Cypress Seminconductor

According to Equity Theory, the most highly motivated employee is the one who perceives his rewards are equal to his contributions. At Cypress Semiconductor, every department is given the same pool of dollars for raises and employees are awarded percentage increases based strictly on merit.

However, the equity in merit evaluation is suspect. Even though the company has automated goal setting and evaluation, it's not clear that there's any way to fairly weight the goals of one employee to another and employees are manipulating the system. Further, equity takes a back seat to merit so there's no guarantee of equity.

Expectancy Theory predicts that employees in an organization will be motivated when they believe that: putting in more effort will yield better job performance; better job performance will lead to organizational rewards; and these rewards are valued by the employee. Employees set their own goals and due dates at Cypress. There's no evidence that this is necessarily motivating greater effort. However, meeting goals is directly tied to merit increases.

3) the CEO encourages management to have delinquency rates less than 20%. If they are above this number, the CEO will send a note which serves as a reminder that performance must be better. Merit wage increases are awarded to employees for their ability to meet stated goals.

4) Because employees define their own goals and deadlines, they may not be appropriately aligned with organizational goals and employees may set them too low just so they can meet them. Equity is part of the salary increase process, but comes only after allocation of merit. This could mean that serious inequities in pay go unresolved. Employees are rebelling against the system, as evidenced by overrides of dates and resistance to entering goals.

5) Management should work more closely with employees to set goals and the notion of team goals should be incorporated into the system to foster team work. Equity should not take a back seat to merit; adjustments should be made to resolve inequities, particularly those that may be related to gender, race or age. Once employees have submitted goals, they should be frozen by the system so that employees can't cheat. Human resources should enforce the use of the goal setting system by all employees.