Question

Employee Motivation PROBLEM-SOLVING APPLICATION CASE (PSAC)

A Fickle Cat : Long-time employees complain that Caterpillar has changed. John Arnold, a 35-year-old parts auditor at Caterpillar's distribution facility in Morton, Illinois, says some of his coworkers are on food stamps. Arnold has worked for Caterpillar since 1999. More than 10 years later, he's making $15.66 an hour.

To succeed today, does an employer have to worry about motivation? In recent years, Caterpillar, a Wall Street darling and mainstay of American manufacturing, has rolled back traditional extrinsic motivators.

• Item: Caterpillar laid off 30,000 workers in 2009.
• Item: By the second quarter of 2012, Cat's profit had jumped 67 percent from the previous year. (Net profits in 2011 2Q of $1.01 billion, or $1.52 per share, rose to net profits of $1.69 billion or $2.54 per share in 2012 2Q.)
• Item: About the same time, Cat was freezing wages and reducing benefits. New contracts created a two-tier system so that new hires were brought in on an even lower wage scale.
• Item: Further layoffs followed the newer, concessionary contracts.

Disparities

In May 2013 a feature in Bloomberg Businessweek noted that while workers were losing jobs, pay, and benefits, CEO Oberhelman prospered. In 2011 his pay rose 60 percent to over $16 million, and in 2012 to more than $22 million. So what serves as employee motivation in this environment? Maybe survival. The article quoted Emily Young, a welder at Caterpillar's Decatur plant: “You're basically expendable. For every one person who doesn't work, there's five waiting in line.” The same article quoted CEO Oberhelman affirming, “We can never make enough profit.” Weakened Unions. As Businessweek reported, Caterpillar toughed out a strike at its Illinois plant in 2012 for over three months. Eventually union workers agreed to virtually the same offer that caused the strike. Existing workers accepted a six-year wage freeze and reduced benefits. New workers would be brought in at a lower wage scale. In Wisconsin in 2013, union workers didn't even try to strike. When their contract expired, workers simply stayed on the job. After a few months of on-again, off-again talks, the workers agreed to conditions similar to the Illinois contract. Worsening Results. Recently Cat's march to higher peaks of profit have stalled. With greater use of natural gas and dropping coal prices, sales of big mining trucks (used in surface coal mining) also declined. This forced the company to scale back production and lay off even more workers. This on top of an overall drop in spending in the Asian mining sector contributed to Cat's decline in earnings.

Money Problem

Some industry watchers see Caterpillar's worries as a money problem. As in too much of it. Fortune senior editor Matt Vella, in a Fortune Brainstorm podcast with magazine staff, sees it this way: “The criticism from labor is the company is doing better than ever; why aren't we seeing some of the rewards of that? The company will say, ‘Well, we can't afford to give too much away because we don't know what's going to come down the road.’” The Businessweek article brought such questions to a head: Caterpillar has become a symbol of the growing divergence in corporate America between profits and wages. As a percentage of gross domestic product, corporate earnings recently hit their highest level in more than 60 years, and wages fell to new lows, according to Moody's Analytics. “What's interesting,” says Fortune writer Nin-Hai Tseng, “ … is that Caterpillar makes itself out to be this poster child of everything that went right with manufacturing in America. With that reputation carries a lot of responsibility…. [P]eople can ask … does it have a responsibility to pay its workers more?”

What Employees Say

While Glassdoor.com doesn't provide objective analysis, this job research site provides ready access to employee voices. The site includes posts by current and former company employees so people looking for work can research a potential employer. Most reviews include a simple yes or no on whether the reviewer would recommend the company as an employer. While there's no guarantee that all posts are legitimate, Glassdoor.com remains one of the best places to get a quick read on the way current and former employees likely feel. Reviews for Caterpillar vary. Some workers say good things about their future with Caterpillar and the corporate culture. But more critique the company. Critics of the company's policies include both current and former employees. Tellingly, many current employees who would recommend the company as an employer have misgivings. Major themes include:

• Lack of chances to advance, stand out, prove one's worth, or improve one's compensation.
• Rueful acceptance of problems in the workplace because of the need to have a job.
• Over-management in face of shrinking pay.
• Overemphasis on cost-cutting programs by middle managers who frequently lack product or process knowledge.
• Lack of progressive vision for future growth, with single focus on reducing costs.

You get a sense of the tone of many comments in this post from a former employee, let go after eight years: “They will preach values, morality, safety, people, and quality, but in the end they only care about profit. Never been so disappointed in what a company has become as this one.”

The Executive View

When Businessweek asked Oberhelman about increasing wages, he sounded wistful. He can raise wages “when we start to see economic growth through GDP,” he says. “Part of the reason we're seeing no inflation is because there's no growth. Inflation was driven by higher labor costs, not higher goods costs. Frankly, I'd love to see a

little bit of that. Because I'd love to pay people more. I'd love to see rising wages for everybody.”

Real GDP has grown slightly during the period in which Oberhelman has reduced and frozen wages, from a negative 3.1% in 2009 up 2.4% in 2010, 1.8% in 2011, and 2.2% in 2012, according to the US Dept. of Commerce. In the meantime, Oberhelman justifies the growing disparity by invoking competitiveness. For Cat to be competitive, his executive salary needs to increase dramatically. For Cat to be competitive, workers’ wages need to be reduced or frozen.

Then and Now

In contrast to its current frosty relations with labor, once Caterpillar was seen as an exemplar of an enlightened management that could justify spending to increase employee engagement by its return on investment. As recently as 2006, a human resources guide on employee engagement cited Caterpillar as a success story. The guide noted Caterpillar's gains as follows:

• Annual savings of $8.8 million from decreased attrition, absenteeism, and overtime (Europe).
• Increase in output by 70% in less than 4 months (Asia Pacific).
• Decrease in break-even point by almost 50% in units/day, and of grievances by 80% (unionized plant).
• Increase of $2 million in profit and 34% in highly satisfied customers (start-up plant).

Now Caterpillar has decided to increase profitability almost solely by going leaner. The staff at Fortune doubt that today's Caterpillar will ever restore the kinds of manufacturing jobs of the past—jobs that brought US workers into the middle class. Instead, Cat hews to a global view of managing labor costs.

The company continues to increase its overseas operations in places like Korea, Russia, and Brazil. Over half of its labor force and its profits are overseas. Domestically Caterpillar continues to reduce and reshape labor, moving to lower pay scales and benefits, and with a greater reliance on guest workers. (Oberhelman has lobbied to make it easier for corporations to bring in lower-cost, highly trained foreign PhDs.) As modern manufacturing continues to do more for less, organic demand for labor will continue to decrease.89

Time will tell if the company can remain competitive with a primary focus on managing costs only, or if it will find reason to elevate employee engagement as a company priority.

Apply the 3-Stop Problem-Solving Approach to OB

• Stop 1: What is the problem?
  • Use the Integrative Framework for Understanding and Applying OB (Figure 5.9) to help identify the outcomes that are important in this case.
  • Which of these outcomes are not being achieved in the case?
  • Based on considering the above two questions, what is the most important problem in this case?
• Stop 2: Use the Integrative Framework to identify the OB concepts or theories that help you to understand the problem in this case.
  • What person factors are most relevant?
  • What environmental characteristics are most important to consider?
  • Do you need to consider any processes? Which ones?
  • What concepts or theories discussed in this chapter are most relevant for solving the key problem in this case?
• Stop 3: What are your recommendations for solving the problem?
  • Review the material in the chapter that most pertains to your proposed solution and look for practical recommendations.
  • Use any past OB knowledge or experience to generate recommendations
  • Outline your plan for solving the problem in this case.

Answer 1

In this case the problem is about employee motivation. As the case said that the company lack of chances to advance, stand out, prove one's worth, or improve one's compensation. Rueful acceptance of problems in the workplace because of the need to have a job. Over-management in face of shrinking pay. Overemphasis on cost-cutting programs by middle managers who frequently lack product or process knowledge. Lack of progressive vision for future growth, with single focus on reducing costs.

Motivation is an employee's intrinsic enthusiasm about and drive to accomplish activities related to work. Motivation is that internal drive that causes an individual to decide to take action. An individual's motivation is influenced by biological, intellectual, social and emotional factors. As such, motivation is a complex, not easily defined, intrinsic driving force that can also be influenced by external factors. Every person is motivated. Every employee has activities, events, people, and goals in his or her life that he or she finds motivating. So, motivation about some aspect of life exists in each person's consciousness and actions.

The trick for employers is to figure out how to inspire employee motivation at work. To create a work environment in which an employee is motivated about work involves both intrinsically satisfying and extrinsically encouraging factors. Employee motivation is the combination of fulfilling the employee's needs and expectations from work and the workplace factors that enable employee motivation or not. These variables make motivating employees challenging. Employers understand that they need to provide a work environment that creates motivation in people. But, many employers fail to understand the significance of motivation in accomplishing their mission and vision. Even when they understand the importance of motivation, they lack the skill and knowledge to provide a work environment that fosters employee motivation. Too often, organizations fail to pay attention to the employee relations, communication, recognition, and involvement issues that are most important to people.

Management within organizations must remain vigilant for signs employees are not as motivated as they should be. Less motivated workers may not put forth the effort they need to contribute to the company accomplishing its goals. Serious motivation problems can lead to sloppy work and mistakes that cause the company to lose customers, or have its reputation suffer. Consistently using motivational tools is one of the primary responsibilities of all individuals in a supervisory role.

Learning new tasks on the job is mentally stimulating. Employees avoid that feeling of just going through the motions at work, which can lead to becoming less motivated. Employees also view the opportunity to acquire new responsibilities as leading to career advancement and higher compensation. Cross training -- letting an employee learn how to do another employee's job -- makes economic sense as well for the organization. If an employee elects to leave the company, another one is ready to step into that role without any interruption in productivity.

A supervisor taking time out to praise her employees is an easy way to motivate those who report to her -- and doesn't cost the company anything. The best managers understand the value of praise as a motivational tool. People need and want to be appreciated. Managers with cold or distant personalities are missing an opportunity to boost productivity through a few simple words of praise.

Although everyone in an organization gets a boost from receiving a bonus or other financial recognition of superior performance, peer recognition is a motivating force as well. Simple "Employee of the Month" recognition in a newsletter to everyone in the organization can be tremendously exciting and motivating to an employee.

With technology playing an ever-increasing role in the operations of most companies, employees know that improving their knowledge of and skill with the latest workplace technologies improves their chances of career advancement. Providing learning opportunities, such as sending employees to seminars or paying for online classes, is a way for companies to keep employees motivated. And it has the even more practical benefit of increasing the overall skill level of the company's workforce, which helps it stay competitive in the marketplace.

It can be a thrill for an employee to find out his supervisor appreciates his input and ideas. Managers who express this appreciation to employees are doing themselves a favor as well -- employees of all levels in the organization have valuable ideas and observations to contribute that can improve the productivity, efficiency and even the profitability of the company. The employee receives a psychic benefit and the company receives a financial one.

Companies often have ambitious growth plans and strategies. Many of the specific plans are of a confidential nature that the top management prefers not to disclose to anyone for fear that competitors may find them out, but companies can share a general vision of the future with employees. Employees prefer to work for companies that have the potential for rapid growth. They know that growth translates into prosperity -- some of which will filter down to them. Just being part of a company that's a "winner" can be a motivating factor for employees.

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