Question

One for the Money…

Does money buy happiness? Several of the 120 employees at Gravity Payments, a credit card processing company based in Seattle, are about to find out.75 The company’s founder, 29-year-old Dan Price, made the news in the spring of 2015 when he decided to bump up the salary of 70 employees to a new “minimum wage” of $70,000. Now, everyone in the company will be making at least $70,000. Some employees at the company, where the average salary was $48,000, doubled their pay, and others got a nice salary increase—probably enough, you’d think, for employees to be pretty happy about! Money = Happiness, or Does It?

Why did Price do it? He said that he had been thinking about employee pay for a while, especially after reading several news reports about the glaring pay disparities between corporate CEOs and employees, which he says struck him as “ridiculous” and “absurd.” Also, Price had read an article on happiness by two Princeton researchers (one a Nobel Prize-winning psychologist) who had surveyed 450,000 U.S. residents on whether money could buy happiness—both as it affected overall happiness but also how it affected day-to-day life. The researchers concluded that people claimed to be happier with each doubling of income but only to a point. But even more interesting was the dollar amount that respondents said would make their daily life more pleasant: about $75,000 a year. Price decided to offer his employees a minimum salary of $70,000. He felt that giving his employees this amount could enable many of them to buy homes and pay for their kids’ educations.

To pay for the salary increase, Price is taking a pay cut from his annual $1 million salary down to $70,000. Also, the company will have to use 75 to 80 percent of its profits to help cover the cost. Some management consultants are questioning the move, wondering if it will affect employee productivity and pay off in the long run. Concerns about what happens to employee motivation include: Will employees be less motivated to work to be promoted to higher levels of responsibility, and would those employees who put in additional effort above and beyond their current tasks lose the incentive to do so (“why should I work harder if we all get the same pay”). And what happens to the CEO’s motivation—would Price himself lose the incentive to want to grow the company? Then, there’s also the question of what happens if the company’s profitability starts to fall. Only time will tell if such issues are even relevant.

Discussion Questions

11-14 Look back at the chapter-opening Management Myth and how it was “debunked.” Evaluate this wage decision in light of that.

11-15 Explain each of the employee productivity/motivation concerns. Which of these do you think is most critical? Why?

11-16 Choose one of the contemporary motivation theories discussed in the chapter and write a description of it for Mr. Price, explaining how and why it would be a good alternative for employee motivation.

11-17 What problem(s) might managers face under this new pay approach and how could they use knowledge about employee motivation to help them deal with those problem(s)?

Answer 1

Answer:-

11-14)

From the situation of the contextual analysis, we can see that the CEO has put intensely himself in knowing the compensation prerequisites of workers dependent on different statistical surveying.

The misinterpretation of the executives that said the CEO didn't work and acquire a more significant compensation has been discredited as Price has sliced his pay rates to meet the lowest pay permitted by law of the specialist.

11-15)

Concerns with respect to the morals of laborers include: if representatives are not inspired to work for more elevated levels of obligation and if these representatives accomplish more work than and past their current obligations lose the will to do as such.

The subsequent issue is the most significant, as representatives commonly require extra time so as to acquire motivating forces/rewards and contrasting compensations. In any case, if everybody gains a similar pay, some of them are normally propelled to break their activity.

11-16)

Right now hypothesis straightforwardly connected with Mr, Prices Behavior and dynamic instrument. Value hypothesis can be abridged as

Given installment by time:

Overrewarded representatives will create more than will fairly paid workers.

Underrewarded representatives will create less or more unfortunate nature of yield.

Given installment by amount of creation:

Overrewarded representatives will create less, yet more excellent, units than will evenhandedly paid workers.

Underrewarded representatives will deliver some low-quality units in examination with fairly paid workers.

The Theory likewise clarified that Motivation is affected fundamentally by others' awards just as by one's own prizes. In this way, on the off chance that cost is giving everybody same wages, at that point obviously it going to influence the inspiration level of the workers.

11-17)

Managers may confront not many issues, for example, how to separate (a) genuine and dedicated workers from the individuals who are not all that earnest and persevering, (b) propelled/very much inspired representatives from workers having less inspiration/laid back mentality.

These issues are normal to any association regardless of its representative well disposed culture. So as to resolve such contrasts, the managers would have to (an) embrace very much characterized execution grids, (b) complete execution examination and (c) guiding varying and so forth.

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