Employee Management Case Study: Motivation and Pay Structure

Introduction

This report has been prepared for the design firm under review. The company currently wishes to expand its design team to ten designers instead of the current eight. The reaction of the employees to this decision reveals various problems within the organization.

These problems are related to employee morale, with the commission-only pay structure central to the issue. The pay structure is a symptom that employees' goals are not effectively aligned with the organization's goals. Compounding this are additional problems including high employee turnover and low morale.

After analyzing the problems, it is recommended that the company employ six designers instead of ten and that each designer be paid a salary with bonuses instead of commission only. This solution ensures that all employees are fully utilized, communicates to employees that they are valued, and encourages teamwork and the development of a cohesive working team.

This approach increases the organization's cost efficiency through improved morale and increased employee satisfaction and motivation. By better managing employees, the firm will be able to work more effectively with six employees than with ten, while saving on financial costs, efficiency costs, and employee management costs.

With increased employee satisfaction and commitment, having six employees will allow the company to handle busy periods more effectively than having ten employees, ensuring that peak workloads can be managed. It is also recommended that the company employ two assistant designers to help cope with peak workload, serve as backup, and allow smoother replacement of departing staff.

The firm in question is a design company that currently employs eight designers. These designers are paid on commission only and must therefore rely on there being enough client traffic in the store to support all the designers. There is also high staff turnover and low morale among the designers.

The company needs to ensure that there are sufficient designers available to handle high demand at any time. For this reason, management wishes to employ two more designers. The employees are unhappy about this decision because new designers will take work away from them.

Problem Summary

The core challenge is how to manage employees effectively while still meeting the organization's goals. While having ten designers solves the problem of covering high-demand periods, it does not meet the employees' needs. In turn, this works against the organization's own goals, as employees experience lower morale, higher turnover, and reduced efficiency.

Problem Definition

Several specific problems can be identified; each is discussed in turn below.

Problem One — Low Employee Motivation

High turnover and low morale both stem from the root cause of low employee motivation. As McNamara (2001) notes, "the key to supporting the motivation of your employee is understanding what motivates each of them." The low morale of the employees is a clear sign that their needs have not been adequately considered. While the organization is concerned about having enough employees to cover high-demand times, there appears to be little concern that employees feel they are competing with one another for enough work to sustain an income.

Problem Two — Employees' Needs and Organizational Needs Not Consistent

McNamara (2001) argues that the goals of the organization must be aligned with the goals of its employees. Employees need to share the aims of the organization and be motivated to work towards them, enabling the company to pursue its objectives efficiently. Participation greatly increases employee motivation and productivity and aligns individual goals with organizational goals. It is also noted that empowering employees requires a culture that reflects this value (Billsberry, 2000, p. 292). A study published in the Journal of Applied Psychology reports that employees working on projects are more efficient when their goals relate to overall team goals rather than individual goals (Kristof-Brown, 2001). Viewing the design team as a unit, there is a clear need for employees to be working towards the organization's goals rather than solely their own.

Problem Three — Employees Cannot Work as a Team

The commission-only pay structure means that employees must compete against each other for work and earnings. In this environment, effective teamwork is not possible. Three vital characteristics of a successful team include (Robbins, Bergman, & Stagg, 1999, p. 521):

• Members share a common purpose and are clear on how to achieve the task.
• Members have some degree of empowerment.
• High morale among team members.

These factors are clearly absent in the current situation.

Problem Four — Commission-Only System Bad for Morale

Paying employees commission only communicates an important message to them. Tony McGraw, who has managed real estate agencies for over ten years — an industry known for paying salespeople by commission — states that this arrangement communicates to employees that they are only worth what they can earn. According to McGraw, paying people a base salary signals that they are worth employing and valuable to the company. McGraw also notes that commission-only pay puts stress on employees to meet their targets, which often causes them to push too hard. Overall, a commission-only payment system pressures employees and communicates that they are not truly valued by the organization. It is also perceived as unfair, since income depends not just on how well employees work, but on how much work is available — something beyond their control.

Problem Five — Resistance to Change

There is evidence that many employees are resistant to the proposed changes. This is to be expected: as many managers have observed, employees often resist change for no apparent reason (Daft, 1998, p. 548). Major reasons for resistance include (Daft, 1998, pp. 548–550):

• Self-interest and fear of losing power or prestige.
• Lack of understanding regarding the changes.
• Uncertainty.

These same reasons for resistance are evident in the current situation, which is a sign that change management has not been handled effectively.