Motivating Employees in a Startup Venture

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This document enlists the key aspects that an Entrepreneur must be cognizant of for motivating employees in a startup venture.

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Motivating Employees in a Startup Venture

  1. 1. What an Entrepreneur must know about motivating staff in the context of a startup venture An Entrepreneur is someone who manages a business, takes risks and uses initiative to make it successful. One distinguishing mark of an entrepreneur is that they focus on a niche or opportunity that has as yet been unfulfilled or not been exploited properly, either because there is still room in the marketplace for one more, or is very new and not yet noticed by the more established companies 1. Among the basic skills that an Entrepreneur ought to possess, motivational skill is one of the key skills required inorder to drive results. Motivation is defined as a driving force that initiates and directs behavior. In other words, motivation is a kind of internal energy which drives a person to do something in order to achieve something. It is a temporal or dynamic state within a person2. Motivation is the process of boosting the morale of employees to encourage them to willingly give their best in accomplishing assigned tasks. Employee motivation is key to achieving extraordinary results. Motivation is the combination of a person's desire and energy directed at achieving a goal. It is the cause of action. Influencing people's motivation means getting then to want to do what you know must be done. Often an employee knows how to perform correctly, the process is good, and all resources are available, but for one reason or another, chooses not to do so, which normally means it is a motivational issue. While many jobs have problems that are inherent to the position, it is the problems that are inherent to the person that normally cause us to loose focus from our main task of getting results. These motivational problems could arrive from family pressures, personality conflicts, a lack of understanding on how the behavior affects other people or process, etc3. Motivated employees are imperative in rapidly changing workplaces. Motivated employees are extremely productive and help organizations survive. To be effective, Entrepreneurs need to understand what motivates employees within the context of the roles they perform. Of all the functions an Entrepreneur performs, motivating employees is arguably the most complex. This is due, in part, to the fact that what motivates employees changes constantly. For example, research suggests that as employees' income increases, money becomes less of a motivator. Also, as employees get older, interesting work becomes more of a motivator4. Thus, it can be stated that Motivation results in influx of positive energy which translates into positive actions performed by the employees, resulting in success for the organization, thus making it important for Entrepreneurs to hone the skill of Motivating employees. In order to understand the various methods that can be employed to motivate an employee, it is important to first comprehend which motivation method can Maslow’s Hierarchy of Thus, it is imperative to understand few Motivational Theories. best suit various employees. Needs 1 Nazir Daud - Ezine Articles - http://ezinearticles.com/?The-Definition-of-Entrepreneur&id=1273801 2 Richard Romando - Ezine Articles - http://ezinearticles.com/?Define-Motivation&id=410696 3 NWLink - http://www.nwlink.com/~Donclark/performance/motivation.html 4 James R. Lindner - Understanding Employee Motivation - http://www.joe.org/joe/1998june/rb3.php
  2. 2. Maslow's hierarchy of needs is used extensively in understanding human motivation and is predetermined in order of importance. It is depicted as a pyramid consisting of five levels: the lowest level is associated with physiological needs, while the uppermost level is associated with self- actualization needs, particularly those related to identity and purpose. The higher needs in this hierarchy only come into focus when the lower needs in the pyramid are met. Once an individual has moved upwards to the next level, needs in the lower level will no longer be prioritized. If a lower set of needs is no longer being met, the individual will temporarily re-prioritize those needs by focusing attention on the unfulfilled needs, but will not permanently regress to the lower level. Maslow's ideas surrounding the Hierarchy of Needs concerning the responsibility of employers to provide a workplace environment that encourages and enables employees to fulfill their own unique potential (self-actualization) are today more relevant than ever. Maslow's concept of self-actualization relates directly to the present day challenges and opportunities for employers and organizations - to provide real meaning, purpose and true personal development for their employees5. Before using any tool to motivate an employee, Entrepreneur must first ascertain at which level of need is the employee currently lying in and employ the relevant tool. Theory X and Theory Y Theory X and Theory Y are theories of human motivation created and developed by Douglas McGregor and have been used in human resource management, organizational behavior, organizational communication and organizational development. They describe two very different attitudes toward workforce motivation. Theory X, which many managers practice, postulates that management assumes employees are inherently lazy and will avoid work if they can. They inherently dislike work. Because of this, workers need to be closely supervised and comprehensive systems of controls developed. A hierarchical structure is needed with narrow span of control at each and every level. According to this theory, employees will show little ambition without an enticing incentive program and will avoid responsibility whenever they can. Theory Y postulates that management assumes employees may be ambitious and self-motivated and exercise self-control. It is believed that employees enjoy their mental and physical work duties. They possess the ability for creative problem solving, but their talents are underused in most organizations. Given the proper conditions, theory Y managers believe that employees will learn to seek out and accept responsibility and to exercise self-control and self-direction in accomplishing objectives to which they are committed. A Theory Y manager believes that, given the right conditions, most people will want to do well at work. They believe that the satisfaction of doing a good job is a strong motivation. Many people interpret Theory Y as a positive set of beliefs about workers6. 5 BusinessBalls - http://www.businessballs.com/maslow.htm 6 Business Balls - http://www.businessballs.com/mcgregor.htm
  3. 3. Having learnt about two of the main theories of motivation, let us review the various methods of motivating employees. Broadly categorizing, there are two main methods of motivating employees by providing incentives - Financial Incentives & Non-Financial Incentives. The following chart displays the various methods of motivating employees: - Financial Incentives Although some theorists like Herzberg believe that money is not a positive motivator (although lack of it can de-motivate), pay systems are designed to motivate employees. Theory X approach, in particular, argues that workers respond to financial rewards7. Time rates are used when employees are paid for the amount of time they spend at work. Time worked over this standard is known as overtime. Overtime is generally paid at a higher rate than the standard time-rate – reflecting the element of sacrifice by an employee. Piece-rate pay gives a payment for each item produced – it is therefore the easiest way for a business to ensure that employees are paid for the amount of work they do. Piece-rate pay encourages effort, but, it is argued, often at the expense of quality. Commission is a payment made to employees based on the value of sales achieved. It can form all or part of a pay package. Commission is, therefore, a form of “incentive pay”. The main advantage of commission from an employee’s point-of-view is that it enables high performing sales people to earn huge amounts. The main advantage to the employer is that the payroll cost is related to the value of business achieved rather than just the amount produced. Performance-related pay is a financial reward to employees whose work is either considered to have reached a required standard, and/or is above average. Performance related pay is generally used where employee performance cannot be appropriately measured in terms of output produced or sales achieved. Performance-related pay has grown widely in recent years – particularly in the public sector. This is part of a movement towards rewarding individual performance which reflects individual circumstances. Employee Share Ownership is an increasingly popular part of pay packages – particularly for businesses whose shares are traded on a stock exchange. Offering shares is a more complicated kind of 7 Tutor2U - http://www.tutor2u.net/business/people/motivation_financial_minimumwage.asp
  4. 4. reward than paying employees cash. However, it can be much more effective in linking the objectives of the business and the objectives of employees. Pension is an arrangement to provide people with an income when they are no longer earning a regular income from employment. The terms retirement plan or superannuation refer to a pension granted upon retirement. This is an effective method is ensuring a long lasting relationship with the employees. Non-Financial Incentives It may be perceived that money is an effective motivator in your business although it may have some effect in the short term: employees may also see factors aside from money as prime motivators, especially for Theory Y employees8. Job Enlargement- This involves expanding the job of an employee that has them doing more work of a similar nature to what they already do. This may be allowing them to complete the whole task instead of just part of it. This process ideally allows them to complete the whole process, thus increasing their responsibility. Job Rotation- This involves allowing employees to change the nature of their job periodically. The purpose of this is that the employee is satisfied by reduced boredom and also motivated by the achievement of increased skills. The business owner gains from cross-training and the potential for feed-back and improvement ideas. Job Enrichment- An Entrepreneur can enrich an employee's job by expanding their tasks to give a higher level of responsibility in the nature of work they do. This will not only expand their skills, but also give them an increased challenge (responsibility). Apart from all these techniques, what also must be noted that the primary objective of an Entrepreneur must be to instill confidence and enthusiasm within his employees. Since, the Entrepreneur is starting with a new venture; the employees will be highly skeptical regarding the success of the startup and would be concerned about their own growth. Hence, the Entrepreneur should take few small measures that would instill confidence and boost employee morale. Demonstrate enthusiasm - In many ways, an Entrepreneur sets the tone for his employees. If he is not motivated, he can very well expect his employees also to be unmotivated. Interface with employees - It's important that an Entrepreneur interacts directly with his employees on a regular basis. A prolonged pattern of distance between him and his employees creates the perception of a cold, uncaring autocrat rather than the caring, compassionate leader. Celebrate accomplishments - Take time out to celebrate accomplishments as a company. When you've asked your employees to go the extra mile to complete a major project, it's not unreasonable for them to expect to celebrate a little bit. Treat employees with kindness - Kindness and understanding on the Entrepreneur's part will go a long way toward motivating your employees to help you achieve your goals as an entrepreneur. As much as possible, try to give your employees the space they need to care for their families. Listen - Above all else, listen to what your employees' have to say and let them know how much you value their input. The loyalty it inspires in your employees will make it well worth your while. Thus, it can be concluded that motivating employees is key to success and every Entrepreneur should have the requisite skills and knowledge inorder to motivate the employees to influence them to work to their fullest possible potential. 8 BizHelp - http://www.bizhelp24.com/employment-and-personal-development/motivation-in-the-workplace-8.html

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