AIG Case Study What types of work behaviors did AIG intend to encourage through its retention bonus plan?

AIG was attempting to encourage efficiency. Because of failures in its Financial Products unit, it intended to shut this area of the company down. Arguably, workers within the unit would only work in a proactive manner if they received bonuses to 'work themselves out of a job.' However, there was no clear relationship between performance and pay: even during the height of the toxic real estate debacle, employees were still given bonuses.

Using the model of the individual-organizational exchange relationship, explain the relationship that employees of AIG's Financial Products unit believed they had with the company. How was this exchange relationship violated?

Employees at the company believed that if they performed the actions they were bidden to perform, they would be rewarded. Under the exchange model, workers are paid for performing work and meeting goals, not for upholding ethical ideals. However, the actions of the Financial Products unit were such that they nearly brought down the company (and much of the world economy)...

Even in a pure exchange relationship, the employee is assumed to bring something of value to the organization. The opponents of giving the workers in AIG's Financial Products bonuses felt that they did not do this and merely created harm for others in the long-term to make profits in the short-term.
However, the workers alleged that they were simply doing what they had been asked to do after working long and hard to dismantle the company. One aggrieved worker pointed out that for some employees, the bonuses were their salaries. To deny workers the bonuses would thus be a denial of the most basic aspects of the employee-employer relationship. Also, other elements of the company had a role in bringing about the credit crisis as well as AIG: it was unfair to solely blame the Financial Product division.

Q3. Which motivation theory do you think has the most relevance for understanding the responses of the Financial Product employees to the implementation and unraveling of the retention bonus plan? Explain the reasoning behind your answer.

The motivational theory of path-goal theory…