Dollars Last Days . . . Purpose Increases Value

Business owners have moved to creating ‘relationships’ with employees as a motivational tool. However, to support the pace of growth in our economy, employees struggle to find value in ‘soft’ motivational tools such as “employee of the month” programs and look more toward being an integral part of planning their own success. I believe that a pragmatic balance between both the subjective (intangible goals) and the objective (tangible goals) provides the optimal mix for lasting employee motivation.

Even before the Hawthorne Studies in 1932, society recognized that employees are not just inputs to the production of goods and services. Business owners have moved to creating ‘relationships’ with employees as a motivational tool. However, to support the pace of growth in our economy, employees struggle to find value in ‘soft’ motivational tools such as “employee of the month” programs and look more toward being an integral part of planning their own success. Later studies, based on Management By Objective, concluded that employee effort will lead to performance, performance will lead to rewards, and rewards cause motivation. I believe that a pragmatic balance between both the subjective (intangible goals) and the objective (tangible goals) provides the optimal mix for lasting employee motivation.

Our economy has flourished as our thinking has moved away from treating human resources as commodities and toward viewing them as strategic business resources. But how can we expect performance from these strategic tools if few businesses provide their workforce with participation in the creation of their own strategic plans and goals?

More and more successful organizations are adapting such simple, time-honored concepts as this popular Chinese proverb: “Give a man a fish, he will eat for a day. Teach a man to fish, and you feed him for a lifetime.” A modern example is “You can direct a man with a specific task, and he only produces today’s product, but when you involve an organization in designing its collective plan for success, you set in motion the synergies that make us competitive.”

If employees never changed jobs, the issue of employee motivation and retention would not be important. Several studies estimate the real cost of replacing one employee is from 35 to 70 percent of his or her total annual compensation. This would explain why employee retention and loyalty has become a billion dollar industry in our economy.

The interpretation of what defines motivation is vast. As business owners are faced with weeding through everything from the ‘touchy-feely teamwork’ side of motivation, to the strictest interpretations of the ‘management by objective’ philosophy, we find it is usually more realistic to find a balance.

Employee motivation is often summarized within four main components: compensation, praise, ownership and purpose. Considering the progression of employees in a business, we often start with providing compensation for tasks performed. Then we progress to providing occasional praise for a series of well-done tasks. Next, we tend to consider sharing ownership with certain key employees as a method of reward (and retention) for those employees’ skills, which would be hard to replace. Finally, after some series of rewards, the employee tries to justify the basis on which each of these steps was taken to his or her benefit or detriment. Unfortunately, because most reward systems are considered ad-hoc, employees are unable to really understand what they did to deserve the benefits they received.

  Immediate  Long-Term
Tangible
Intangible
  Compensation
Praise
Ownership
Purpose

This traditional model views compensation and praise as the most immediate tools of motivation, while ownership and purpose provide a long-term support for maintaining a motivated workforce. Note that these components can be divided into immediate and long-term motivating tools as well as tangible and intangible forms of reward.

However, we find that several successful companies have found that the inverse of this priority works better for lasting employee motivation.

Most employees receive both compensation for their daily duties and occasional praise for noted success. But when asked directly, rarely do employees say they are motivated by an understanding of their true purpose to the organization. When we ask most employees if they understand how they can achieve success within the organization, we find a common response is: “I will succeed if I work hard, keep our customers happy and get along with others.”

Traditional Model   Balanced Model
Compensation
Praise
Ownership
Purpose
 
Purpose
Compensation
Praise
Ownership

Although this sounds like an admirable mission statement, it often falls short of providing a pragmatic way for the employee to prioritize and execute the thousands of activities it often takes to achieve these goals. Instead, as each employee pursues his or her own interpretation of accomplishing each goal, some degree of chaos or conflict ensues, resulting in a de-motivated workforce.

In recent years, as our economy strives to stay ahead of global competition, our workforce consistently invests more than 50 percent of waking hours at work. With such an increasing personal investment of time and talents, employee expectations from their investment in their work are on the rise.

In privately held family businesses, employees are often initially attracted to the culture, the people and the promises of success these often smaller organizations provide. However, over time, the lack of tangible goals, coupled with an increasing desire to participate in the planning and measurement of their own success, overshadows the initial benefits of the smaller company in the eyes of employees.

Leadership With Participation = Motivation

Many successful companies today allow all employees to create objective ways to define their contributions to the organization and the tools through which to measure their own successes.

Owners and leaders often share the vision and direction for the organization, while many realize they also bear the responsibility of leading, creating and communicating an objective plan to turn their vision into reality. Some leaders enjoy the motivation they cause by subscribing themselves and their employees to the same plans and goals. Such plans go well beyond, “work hard, follow my direction and I will reward you eventually . . . somehow . . .with something.” When owners and employees build a road map together for their mutual success, then they approach each passing decision with commonality of purpose and direction. Compensation in any form should not be a surprise, no mat­ter how pleasant. It needs to be built into our understanding of the busi­ness, so that every step along the way, we know how we are measuring up. To tie it all together, the organiza­tion as a whole should share a few common objectives against which employees can measure and judge progress, so as to take corrective action at the earliest moment.

Therefore, the core of employee motivation is all employees participate, contribute and buy into the objective plan for their success. That means a strategic business plan must exist that provides the road map for each person’s success, culminating in a success plan for the entire business. Writing a strategy and plan that objectively define how you will collectively succeed converts the employees from feeling like commodities into feeling invested in the company purpose and goals.

All too often, especially in recent economic conditions, we hear announcements of corporate hardship. When negative things happen, businesses clearly communicate why they have taken negative action against their loyal employees. As we explain the negative reaction to current conditions, we should create and share our plans for creating positive outcomes. We often find that when employees have no objective plan by which to measure themselves, employers are indirectly communicating a message that their employees are just a commodity, and their only value is in the next unit of production. Let’s show our employees their real purpose and the pathway to be successful, so the accolades and praise are not a secret, but a proud result of a well managed investment of time and talent.

To create a plan together, owners and non-owners provide benchmarks by which to understand the employee’s pathway to success. Owners and employees, by building a plan for the business, provide a venue for all to understand their purpose and prospective rewards for reaching established goals. Remember

Compensation = Today’s Production . . . But Purpose = Motivation = Organizational Momentum= Increased Business Value.

Reprinted with permission from The Family Business Report sponsored by the Goering Center at the University of Cincinnati College of Business Administration.