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  • This is Designing a Motivating Work Environment, chapter 6 from the book An Introduction to OrganizationalBehavior (index.html) (v. 1.1).

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  • Chapter 6

    Designing a Motivating Work Environment


    After reading this chapter, you should be able to do the following:

    1. Describe the history of job design approaches.2. Understand how to increase the motivating potential of a job.3. Understand why goals should be SMART.4. Set SMART goals.5. Give performance feedback effectively.6. Describe individual-, team-, and organization-based incentives that can

    be used to motivate the workforce.

    What are the tools companies can use to ensure a motivated workforce? Nucorseems to have found two very useful tools to motivate its workforce: a job designincorporating empowerment, and a reward system that aligns companyperformance with employee rewards. In this chapter, we will cover the basic toolsorganizations can use to motivate workers. The tools that will be described arebased on motivation principles such as expectancy theory, reinforcement theory,and need-based theories. Specifically, we cover motivating employees through jobdesign, goal setting, performance feedback, and reward systems.


  • 6.1 Motivating Steel Workers Works: The Case of Nucor

    Chapter 6 Designing a Motivating Work Environment


  • Figure 6.1

    2010 JupiterimagesCorporation

    Manufacturing steel is not a glamorous job. The industry is beset by many problems, and more than 40 steelmanufacturers have filed for bankruptcy in recent years. Most young employees do not view working at a steelmill as their dream job. Yet, one company distinguished itself from all the rest by remaining profitable for over130 quarters and by providing an over 350% return on investment (ROI) to shareholders. The company is clearlydoing well by every financial metric available and is the most profitable in its industry.

    How do they achieve these amazing results? For one thing, every one of Nucor Corporations (NYSE: NUE) 12,000employees acts like an owner of the company. Employees are encouraged to fix the things they see as wrong andhave real power on their jobs. When there is a breakdown in a plant, a supervisor does not have to askemployees to work overtime; employees volunteer for it. In fact, the company is famous for its decentralizedstructure and for pushing authority and responsibility down to lower levels in the hierarchy. Tasks thatpreviously belonged to management are performed by line workers. Management listens to lower levelemployees and routinely implements their new ideas.

    The reward system in place at Nucor is also unique, and its employees may be the highest paid steelworkers inthe world. In 2005, the average Nucor employee earned $79,000, followed by a $2,000 bonus decided by thecompanys annual earnings and $18,000 in the form of profit sharing. At the same time, a large percentage ofthese earnings are based on performance. People have the opportunity to earn a lot of money if the company isdoing well, and there is no upward limit to how much they can make. However, they will do much worse thantheir counterparts in other mills if the company does poorly. Thus, it is to everyones advantage to help thecompany perform well. The same incentive system exists at all levels of the company. CEO pay is clearly tied tocorporate performance. The incentive system penalizes low performers while increasing commitment to thecompany as well as to high performance.

    Nucors formula for success seems simple: align company goals with employee goals and give employees realpower to make things happen. The results seem to work for the company and its employees. Evidence of thissuccessful method is that the company has one of the lowest employee turnover rates in the industry and

    Chapter 6 Designing a Motivating Work Environment

    6.1 Motivating Steel Workers Works: The Case of Nucor 242

  • remains one of the few remaining nonunionized environments in manufacturing. Nucor is the largest U.S.minimill and steel scrap recycler.

    Case written by [citation redacted per publisher request]. Based on information from Byrnes, N., & Arndt, M.(2006, May 1). The art of motivation. BusinessWeek. Retrieved April 30, 2010, from; Foust, D. (2008, April 7). The bestperformers of 2008. BusinessWeek. Retrieved April 30, 2010, from; Jennings, J. (2003). Ways to really motivate people:Authenticity is a huge hit with Gen X and Y. The Secured Lender, 59, 6270; Marks, S. J. (2001). Incentives thatreally reward and motivate. Workforce, 80, 108114.


    1. What are some potential problems with closely tying employee pay tocompany performance?

    2. Nucor has one of the lowest turnover rates in the industry. How much ofthe organizations employee retention is related to the otherwise lowpay of the steel working industry?

    3. What would Nucors strategy look like in a nonmanufacturingenvironment (e.g., a bank)?

    4. Would Nucors employee profit-sharing system work at a much largercompany? At what point does a company become too large for profitsharing to make a difference in employee motivation?

    5. Imagine that the steel industry is taking a major economic hit andNucors profits are way down. Employees are beginning to feel the pinchof substantially reduced pay. What can Nucor do to keep its employeeshappy?

    Chapter 6 Designing a Motivating Work Environment

    6.1 Motivating Steel Workers Works: The Case of Nucor 243

  • 6.2 Motivating Employees Through Job Design


    1. Learn about the history of job design approaches.2. Consider alternatives to job specialization.3. Identify job characteristics that increase motivating potential.4. Learn how to empower employees.

    Importance of Job Design

    Many of us assume the most important motivator at work is pay. Yet, studies pointto a different factor as the major influence over worker motivationjob design.How a job is designed has a major impact on employee motivation, job satisfaction,commitment to an organization, absenteeism, and turnover.

    The question of how to properly design jobs so that employees are more productiveand more satisfied has received attention from managers and researchers since thebeginning of the 20th century. We will review major approaches to job designstarting from its early history.

    Scientific Management and Job Specialization

    Perhaps the earliest attempt to design jobs came during the era of scientificmanagement. Scientific management is a philosophy based on the ideas ofFrederick Taylor as presented in his 1911 book, Principles of Scientific Management.Taylors book is among the most influential books of the 20th century; the ideaspresented had a major influence over how work was organized in the followingyears. Taylor was a mechanical engineer in the manufacturing industry. He sawwork being done haphazardly, with only workers in charge. He saw theinefficiencies inherent in employees production methods and argued that amanagers job was to carefully plan the work to be performed by employees. He alsobelieved that scientific methods could be used to increase productivity. As anexample, Taylor found that instead of allowing workers to use their own shovels, aswas the custom at the time, providing specially designed shovels increasedproductivity. Further, by providing training and specific instructions, he was able todramatically reduce the number of laborers required to handle each job.Taylor, F.W. (1911). Principles of scientific management. American Magazine, 71, 570581.Wilson, F. M. (1999). Rationalization and rationality 1: From the founding fathers to

    Chapter 6