Why Incentives Help Make Employees Happy

¶ … Profit Sharing and Other Incentives as Employee Development Performance Motivational Tools and the Relationship between Managerial Support and Employee Commitment to the Organization

The impact of profit sharing and other incentives on employee development and organizational growth is measured in various companies around the world. From Keller Williams to Southwest Airlines companies are utilizing incentives, such as 401ks, profit sharing plans, insurance plans, even pre-tax commuter benefits, because like Southwest they believe that their "greatest asset" is their employee (Southwest Report, 2010, p. 45). According to servant leadership theory, by offering managerial support that is designed to benefit and assist the worker, a higher degree of employee commitment to the organization can take place. Thus, companies such as Keller Williams promote mottos like "God, Family, Business" in that order to show that in their workplace environment what comes first is not business but that which is more important than business: family and God. In effect, the workplace environment under this direction becomes familial and fosters a "spirit of mission" that is located in the overall objective of the employees to not only be successful in their careers but also to be successful as people, i.e., good, understanding, ethical, supportive, unified, and giving. In other words, the theory of servant leadership is combined with the theory of directional leadership in order to enhance employee development and facilitate employee commitment to the organization and its objectives. This is made easier and more possible because it is emphasized under these two theoretical approaches that the organization's objectives are identical to the employee's objectives.

How It Works

At Southwest, for instance, the workplace culture is represented by the public company's ticker symbol on the NYSE: LUV. The "Luv" (love) culture embodied by Southwest is rooted in the founders' concept of an airline that prides itself on delivering first-class customer service -- which, to do so, requires first-class employee service; i.e., by taking care of its employees, Southwest believes its employees will in turn take care of its customers. It is very much a pay-it-forward type of mentality that is encouraged in the organization and one that has succeeded at a high level in establishing a winning track record of high employee performance ratings among patrons (Gallo, 2013). Southwest is not alone either in the airline industry: it is joined by Virgin Airlines in offering the kind of employee care and incentivizing that makes workers want to be part of the team. Part of that incentivizing is found in ideas like profit-sharing -- but not all of it. Some of the most important incentives are found simply in the way that managers give support to employees.

Few companies embody the concept of managerial support the way that Keller Williams does. While the individual real estate agents who work for Keller Williams brokerage houses around the world are technically not employed and therefore do not "have" managers, the KW offices utilize a system of agent reciprocity rooted in the management support system doctrine. In other words, senior agents provide guidance (often 24/7) to young or inexperienced agents in order to help them establish and further their careers as well as their commitment to the office. The world of real estate is one in which various brokerages are often competing for talent, so keeping top-performing agents at any given company is a task in and of itself. The Keller Williams approach to recruiting and keeping talent is found in its vision of reciprocity: if you give us your talents, we will give you everything we have. Thus, the KW profit-sharing program is set up in such a way that each office divides the profits "so that the owners who risked their investments enjoy roughly 52% of the profit and the associates who helped grow the company enjoy roughly 48% of the profit" (Thompson, 2009, p. 3). This nearly equal spit of profits has a two-fold strategy at its heart: first, it indicates that owners and associates are on an equal footing and that both depend upon one another for success; second, it rewards employees for growing the market center by bringing in new agents. The profit-sharing system is set up to share the profits of agents with those in the office who helped to recruit them. Thus, if Agent X brings three new agents to the company, a percentage of their profits will be shared between the owners of the market center Agent X since he is responsible for their being there in the first place. It is a system of reciprocity that is attractive for agents and in return they are compelled to help teach, guide and support new agents who require assistance (Larcker, Tayan, 2015).

The Essence of Employee Development

Employee development is a crucial aspect of corporate success, as these companies show (their growth is literally off the charts when compared to that of more conventional, less employee-centric companies) (Gallo, 2013). At the same time, successful companies realize that their success is dependent upon attracting and hiring the "right" sort of employee: people-skills and an ability to serve others are a must; qualities like emotional intelligence (EI) and communication are viewed by managers as assets that are valuable in a service economy. This indicates that in developing employees and incorporating motivational tools like profit-sharing and other incentives, managers look to first have a solid base in terms of employee suitability. The "right" kind of employee in service sector companies is one who is aware of the need to provide high-quality customer care and is more people-focused than data-focused. Data-driven types, however, can also be incorporated into the profit-sharing plan and the incentivizing aspect of the motivational program, but their job description will pertain to other elements of the company's business and will typically be placed in analytical departments. In an organization that values all types of employees, both people and data focused individuals will be looked after because both will be viewed as important for the different skill set that they bring. For Southwest, Virgin and KW, the right kind of asset is one who is people-friendly. For a company like Kroger, however, which has expanded its footprint substantially in recent years thanks in large part to its data-driven focus on building a product base that is in demand among consumers, the numbers-crunching employee is one who is invaluable. Maintaining employee commitment begins by recognizing "that an effective corporate wellness mission starts from the inside out" (Dudlicek, 2014).

In Kroger's case, this beginning inside approach is rooted in the incentivizing "total rewards" program, which has been recognized by the American Heart Association and the National Business Group for its policy on committing to the health of its employees by implementing "well-being programs for employees and their families" (Dudlicek, 2014). Thus, it is not just profit-sharing but also concern, regard and commitment to the actual lives of employees that can drive a company to achieve even greater things. As Kroger realizes, by committing to its workers, its workers in turn are more incentivized to commit to the company. With nearly 400,000 workers across the U.S., Kroger's success is evident in its growth in terms of franchises supermarkets and employee motivation.

Applying the Right Theory

In every instance, the theory of servant leadership as well as directional leadership can be seen as companies take to assessing just how their role in the manager-employee relationship can be best supported. Managerial support embodies the servant leadership mindset and fosters the bond that facilitates growth; directional leadership allows companies to assess the needs of its employees in an economic environment that is subject to fits and starts and to make the proper decisions regarding which direction to take to help incentivize its work force. The key is to develop high-performance level skills in employees and to secure commitment and the object is to accomplish this using motivational tools like Kroger's "total rewards" program which highlights the important need among workers to know that their health is being looked after. For a company like Keller Williams, it motivates by giving its agents the tools they need to generate success independently and in groups through programs like BOLD and Ignite (Larcker, Tayan, 2015).

And as Jacqui, Cairncross and Lamont (2014) note, identifying the needs of employees allows managers to steer their workers towards the goals of the organization by supporting them from behind. For example, by meeting the emotional needs of workers through the implementation of EI, a positive workplace culture can be effected and substantial employee development undertaken. Moreover, by focusing on the positive effects that employees have not only on each other and the organization but also in the community, managers can support the sense of self-worth in employees that helps to build stronger relationships and a more productive environment. Workers respond well to the idea that they are engaged in work that is both beneficial to themselves and to the world around them, according to Rogers, Jiang, Rogers and Intindola (2015). In this manner, they adhere to the suggestion of Sanders (2006), which is that to really incentivize employees and to develop their fullest potential, including their sense of organizational commitment, it is necessary for managers to make themselves likeable. Managerial support is one way of doing this -- and plans like profit-sharing, health care, and a good 401k are other ways. Showing employees that their concerns are the organization's concerns sets the tone and the necessary example that managers and team leaders want their workers to show to customers and to the organization in return. It is a reciprocal relationship at root and one that is based upon the notion that all people want to be cared for.

Recommendations

This paper recommends to Human Resources professionals that they remind companies looking to promote employee development to utilize motivational tools such as profit-sharing and other incentives and to be mindful of the approach that servant leadership theory provides in conjunction with these employee-focused programs. Servant leadership is a style founded on "ethics, virtues and morality," which are areas of business and life that demand attention, discipline, care and integrity (Parris, Peachey, 2013, p. 377). By "prioritizing the needs of others" (Liden, Wayne, Liao, Meuser, 2014, p. 1434) companies can offer the right kind of managerial support needed to help establish employee commitment to the organization. Servant leadership does exactly this: it places the needs of others ahead of its own. Companies like KW embody this type of leadership in their profit-sharing plan which essentially divides profits equally between owners and agents.

The directional leadership approach can also be utilized in order to make the big decisions that organizations must make in terms of assessing how best to incentivize employees and support their overall drive to be committed to the company. These decisions can range from whether or not to implement a profit-share plan or to offer exceedingly good health care plans. The key to this decision making process is that leaders, managers and owners get feedback from employees regarding what they would prefer. That is the heart and soul of the directional leadership style: it incorporates into its assessment that which is important to the workers and then, after analyzing all aspects of the company, including objectives within the community, it can make the proper judgment as to which plan to adopt. This leadership style has some similarity to servant leadership, which is why it can be adopted in unison with that style, because it identifies the needs of employees and elevates them. Putting employees first is and incentivizing method that boosts morale and makes workers feel important in the sense that they feel that the company is investing in them and not just hiring them for a menial task. In response, workers are more inclined to invest in their organization, thus fulfilling the needs of the company as well.

Essentially, there should be a balance between the needs of the organization and the needs of the worker, and the relationship should be based on factors that take into consideration the totality of these needs rather than simply being a means to an end for the organization and not for the worker, whose need to work is otherwise exploited by the organization.

Moreover, by using motivational tools such as profit-share plans and other incentives, organizations can develop employee performance to a high level especially when those motivational tools conform with the motivational cues that the surrounding community traditionally supports. This alludes to an organization's ability to investigate what it is that a particular culture values and why and then incorporate these values into the organization's own ethical system.

As the success of companies like Keller Williams, Southwest, Virgin and Kroger's shows, there is a good deal of reason to implement incentive programs for employees. Not only are these programs recognized by the community and lauded for the good that they do for workers, but they also support the worker's initiative to give back to the organization. Keller Williams agents are a good example of the way in which workers are incentivized to support the workplace culture and framework by leading committees at market centers and by training new agents and leading them in a field that is otherwise highly competitive. In an industry where most agents are required to learn on their own, KW has implemented a system of giving that has allowed it to become the biggest in the nation and be recognized as having the best training program in the world (Larcker, Tayan, 2015).

When companies make themselves likeable through incentivizing plans, they invigorate employees and, as in any relationship, make the "other" want to be involved in the relationship. It is not just a case of you-do-something-for-me and I'll-do-something-for-you. The relationship evolves on a deeper level. There is a sense of camaraderie that is fostered as the spirit of mission and purpose is recognized and embraced within the workplace culture. This spirit is manifested in the positive attitudes and the willingness and desire on the part of both managers and employees to help one another as well as customers and community members. It is a spirit that operates out of a sense of fullness rather than out of a sense of need. Even though the manager examines and empathizes with the needs of the employees, this information is used to formulate the direction that the company should take in responding to these needs. Yet this formulation is founded in a spirit of abundance: one cannot give what one does not have. A company that provides for the needs of employees is not a company that is in need itself -- and looking for something in return is not the aim of the company (even though a return is expected, obviously). The aim is that of servant leadership: the objective is the individual employee himself -- to satisfy his needs and to get him to a place where he feels valued, confident, and needed. By giving the employee a sense of how he is needed (not for the company's sake but for the sake of the consumer) the employee develops a sense of self-worth that is invaluable.

This is essentially the underlying principle of transformational leadership, which may be taken as the culmination of various styles, including servant and directional leadership. The goal of the company is not to incentivize for the sake of incentivizing or for the sake of reaping rewards and lauds from the community or various associations that monitor such programs. The goal is to transform the workplace culture from one in which work is viewed as a dreary task to a culture in which work is viewed as something of considerable value to the community -- as something essential to the lives of those around the community; as something that would be sorely missed were it suddenly to go away.

The development of employee performance is tied to the development of the workplace culture and the workplace culture is tied to the development of leadership strategies utilized by management, team leaders and market centers. Everything is related in the world of business and that means that communities and the needs of employees must be considered just as much if not more than the needs of the customers that companies look to serve. Serving is the ultimate idea -- the main justification of all business. Profit is secondary and comes when the concept of serving another and meeting his or her needs has been accomplished.

Conclusion

In conclusion, employee development can be supported by utilizing a program of incentivizing that aims to foster a spirit of reciprocity, mission, self-worth, and commitment. Incentivizing via profit-sharing and/or other programs allows employees to feel that they are valued and appreciated in their service both to the consumer and to the organization. At the same time incentives can be coupled with a concept of managerial support that fosters employee commitment to the company through a spirit of goodwill. By putting employees first, companies like Southwest and Kroger have risen to best competitors in their respective industries by assessing what it is that not only their customers but their employees want in an organization. By aiming to please, these companies have developed a spirit that is continually rewarding because there is, ultimately, nothing selfish about them. They constantly look outwards to the other -- whether it is customer, the manager, or the employee -- and seek ways to make their lives better. That is the overall aim of the incentivizing strategy of companies -- and the impact is told in the success of these companies over the years, not only in terms of growth but also in terms of employee retention and development.

Annotated Bibliography

Dudlicek, J. (2014). Kroger Feted for Owning Health and Wellness. Progressive Grocer. Retrieved from http://www.progressivegrocer.com/departments/pharmacy-wellness-bpc/kroger-feted-owning-health-and-wellness?nopaging=1

This article is helpful for understanding how Kroger has set itself apart from other industry leaders by appealing to a very popular desire in the American worker, which is good health care. Kroger provides an award-winning health care system to its employees which serves as a tremendous incentive to employee loyalty. This is a good example of incentivizing in the grocery industry and it indicates how a company might promote employee development and commitment via an incentive plan that is beneficial to workers and their families.

Gallo, C. (2013). How Southwest and Virgin America Win by Putting People Before

Profit. Forbes. Retrieved from http://www.forbes.com/sites/carminegallo/2013/09/10/how-southwest-and-virgin-america-win-by-putting-people-before-profit/

This article examines the people-first business plan of Southwest and Virgin and shows how by placing others ahead of the company's own self-interests, the companies actually thrive because they meet the needs and demands of the consumer base in a way that other companies who are more self-interested do not. This people-first plan is reflected moreover in the companies' attitudes towards employees, who feel like they are part of a family in these companies and not just an employee -- but more like a valued son. The article illustrates the importance of incentivizing employees by making the workplace culture full of likeability.

Jacqui, L., Cairncross, G., Lamont, M. (2014). Inducting and training Generation Y

volunteers: a sport event case study. Proceedings of the CAUTHE 2014: Tourism and hospitality in the contemporary world: trends, changes and complexity. Brisbane: University of Queensland: 363-374.

This article showcases why it is necessary to understand what is important and valued to the next generation of workers who are raised within a culture that has taught them motivational cues. The study highlights that certain communities want to be valued for what they give to their organizations and that demonstrating strong EI on the part of management can lead to better commitment and employee retention within the organization. Developing this EI depends upon understanding the motivational cues that the young generation's community has instilled in it.

Larcker, D., Tayan, B. (2015). How important is culture? An inside look at Keller

Williams Realty. Rock Center for Corporate Governance at Stanford University Closer Look Series: Topics, Issues and Controversies in Corporate Governance No. CGRP-48. Social Science Research Network.

This article examines the critical aspect of workplace culture within the environment of Keller Williams Realty and shows that by incorporating a system of virtue ethics in line with servant leadership principles, the program to incentive its agents through profit-shares and highly-touted educational programs like Ignite and BOLD, KW has risen to the top of its class in terms of acquiring agents and developing training programs. KW has more agents for this reason than any brokerage in North America, which is a testament to its profit-share program's success.

Liden, R., Wayne, S., Liao, C., Meuser, J. (2014). Servant leadership and serving culture: Influence on individual and unit performance. Academy of Management Journal, 57(5): 1434-1452.

This article discusses the aspects of servant leadership that are essential in providing this style and approach. It emphasizes the need to conceptualize and to assess the needs of others and to put them ahead of one's own and how this strategy can be effective in binding organizations together and helping employees to grow and develop into better facilitators of the organization's overall goals and objectives. Servant leadership helps to strengthen the workplace culture by supporting an ethica system that is rooted in the observance of virtues.

Parris, D., Peachey, J. (2013). A systematic literature review of servant leadership theory in organizational contexts. Journal of Business Ethics, 113(3): 377-393.

This study emphasizes the rewarding aspect of servant leadership within organizational frameworks by highlighting the positive outcomes of servant leadership, such as strong inter-relationship developments and more integrated and appreciative manager-employee structures. The finding of this study is that servant leadership is a practical and effective strategy for incentivizing workers within any organizational because it sets a positive tone and creates a rewarding atmosphere for workers to be a part of.

Rogers, S., Jiang, K., Rogers, C., Intindola, M. (2015). Strategic Human Resource

Management of Volunteers and the Link to Hospital Patient Satisfaction. Nonprofit and Voluntary Sector Quarterly, doi: 10.1177/0899764015596434.

This study suggests that a positive relationship between managers and workers can be established when managers consider and recognize the special talents of workers and show appreciation for their efforts. This makes employees feel better and more connected to their workplace environment through self-esteem building and gives them a feeling of confidence that then can be translated into productivity and better development for the organization as a whole. This study shows that positive relationship building is an essential component in the maintaining of employee morale and acts as an effective incentive for retaining employees over time.

Sanders, T. (2006). The Likeability Factor. NY: Three Rivers Press.

This book examines the impact of likeability by managers in the workplace and shows that managers who are likeable have better success rates and are more effective at motivating employees than managers who are not likeable. Sanders supports his findings with qualitative and quantitative data that shows why and how employees are motivated by likeable managers. The findings suggest that organizations can improve their bottom lines by being kind, fair and likeable to their employees as a matter of policy and this is true for organizations all over the world, not just in Western companies. The findings consider several case studies as examples in order to support the overall thesis. Overall, likeability is a significant factor in organizational success and should be considered a key component in establishing positive employee development.