager nearby to monitor their productivity, remote workers actually log more hours at their primary job than do their on-site counterparts. • Only 22\% of U.S. employees are engaged and thriving. When employees are engaged and thriving in their overall lives, they are more likely to maintain strong work performance — even during difficult times. EMPLOYEES ARE NOT PREPARED TO ENGAGE CUSTOMERS • Only 41\% of employees felt that they know what their company stands for and what makes its brand different from its competitors’ brands. • Engagement levels among service employees — those workers who are often on the front line serving customers — are among the lowest of any occupation Gallup measured and have declined in recent years, while engagement for every other job category increased. STATE OF THE AMERICAN WORKPLACE E M P L O Y E E E N G A G E M E N T I N S I G H T S F O R U . S . B U S I N E S S L E A D E R S 10 WHAT COMPANIES CAN DO TO IMPROVE EMPLOYEE ENGAGEMENT Use the right employee engagement survey. The employee engagement metrics companies use can affect their ability to create changes in performance. Often, organizations make the mistake of using employee surveys to collect data that are irrelevant or impossible to act on. When a company asks its employees for their opinions, they expect action to follow. Gallup’s Q12 employee engagement metric was designed with this expectation in mind — the data the Q12 survey collects are specific, relevant, and actionable for any team at any organizational level, and they are proven to affect key performance metrics. Why? Because the Q12 measures employees’ emotional engagement, which ties directly to their level of discretionary effort — their willingness to go the extra mile for their company. Focus on engagement at the enterprise and local levels. Transformation occurs at the local level, but it only happens when the tone is set from the top down. Companies realize the most benefit from engagement initiatives when leaders weave employee engagement into performance expectations for managers and enable them to execute on those expectations. Managers and employees must feel empowered by leadership to make a significant difference in their immediate environment. Select the right managers. Whether hiring from the outside or promoting from within, organizations that scientifically select managers for the unique talents it takes to effectively manage people greatly increase the odds of engaging their employees. Instead of using management jobs as promotional prizes for all career paths, companies should treat these roles as unique with distinct functional demands that require a specific talent set. They should select managers with the right talents for supporting, positioning, empowering, and engaging their staff. Coach managers and hold them accountable for their employees’ engagement. Gallup’s research has found that managers are primarily responsible for their employees’ engagement levels. Organizations should coach managers to take an active role in building engagement plans with their employees, hold managers accountable, track their progress, and ensure they continuously focus on emotionally engaging their employees. Gallup’s Great Workplace Award winners consistently make employee engagement part of their formal review process, and most use these improvements as a criterion for promotions. Define engagement goals in realistic, everyday terms. While the overall organization may set lofty goals for engagement, leaders must make these objectives meaningful to employees’ day- to-day experiences to bring engagement to life. Ensure that managers discuss employee engagement elements at weekly meetings, impact planning sessions, and in one-on-one sessions with employees to weave engagement into daily interactions and activities. Find ways to connect with each employee. As this report clearly illustrates, each person has different needs and expectations regarding employee engagement. Managers should know that age, gender, tenure, and other variables all play a vital role in shaping a team member’s workplace experience. Managers should also know that every interaction with an employee has the potential to influence his or her engagement and inspire discretionary effort. STATE OF THE AMERICAN WORKPLACE E M P L O Y E E E N G A G E M E N T I N S I G H T S F O R U . S . B U S I N E S S L E A D E R S 11 Since the global recession of 2007-2009, the American workforce has struggled to adapt to the new economic climate’s uncertainties in a period marked by sluggish growth, persistently high unemployment, and sharp spending cuts by businesses and consumers. Despite the toll the Great Recession has taken on the economy, which was documented at length in Gallup’s 2008- 2010 State of the American Workplace report, Gallup found employee engagement levels holding steady among U.S. workers during that interval. This trend continued through the 2010-2012 period of Gallup’s latest report. Gallup defines “engaged” employees as those who are involved in, enthusiastic about, and committed to their work and contribute to their organization in a positive manner. In 2010, 28\% of American workers were engaged. By the end of 2012, as the U.S. inched toward a modest recovery, that number increased slightly to 30\%, matching the all-time high since Gallup began tracking the employee engagement levels of the U.S. working population in 2000. These latest findings indicate that 70\% of American workers are “not engaged” or “actively disengaged” and are emotionally disconnected from their workplaces and less likely to be productive. Currently, 52\% of workers are not engaged, and worse, another 18\% are actively disengaged in their work. Gallup estimates that these actively disengaged employees cost the U.S. between $450 billion to $550 billion each year in lost productivity. They are more likely to steal U.S. WORKFORCE ENGAGEMENT STAGNANT HOLDING BACK ECONOMY 70\% OF AMERICAN WORKERS ARE “NOT ENGAGED” OR “ACTIVELY DISENGAGED.” 12 from their companies, negatively influence their coworkers, miss workdays, and drive customers away. Having the vast majority of American employees not engaged with their workplaces is troublesome as the country attempts to recover ground lost during the financial crisis and get back on track to pre-recession levels of prosperity. Even more troubling is that workplace engagement levels have hardly budged since Gallup began measuring them in 2000, with fewer than one-third of Americans engaged in their jobs in any given year. Gallup’s extensive research shows that engagement is strongly connected to business outcomes essential to an organization’s financial success, including productivity, profitability, and customer satisfaction. And engaged employees are the ones who are the most likely to drive the innovation, growth, and revenue that their companies desperately need. These engaged workers build new products and services, generate new ideas, create new customers, and ultimately help spur the economy to create more good jobs. 0\% 100\% 30 29 28 28 29 30 30 26 29 28 30 30 26 52 52 53 54 51 50 55 59 54 55 53 54 56 18 19 19 18 20 20 15 15 17 17 17 16 182000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 EMPLOYEE ENGAGEMENT AMONG THE U.S. WORKING POPULATION ACTIVELY DISENGAGED NOT ENGAGED ENGAGED 13 ENGAGEMENT AMONG WORKERS, STATE BY STATE Although engagement has remained flat overall in the U.S., Gallup researchers found slight variation in engagement among workers state by state. Louisiana leads the country with the highest percentage of engaged workers, at 37\%, followed closely by Oklahoma at 36\%. South Dakota, Georgia, Arkansas, and South Carolina each have 34\% of engaged workers. Thirty-three percent of workers are engaged in Texas, Nevada, Wyoming, Alabama, North Dakota, and Florida. At the far end of the range is Minnesota, which has the lowest number of engaged workers, at 26\%. Gallup found that at the opposite end of the engagement spectrum, more than one in five (21\%) workers in Rhode Island are actively disengaged, as are 20\% of employees in New Jersey, Connecticut, Pennsylvania, New York, Michigan, Vermont, Kentucky, and Illinois. When looking at the range of actively disengaged employees, Idaho had the lowest percentage of this type of worker, at 14\%. Percentage of engaged workers 14 0\% 10\% 20\% 30\% 40\% 50\% 43 34 21 0\% 10\% 20\% 30\% 40\% 50\% 13 20 30 “ORGANIZATION IS HIRING” 0\% 10\% 20\% 30\% 40\% 50\% 43 34 21 0\% 10\% 20\% 30\% 40\% 50\% 13 20 30 “ORGANIZATION IS LETTING GO” ENGAGED WORKERS REPORT TWICE AS MUCH JOB CREATION The national unemployment rate has served as a key indicator of progress — or lack thereof — in what many economists have characterized as a “ jobless recovery” after the recession years. Economists widely agree that the U.S. needs more jobs to bolster the country’s fragile economic recovery. In a recent study, Gallup found that engaged employees are twice as likely to report that their organization is hiring new workers as those who are actively disengaged. In contrast, those who are actively disengaged are nearly three times more likely than those who are engaged to report that their organization is shedding jobs. This is regardless of overall U.S. job creation holding steady during the survey period. Gallup researchers surmise that job creation partially may be a by product of the economic climate as a whole, but it is also likely a function of a business’ own success, driven by its workplace environment, performance, and leadership. How leaders manage their employees can substantially affect engagement levels in the workplace, in turn influencing the company’s bottom line. Gallup’s analysis suggests that the most successful organizations effectively engage their employees, leading to higher productivity and better financial outcomes. These organizations appear to move the job market in the right direction. By comparison, workplaces that disengage their workers suffer from lower productivity, are less likely to create new jobs, and are more likely to be reducing their workforce. These findings suggest a link between engagement and job creation. And if American companies do not find a way to engage more of their workers, they will struggle to create more jobs, making it difficult for the U.S. to achieve real, sustainable economic growth in the near future. ENGAGED NOT ENGAGED ACTIVELY DISENGAGED 15 A CLOSER LOOK AT UNEMPLOYMENT IN THE U.S., 2010-2012 In reviewing the state of the U.S. workplace, it is important to consider the broader impact of unemployment on the country’s workforce. Gallup’s unemployment rate averaged 9\% from 2010-2012. It peaked at 10.9\% in January 2010 and remained above 10\% for three consecutive months through March of that year. The lowest unemployment level Gallup measured during this period was in October 2012 when it dipped to 7\%, likely as a result of seasonal holiday hiring, although it quickly bounced back up to 7.8\% a month later. While Gallup did not begin tracking unemployment until 2010, according to the U.S. Bureau of Labor Statistics (BLS), the pre-recession unemployment rate was 5\% in late 2007 and had remained more or less stable at that rate for 30 months. Gallup measures unemployment in a method similar to what the BLS uses; however, Gallup does not seasonally adjust its unemployment metric and it reflects daily interviewing. The BLS, on the other hand, collects and analyzes data for one week of each month and adjusts the data according to seasonal trends. As Gallup began tracking daily unemployment numbers during recovery from the recent economic downturn, it became clear that this conventional unemployment metric only told part of the story. To fully understand the economic backdrop of this recovery period, Gallup developed a Payroll to Population (P2P) rate and an “underemployment” rate. P2P measures the percentage of the U.S. adult population aged 18 and older who are employed full time by an employer for at least 30 hours per week. Gallup’s underemployment rate measures the combined percentage of U.S. adults who are unemployed in the workforce with the percentage of those who are working part time but looking for full-time work. These measures are unique to Gallup and paint a more complete picture of the U.S. employment situation than can the unemployment rate alone. 16 Unlike unemployment rates, which can actually improve if people drop out of the workforce, P2P is a true reflection of the labor force. P2P is also highly correlated with GDP per capita and wellbeing. Gallup tracked the country’s highest P2P rate from the 2010-2012 period in October 2012 at 45.7\%. The lowest reading of 41.7\% came in February 2011. The overall average for this period was 43.8\%, although by December 2012 the P2P rate was up to 44.4\%. Similar to other employment metrics, P2P is subject to seasonal hiring fluctuations, but in general, P2P has improved since 2010, and many months in 2012 saw month-over-month improvements. The employment situation seems to be steadily improving, though it is still in a fragile state. 201220112010 40\% 50\% DecNovOctSepAugJulJunMayAprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJan 201220112010 5\% 10\% 15\% DecNovOctSepAugJulJunMayAprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJanDecNovOctSepAugJulJunMayAprMarFebJan GALLUP PAYROLL TO POPULATION RATE TREND, 2010-2012 GALLUP UNEMPLOYMENT RATE TREND, 2010-2012 17 HOW GALLUP MEASURES EMPLOYEE ENGAGEMENT Gallup measures employee engagement based on workers’ responses to its Q12 survey, which consists of 12 actionable workplace elements with proven links to performance outcomes. To identify these elements, Gallup spent years conducting thousands of interviews at every level of various organizations, in most industries, and in several countries. Since Gallup finalized the Q12 question wording in the late 1990s, the survey has been administered to more than 25 million employees in 195 different countries and 70 languages. The following items are the ones that emerged from Gallup’s pioneering research as the best predictors of employee and workgroup performance. 18 01 I know what is expected of me at work. 07 At work, my opinions seem to count. 02 I have the materials and equipment I need to do my work right. 08 The mission or purpose of my company makes me feel my job is important. 03 At work, I have the opportunity to do what I do best every day. 09 My associates or fellow employees are committed to doing quality work. 04 In the last seven days, I have received recognition or praise for doing good work. 10 I have a best friend at work. 05 My supervisor, or someone at work, seems to care about me as a person. 11 In the last six months, someone at work has talked to me about my progress. 06 There is someone at work who encourages my development. 12 This last year, I have had opportunities at work to learn and grow. GALLUP’S Q12® 19 FOUR STAGES OF EMPLOYEE ENGAGEMENT In addition to discovering the 12 items, Gallup also found that the order of the items is important. The 12 items represent the four stages of a hierarchy that an employee goes through on the path to complete engagement. Items 1 and 2 represent employees’ primary needs. When employees start a new role, their needs are basic. They ask, “What do I get from this role?” In the second stage, encompassing items 3 through 6, employees think about their own individual contributions and consider how others view and value their efforts. Manager support is most important here because managers typically define perceptions of value. Once employees advance through the first two stages of the hierarchy, their perspective begins to widen and they evaluate their connection to the team and the organization. In the third stage, encompassing items 7 through 10, employees ask themselves, “Do I belong?” Then, during the fourth and most advanced stage, composed of items 11 and 12, employees want to make improvements, learn, grow, innovate, and apply their new ideas. The four stages help managers evaluate workgroup performance and concentrate their efforts on areas most relevant to where their team is at on the journey to complete engagement. 25M EMPLOYEES IN 195 DIFFERENT COUNTRIES AND 70 LANGUAGES SINCE THE Q12 QUESTION …