CASE STUDY ASSIGNMENT

MGHB02
Professor Saks
Employee Motivation at DataCom

DataCom is a company started by Grace Lin and Annie Pan, two friends who had just
graduated with degrees in business administration and saw an opportunity to start their
own business. With an increasing number of organizations conducting employee attitude
surveys, they saw a need for data input and analyses as well as for the design of web-based
surveys. With a loan from their parents, they rented space, purchased 20 used computers,
and set up shop. They hired some students whom they knew at the university and began
advertising their services. Employees were paid minimum wage and usually worked three-
hour shifts in the mornings and afternoons several days a week.

The assignment of projects to employees was fairly straightforward. Whenever a new

project was received, Annie would review the job and then set a deadline for completion
based on the nature of the project and the customer’s needs. While some employees only
worked on web-based surveys, all employees were able to input data and conduct some
basic data analyses. If a project required more advanced data analysis, it was assigned to
one of a handful of employees who were able to do it. It was Grace’s responsibility to check
on the progress of projects and make sure they were completed by the deadline. Once a
project was completed, Annie would review it and check for mistakes and errors. If a project
was found to have errors, Annie would send it back to the employee who worked on it, with
instructions on what needed to be corrected and the new deadline. If the corrections were
minor, then the employee would be asked to do them immediately and put aside what they
were currently working on. If the corrections were more substantial, then the employee’s
current project would be assigned to another employee so that the employee could work on
the project that required corrections.

Within a relatively short period of time, DataCom was having trouble keeping up with
demand. In fact, business was so good they had to hire more employees and purchase more
computers. After about six months, however, they began to notice some problems. An
increasing number of projects were not being completed on time, and customers were
beginning to complain. In some cases, Grace and Annie had to give big discounts to
customers who threatened to take their business elsewhere.

In order to try to deal with the increasing missed deadlines, Grace decided to keep a close
eye on employees during their shifts. After several days, she reached the conclusion that
many of them were friends and spent too much time talking and socializing when they were
supposed to be working.

After discussing the problem with Annie, it was decided that the best thing to do was to
keep a closer eye on employees while they were working. The next day, Grace began
watching employees and even standing over them while they worked. Whenever some of
the employees began to talk with each other, Grace rushed over to remind them that they
were there to work and not to talk. Some of the employees were surprised at this sudden
change and didn’t understand what the problem was. Grace told them that too many
projects were not being completed on time and that talking would no longer be tolerated
while employees are working. “You get paid for working here, not socializing and talking to
your friends,” Grace was often heard saying. “Stop talking and get back to work.”

By the end of the month, however, things had still not improved. While the employees were
no longer talking to each other when Grace was watching them, many projects were still not
being completed on time. Grace and Annie decided that they should focus on those
employees who were the main source of the problem. After reviewing the records of all
employees, they made a list showing the number of projects each employee had completed
on time as well as the number that were late. They then posted the list on a large board at
the front of the room. Employees were told that from now on, Grace and Annie would be
keeping track of how many employees’ projects were completed on time and that they
would fire people who were late completing more than one project a month.

This did not sit well with the employees. Many of them complained that it was unfair to
blame them for being late because some projects were much more demanding than others
and the deadlines were often unreasonable. However, Grace and Annie insisted that the
deadlines were based on the size and difficultly of the projects.

Many of the students relied on the extra money they made from DataCom to pay for their
books, supplies, and the occasional dinner or night out, so being fired was a big concern to
them. Within a few weeks, almost all projects were being completed on time. Grace and
Annie concluded that their latest strategy was working, and the list of employee names
posted at the front of the room was showing a marked increase in projects completed on
time for all employees.

However, by the end of the month there was a new problem. Many of the completed data
files were full of mistakes, the data analysis was often incomplete and incorrect, and the
web-based surveys were often missing questions and contained many errors. As a result,
almost 50 percent (15 jobs per month) of all jobs had to be completely redone. This turned
out to be a costly problem. Each job took between 10 and 50 hours and cost DataCom
hundreds of dollars to fix. This also meant that projects were not being completed on time
because they had to be redone and checked after the deadline. More and more customers
began to complain and to demand a reduction in the cost of their projects.

To make matters worse, some of the best employees decided to quit. Over a period of three
months, DataCom lost an average of three employees a month. Every time an employee
quit, they had to replace them, and the cost of replacement was getting very expensive. The
cost of advertising, interviewing, and hiring a new employee was estimated to be about
$5000.

While employees were at one time bringing their friends to DataCom, this was no longer
enough to fill all the job openings. As a result, it became increasingly difficult to find and hire
new workers. In desperation, Grace and Annie decided to increase the pay to new hires to
above minimum wage. This, however, did not sit well with current employees, some of
whom had been with DataCom since it opened. Some of DataCom’s experienced employees
threatened to quit if they did not receive a pay increase. Grace and Annie did not see how
they could increase the pay of all their current employees. However, they realized that
something had to be done—and fast.

They came up with a three-pronged approach. First, they decided to give those employees
who were threatening to quit a pay increase equal to what new hires were receiving.
Second, they decided to offer a $100 bonus at the end of every month to the employee who
performed best on completion time and quality. The employee with the most projects
completed with the fewest errors would receive the bonus. And third, they decided that
employees who turned in projects with substantial errors would be required to correct them
on their own time, without pay.

When the employees heard about these changes they became less cooperative with each
other and less willing to offer help and assistance. Before the announcement, although
employees engaged in less socializing during working hours, they maintained a friendly and
collegial atmosphere, with workers frequently asking each other for help, and offering to
help new hires. However, with the new bonus program and the possibility of having to
correct errors without pay, this was no longer the case. Employees not only stopped talking
to each other, they also stopped helping each other. This was especially hard on the new
hires, who often needed help and advice from the more experienced employees.

At the end of the first month under the new bonus program, Grace and Annie held a
meeting and told the employees that Mika Solomon had completed three projects and had
made only one error. She happily accepted her bonus cheque for $100 and was
congratulated for her excellent performance. Some of the other employees clapped and
congratulated her, but others were not so happy. Nonetheless, the number of mistakes and
projects that had to be returned to workers for corrections began to decline.

Grace and Annie felt that they had finally found the solution to solving the problems at
DataCom. However, by the end of the week, three other employees demanded a pay
increase and several others complained that they should have received the bonus because
their performance was just as good as Mika’s. To make matters worse, three new hires and
two of DataCom’s most experienced employees decided to quit.

Grace and Annie couldn’t understand how something so good had become so bad. They
wondered whether they should give all employees a pay increase equal to the new hires. Or
maybe they need to do something about the bonus program. They were at a loss as to what
to do next and wondered if maybe it was time to end their business adventure.
QUESTIONS
1. What factors do you think contribute to the performance of employees at DataCom?
Refer to Exhibit 5.1 to explain your answer.

In analyzing the factors that contribute to the performance of employees at DataCom,

using Exhibit 5.1 as a framework, we can delve into several aspects that interplay to
influence how employees perform.

Firstly, the amount of effort that employees put into their work is crucial. If the reward
systems at DataCom are designed in a way that employees feel their efforts are
recognised and rewarded accordingly, it is highly probable that their motivation levels
will increase. The Expectancy Theory supports this idea, indicating that when
individuals have confidence in the connection between their efforts, performance, and
rewards, their motivation to work harder is enhanced.

The Persistence of Effort is another factor. At DataCom, employees are expected to

maintain a consistent level of effort and dedication, going beyond just working hard.
Goal Setting Theory offers a framework that suggests setting specific and challenging
goals, along with providing feedback mechanisms, can help sustain effort in the long
run. DataCom's management can establish effective systems to provide consistent
feedback, which will help employees maintain their focus and determination.

The Direction of Effort is where employees decide to focus their energies. Ensuring
that employee efforts are in line with organisational goals is crucial for DataCom. This
can be accomplished by fostering effective communication regarding the significance
of each person's role in relation to the overall goals of the organisation. It is crucial to
ensure that employees are assigned tasks that will have the most significant influence
on the company's success.

Regarding personal matters, one's personality traits can significantly impact their level
of motivation and performance in their work. Certain people may inherently possess a
greater level of motivation and dedication towards their responsibilities.
Understanding and embracing the unique qualities of each person can enhance job
fulfilment and effectiveness.

General cognitive ability and emotional intelligence play an essential part in this
context. Individuals who possess a greater cognitive ability tend to excel in their
performance as they have a heightened capacity to process information and find
effective solutions to problems. Likewise, individuals who possess a strong sense of
emotional intelligence are able to effectively navigate the complexities of workplace
dynamics and overcome obstacles with greater skill. Investing in training that
develops these aspects can greatly enhance overall performance.

Task Understanding is crucial for employees to have a clear grasp of their job
requirements. Improving performance at DataCom involves clearly defining and
communicating job responsibilities, as well as offering ongoing training to address
any uncertainties.

Lastly, Chance recognises that there are external factors that can affect performance,
which are beyond the control of the company and employees. Although it is
impossible to eliminate these factors, DataCom is committed to providing support and
being flexible in order to minimise any potential negative impact on performance.

2. Consider the needs of the employees at DataCom. What is most likely to motivate
them? How important are intrinsic and extrinsic motivators? Is their motivation
autonomous or controlled?

Initially, DataCom employees enjoyed a collegial environment, highlighting the

significance of intrinsic motivators such as camaraderie, job satisfaction, and a sense
of accomplishment from mutual support and friendly workplace relations. This
motivation is in line with Self-Determination Theory, which suggests that fulfilling
our natural psychological needs - feeling competent, having autonomy, and
connecting with others - can enhance our motivation and involvement in our tasks.

However, the introduction of a bonus system and the potential for termination shifted
the focus towards external motivators. Although there was a slight improvement in
project completion times, there was also a noticeable increase in errors and a decrease
in overall quality. This indicates that the use of external motivators may have had a
negative impact on internal motivation and self-regulation.

The transition from internal to external motivators at DataCom also signifies a shift
from autonomous to controlled motivation. Under the new measures, employees no
longer derived satisfaction from their work or enjoyed the workplace culture. Their
motivation shifted towards avoiding penalties or earning financial rewards. This type
of controlled motivation, which is externally imposed, has been found to have
negative effects on employee well-being. It can result in increased stress levels and a
decline in job performance. This is clearly demonstrated by the rise in errors and
quality problems that occurred after the introduction of the bonus program.

The motivation at DataCom seems to be largely controlled at this point, driven by

external factors such as bonuses and the threat of being fired. This may result in a
decline in overall employee satisfaction and well-being. Therefore, it is important for
Grace and Annie to strike a balance between utilising different types of motivators to
ensure that employees stay motivated and perform well in the long run.

Intrinsic motivators are vital for long-term job satisfaction and can foster a more
profound commitment to work quality. Nevertheless, external motivators play a
crucial role in motivating desired results and can be harmonised with intrinsic goals to
maximise their impact. An ideal approach for Grace and Annie would be to create a
system that rewards performance but also builds a sense of community, personal
growth, and acknowledges the inherent satisfaction of the work itself.
 3. Discuss the motivational strategies being used at DataCom. What are employees
motivated to do? How do the theories of work motivation help us understand
employees’ motivation and performance and the effectiveness of the motivational
strategies?

DataCom's management, Grace and Annie, implemented a three-pronged motivational

strategy to tackle concerns regarding project completion timeliness and quality. The
initial approach entailed providing a salary increase to individuals who expressed
intentions of leaving, ensuring their compensation matched that of newly hired
employees who were being offered higher remuneration. The second approach
involved implementing a monthly $100 bonus for outstanding performance in project
completion time and quality. This initiative aimed to motivate employees to not only
increase their efficiency but also uphold exceptional standards. The third approach
involved implementing a disciplinary action, where employees who submitted projects
with significant errors were expected to rectify them on their own time, without any
extra compensation.

Workers were driven to finish projects promptly and with minimal mistakes in order
to either earn a bonus or prevent the burden of unpaid overtime. The implementation
of these strategies resulted in a decline in collaboration among colleagues and a
noticeable shift in the once friendly work environment. Although the strategies
initially appeared to be effective in improving on-time completion rates, they
unintentionally resulted in an uptick in errors. This was due to employees rushing to
finish projects, which ultimately led to expensive reworks. Furthermore, the
alterations resulted in discontent among the staff, resulting in the departure of top
performers and challenges in hiring new talent due to the unfavourable work
atmosphere.

The theories of work motivation can provide insights into why DataCom's strategies
yielded varied outcomes. According to Expectancy Theory, individuals are more
likely to be motivated to work when they have confidence that their efforts will result
in positive outcomes. However, if the perception of fairness or attainability is lacking
in the expectancy or instrumentality, motivation can decrease. This was apparent at
DataCom, where the employees expressed their frustration with the tight deadlines
and perceived inequity in bonus distribution. As a result, their morale and motivation
suffered.

In addition, the strategies failed to consider the importance of internal motivators and
instead placed too much emphasis on external motivators. This approach, as explained
by Self-Determination Theory, can actually hinder autonomous motivation if intrinsic
rewards are not given equal attention. This imbalance can lead to a decline in job
satisfaction and intrinsic motivation, as evidenced by the decrease in employees'
willingness to help and the subsequent rise in resignation rates.
The effectiveness of DataCom's motivational strategies varies. Although they did
result in a temporary improvement in meeting project deadlines, they also caused an
uptick in expensive mistakes, reduced internal drive, and higher staff attrition rates. A
well-rounded perspective that takes into account various factors and the unique
requirements of individuals may yield better results in the future.

4. Using the theories of motivation, what advice would you give Grace and Annie on how to
motivate their employees? Be sure to refer to the need theories and the process theories of
work motivation when answering this question.

Grace and Annie have the opportunity to utilise motivation theories to improve their
approach to employee motivation at DataCom. The need theories, such as Maslow's
Hierarchy of Needs and Alderfer's ERG Theory, along with process theories like
Expectancy Theory and Goal Setting Theory, offer a comprehensive framework for
comprehending the factors that influence employee behaviour and performance.

Applying Maslow's Hierarchy of Needs, it is crucial for Grace and Annie to prioritise
fulfilling the fundamental needs of employees, such as fair compensation and job
stability, before anticipating their motivation to be driven by higher-level needs like
recognition and personal growth. The discontent among employees concerning pay
disparities suggests that there is a lack of attention being given to these fundamental
needs.

As per Alderfer's ERG Theory, it's crucial to acknowledge that individuals have
various needs for their well-being, social connections, and personal development.
These needs are not strictly ranked and can be pursued concurrently. Grace and Annie
should strive to establish a work environment that offers fair compensation,
encourages a strong sense of community and belonging, and provides opportunities
for personal and professional growth.

McClelland's Theory of Needs highlights the significance of the desires for

accomplishment, social connections, and influence. Grace and Annie can cater to
these needs by implementing a system that acknowledges and incentivizes both
individual and team achievements. They can foster a collaborative work environment
that appeals to those who value teamwork and camaraderie. Additionally, they can
offer opportunities for employees to have autonomy and influence over their work and
surroundings, which would be attractive to individuals who seek power and control.

According to the Self-Determination Theory (SDT), fostering employees' autonomy,

competence, and relatedness can lead to increased intrinsic motivation. Grace and
Annie should explore methods that foster independence by offering greater flexibility
in task completion, offer training and resources to improve skills, and cultivate a
supportive and cooperative environment to fulfil the need for connection.

According to Expectancy Theory, individuals are more motivated when they can
clearly see how their efforts, performance, and rewards are connected. Grace and
Annie should make sure that employees feel confident that their hard work will result
in strong performance and that they will be fairly compensated for their efforts.

According to Goal Setting Theory, having clear and ambitious goals can be a great
source of motivation for employees. This is especially true when employees are
actively involved in setting these goals and receive regular feedback on how they're
doing. Grace and Annie should consider involving employees in goal-setting
processes and implementing a structured feedback system to ensure their engagement
and keep them well-informed about their performance.

Practically speaking, Grace and Annie could consider reassessing their bonus and
penalty systems to ensure they are equitable and transparent. They could also foster a
collaborative environment instead of a competitive one, and create avenues for
employees to enhance their skills and advance within the organisation. By taking these
steps, individuals can boost their drive and productivity, decrease the rate of employee
departures, and tackle the expensive mistakes that have been affecting DataCom's
financials and standing.

5. What would you do to motivate the employees at DataCom? Be specific in terms of how
to motivate employees to complete projects on time without errors and to stay at the
company. Be sure to support your answer using the theories of work motivation.

By incorporating theories of motivation into the specific examples given for

motivating employees at DataCom, we can significantly improve the effectiveness of
these strategies.

• Bonuses for Projects with No Errors (Goal Setting Theory): This strategy is designed
to motivate individuals by establishing clear, ambitious, yet attainable objectives, in
line with Goal Setting Theory. The strong connection between reaching these goals
and earning a bonus provides a direct incentive for employees to aim for top-notch,
punctual work.

• Personal Development Plans (Self-Determination Theory): By emphasising the

importance of autonomy, competence, and relatedness, PDPs help individuals in their
personal and professional growth. These plans foster a sense of appreciation and
connection with employees, strengthening their commitment and dedication to the
company.

• Peer Recognition Programs: This program allows employees to acknowledge and

appreciate each other's contributions, fostering a sense of affiliation and boosting
esteem. It emphasises the importance of social motivation, recognising
accomplishments and cultivating a nurturing community.

• Flexible Work Schedules (Self-Determination Theory): Providing flexibility

addresses the desire for independence, enabling individuals to have greater control
over their work-life balance. This independence is vital for internal drive, ensuring
that employees feel valued and esteemed.

• Learning and Error Correction Workshops (Expectancy Theory): These workshops

showcase the connection between employees' efforts to learn from mistakes and
enhance their skills, and the positive outcomes they can achieve, such as recognition,
personal growth, and potential promotions or bonuses.

• 'Project of the Month' Showcase (Equity Theory): Showcasing a successful project

and its team helps ensure that employees who make significant contributions to the
company's success receive the recognition they deserve. This recognition can serve as
a source of inspiration for others, encouraging them to pursue their own achievements
with the confidence that their hard work will be recognised and rewarded.

• Professional Mentorship Program (Alderfer’s ERG Theory): Mentorship programs

address the needs of less experienced employees, fostering a sense of connection and
support within the company. This also gives mentors a feeling of achievement and
importance within the organisation, fostering growth and development for both
individuals involved.

• Providing Clear Career Paths: By outlining career paths within the company,
employees can have a clear route to achieving their professional goals, which can help
meet their esteem and self-actualization needs. This level of openness and
transparency serves as a strong motivator for employees to remain committed to the
organisation and strive towards fulfilling their higher-level needs.

By connecting these strategies to theories of motivation, Grace and Annie can develop
a thorough motivation plan that not only tackles the immediate objectives of
minimising errors and enhancing timeliness, but also cultivates a constructive,
encouraging, and progressive company culture.