Reference no: EM133402428
Case: Times have been tough in the plastic knob business. Ask Ed Rogan, the owner of Rogan Corporation in Northbrook, Illinois, and he'll tell you how the introduction of electronic controls on calibrating instruments has lost him many of his customers. A declining market made pay raises for his 107 employees out of the question, which in turn made it tough to keep them from bailing out-never mind motivating them. Rogan's solution was to give his employees an incentive to find ways of cutting costs by giving them a share of the savings. The hundreds of ideas he received not only helped the company to stay afloat but earned the employees an extra 17 percent of their annual salaries in recent years.The key to the success of Rogan's approach is that sharing improvements encourages employees to take responsibility for their own work.
A similar idea is used at Aspect Communications, a communications equipment manufacturer in San Jose, California, where instead of pegging bonuses to savings, pay is linked to two aspects of customer service: the amount of time the company's product is operational, and measures of customer satisfaction. The basic idea, explains CEO Jim Carreker, is that for the company to be profitable, employees must demonstrate a long-term commitment to customer service. This approach has kept all of Aspect's 400 employees carefully watching the measures on which their pay (and their customers' satisfaction) is based. And it has kept them quite happy with their paychecks!
Paychecks also have been full of pleasant surprises for the 190 employees of the Calvert Group, a financial-management company based in Bethesda, Maryland. These checks include bonuses for outstanding performers and regular distributions of the company's profits. The better the employees perform, the better the company does-and the more the employees make. Says Butler Perkins, a microcomputer-support analyst, "We all know the things we have to do to make more money.'' And, it appears, Calvert employees are doing those things. This is only part of what the Calvert Group does to show appreciation for its employees, however. In a very unusual move, the company also reimburses its employees' commuting expenses. If you walk to work, the company will even reimburse the cost of a pair of running shoes. To save on other expenses (e.g. dry cleaning) still further, Calvert has dropped its dress code, thus allowing employees to come to work in casual clothes-a feature they all like very much.
Questions:
Explain how concepts of organizational justice may be used to explain the success of the incentive programs described here.
Effective incentives involve more than just money. Explain what these three firms are doing in recognition of this fact.
What basic tenets of expectancy theory are illustrated by the innovative incentive systems described here?