Employee motivation and incentives at Apple


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Employee motivation and incentives at Apple

  1. 1. Christoph Müller Employee motivation and incentives at Apple Do incentives really help to motivate employees? EssayDocument Nr. V167839http://www.grin.com/ISBN 978-3-640-84771-69 783640 847716
  2. 2. This paper critically evaluates whether incentives really help to motivate employees.For this purpose it provides a clear definition of motivation, points out why existingtheories are partly outmoded and introduces a new model in order to gain a holisticview of the motivation concept. As the paper progresses it will be dealt withappropriate theories and practical examples in order to promote understanding of thekey aspects of incentives and highlight under which circumstances threats mightmotivate.Successful organisations share a common attribute: They came quickly to realisethat employees play a significant role in terms of business performance (Tidd andBessant, 2009). A key contribution to current understanding comes from Boxall andPurcell (2003), who argue that an employee’s performance is a function of his or herability, motivation and opportunity. Given this notion, the adverse effects of zeromotivation on an organisation’s bottom line are already conceivable. But what ismotivation and what role do incentives or threats play in the motivation process?Motivation can best be described as the force “that gives impetus to our behaviour byarousing, sustaining, and directing it toward the attainment of goals” (Wortman, et al,1999, p. 364).For decades, numerous theorists have attempted to find a way of describing theconcept of motivation. Much has been told about Maslow’s hierarchy of needs(Maslow, 1970), MC Gregor’s XY theory (McGregor, 1960) or Herzberg’s two factortheory (Herzberg, 2003) and there is no doubt that these content theories do providevaluable insights into motivation. Yet they also have limitations and do notnecessarily apply nowadays (Wilson, 2010). Likewise, process theories like Vroom’sExpectancy-Valence-theory (Vroom, 1964) might be considered more meaningful asthey are based on the assumption that motivation depends on different variables, butthey still lack clarity as they overlook important interrelationships.It was therefore necessary to develop a model that takes into account the majorfactors that influence motivation in order to promote understanding. For example, theeffect of a financial crisis, the introduction of new technology and governmentregulations or competitive pressure might compel organisations to adapt to changingcircumstances if they are to survive. Any changes, in effect, can also influenceemployee motivation, whereas the latter will be affected by factors such as the 1
  3. 3. organisation’s leadership capability, its culture or benefits as well as individualdifferences in terms of needs, personality or aspirations.The inference which can be drawn from the model is that motivation depends onvarious external, individual and organisational factors. Moreover, the model makesclear that both incentives and threats are only part of the whole process.French and Raven, as cited by Wilson (2010, p. 302), identified incentives andthreats as key bases of power in order to “change beliefs, attitudes or behavior of atarget.” Yet doing so is easier said than done. 2
  4. 4. In this respect, it is worth considering John Adair’s 50/50 theory (Adair, 2006), whichstresses that one half of motivation is attributed to intrinsic factors (e.g. culture or jobdesign) and the other half to extrinsic factors (e.g. incentives or threats). This impliesthat extrinsic factors alone do not help to motivate employees. Organisationstherefore, first of all, need to align the various organisational factors in a way thatthey become an employer of choice and contribute to intrinsic motivation.For example, Apple, which is considered the most innovative and admired companyin the world (BusinessWeek, 2009; Fortune, 2009), attracts and retains employees inpart owing to the benefits, or expected and non-performance related incentives, itoffers, such as product discounts or insurances (Apple, 2010). But even moreimportant is its outstanding creative culture. Steve Jobs, Apple’s CEO, argues thatthe latter is the gravitational force that puts all the bright and creative people together(Burrows, 2004).With regard to innovative organisations like Apple it is argued that employees’motivation is a key success factor and hence they need to be given incentives inorder to foster creative thinking and sustain high motivation (Tidd and Bessant,2009). As Gilmore et al (2009, p. 184) point out, “managing employee reward is acrucial element in encouraging flexibility, leveraging performance and competing fortalent in tight labour markets.”However, many authors disagree over which incentives are most appropriate.Wallace and Szilagyi (1982), for instance, believe that money is a key incentive as itenables people to satisfy their needs. On the contrary, Herzberg (2003) contendsthat monetary rewards only boost motivation in the short term. Kohn (1993) sharesthis view, as he states that there is no evidence for the contribution of money tosustainable employee motivation. Likewise, Pfeffer (1998) and Trott (2002) stressthat people are not only driven by financial incentives.Given the controversies in regard to incentives it is arguable that the whole conceptis too complex to come to a universally valid conclusion. There are only a fewauthors who acknowledge this, among them are Thomson (2003) and Armstrong(1993). 3
  5. 5. According to Silverman (2004), in order to understand the effect of incentives it isparamount to make a clear distinction between reward and recognition. He contendsthat performance-related rewards can adversely affect intrinsic motivation. EdwardDeci, as cited by Latham (2007), also observed that employees who receive rewardsfor performing tasks feel threatened and out of control. Likewise, people might beinclined to put in only as much effort as is required to reach a goal. It is also worthremembering that “trivial rewards will result in trivial amounts of effort and thus trivialimprovements in performance” (Robinson, et al, 1992, p. 29).Silverman (2004) therefore believes that organisations should rather place moreemphasis on incentives in terms of recognition. Apple, for instance, rewarded itsexecutives by giving them a recognition bonus of 3 to 5 percent of their base salary,despite the fact that they missed their target (ZDNet, 2003). This implies that Applewas aware of the “fundamental attribution error” (Hogg, et al, 2008, p. 91) and tried tosustain employee commitment and motivation.Silverman (2004) further argues that money has no significant symbolic value,despite the fact that is often “the only reward organisations and their managersprovide” (Thomson, 2003, p. 143). Rather, organisations need to embrace incentiveswhich can be remembered, such as holidays, gifts or a simple verbal thank you andpraise (Trott, 2002). These incentives might also be more effective and cheaperaccordingly. For example, Apple’s employees received a free iPod Shuffle or iPhoneas a thank you for their achievements (AppleInsider 2005; Meinck, 2007).According to Legge (2009) and Armstrong (2007) organisations should embrace atotal reward system that incorporates both financial and non-financial incentives. Thisis exactly what Apple has done to date and given its success, this approach hasproven to be effective. It comes with no surprise, then, that Apple’s employees mighteven be motivated by Steve Job’s autocratic leadership style (Thomke, et al, 2009),as the positive aspects of working for the company outweigh the negative aspects ofbeing threatened. And this is crucial because otherwise they might “engage in‘defense routines’ designed to protect themselves and their colleagues” (Morgan,2006, p. 86), which could decrease motivation accordingly.However, despite the effort spend to motivate employees, it is vital to bear in mindthat “sometimes, no matter what a leader does, employees are dissatisfied with their 4
  6. 6. jobs, attain or exceed their work goals, and perform at a high level without a leader’sexerting much influence at all” (George, et al, 2008, p. 407).In conclusion, there is no doubt that employee motivation is a critical determinant ofsuccess and prosperity. In this regard it is crucial to see employee motivation as aconsequence of interrelated external, organisational and individual factors and theway in which employees perceive their job and their employer. Apple is a perfectexample of a company that was not only capable of getting employees to dosomething, but also of getting them to want to do it. In order to achieve this,organisations need to foster both intrinsic and extrinsic motivation throughorganisational factors such as a culture that encourages commitment or a totalreward system that recognises employees’ achievements and value by offeringfinancial and non-financial incentives. Only in this case, and perhaps in times of highunemployment, might threats help to motivate employees. 5
  7. 7. BibliographyAdair J. (2006) Leadership and Motivation.London: Kogan PageApple (2010) All the benefits you’d expect. And then some.Available at: http://www.apple.com/jobs/us/benefits.html(Accessed: 29 October 2010)AppleInsider (2005) Apple to reward employees with free iPod shuffles.Available at:http://www.appleinsider.com/articles/05/01/19/apple_to_reward_employees_with_free_ipod_shuffles_updated.html (Accessed: 29 October 2010)Armstrong M. (1993) Managing Reward Systems.Buckingham: Open University PressArmstrong M. (2007) A Handbook of Employee Reward Management and Practice.2nd edn. London: Kogan PageBoxall P., Purcell J. (2003) Strategy and Human Resource Management.Basingstoke: PalgraveBurrows P. (2004) ‘The Seed of Apple’s Innovation’, BusinessWeek [Online].Available at:http://www.businessweek.com/bwdaily/dnflash/oct2004/nf20041012_4018_PG2_db083.htm (Accessed: 29 October 2010)BusinessWeek (2009) The 50 Most Innovative Companies.Available at: http://bwnt.businessweek.com/interactive_reports/innovative_50_2009/(Accessed: 29 October 2010) 6
  8. 8. Fortune (2009) Top 20 Most Admired Companies.Available at:http://money.cnn.com/galleries/2008/fortune/0802/gallery.mostadmired_top20.fortune/index.html (Accessed: 29 October 2010)George J., Jones G. (2008) Understanding and Managing Organizational BehaviorNew Jersey: Pearson Education, Inc.Gilmore S, Williams S (2009) Human Resource Management.Oxford: Oxford University PressHerzberg F. (2003) ‘One more time: how do you motivate employees?’, HarvardBusiness Review, 81 (1), pp. 87-96Hogg M., Vaughan G. (2008) Social Psychology.5th edn. Essex: Pearson Education LimitedKohn A. (1993) ‘Why incentive plans cannot work’, Harvard Business Review,September/October, pp. 54-63Latham G. (2007) Work Motivation.Thousand Oaks: Sage Publications Inc.Legge C. (2009) ‘Motivating incentives’, HR Management [Online].Available at: http://www.hrmreport.com/article/Motivating-incentives/(Accessed: 30 October 2010)Maslow A. (1970) Motivation and personality.2nd edn. New York: HarperMcGregor D. (1960) The human side of enterprise.New York: McGraw-Hill 7
  9. 9. Meinck C. (2007) ‘Jobs Rewards Employees With iPhones’, Everythingcafe [Online].Available at: http://www.everythingicafe.com/news/apple/jobs-rewards-employees-with-iphones-20070628206/ (Accessed: 29 October 2010)Morgan G. (2006) Images of OrganizationLondon: Sage Publications Ltd.Silverman M. (2004) ‘Non-Financial Recognition: The Most Effective of Rewards?’,Institute of Employment Studies [Online]. Available at: http://www.employment-studies.co.uk/pdflibrary/mp4.pdf (Accessed: 30 October 2010)Pfeffer J. (1998) ‘Six dangerous myths about pay’, Harvard Business Review,May/June, pp. 42-51Robertson I, Smith M., Cooper D. (1992) Motivation.2nd edn. Wiltshire: The Cromwell PressTidd J., Bessant J. (2009) Managing Innovation.4th edn. West Sussex: John Wiley & Sons Ltd.Thomke S., Feinberg B. (2009) ‚Design Thinking and Innovation at Apple’, HarvardBusiness School [Online]. Available at: http://hbr.org/product/design-thinking-and-innovation-at-apple/an/609066-PDF-ENG (Accessed: 30 October 2010)Thomson R. (2002) Managing people.3rd edn. Oxford: Butterworth-HeinemannTrott P. (2002) Innovation Management and New Product Development.2nd edn. Essex: Pearson Education Ltd.Vroom V. (1964) Work and Motivation.New York: WileyWallace M., Szilagyi L. (1982) Managing Behaviour in Organizations.Glenview: Scott 8
  10. 10. Wilson F. (2010) Organisational behaviour and work.3rd edn. Oxford: Oxford PressWilson J. (2005) Human Resource Development.2nd edn. London: Kogan PageWortman C., Loftus E. (1999) Psychology.5th edn. Boston: McGraw-HillZDNet (2003) Apple misses target but rewards staff.Available at: http://www.zdnet.co.uk/news/it-strategy/2003/03/25/apple-misses-targets-but-rewards-staff-2132412/ (Accessed: 29 October 2010) 9