Why Incentives Help Make Employees Happy Capstone Project

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Profit Sharing and Other Incentives as Employee Development Performance Motivational Tools and the Relationship between Managerial Support and Employee Commitment to the Organization

The impact of profit sharing and other incentives on employee development and organizational growth is measured in various companies around the world. From Keller Williams to Southwest Airlines companies are utilizing incentives, such as 401ks, profit sharing plans, insurance plans, even pre-tax commuter benefits, because like Southwest they believe that their "greatest asset" is their employee (Southwest Report, 2010, p. 45). According to servant leadership theory, by offering managerial support that is designed to benefit and assist the worker, a higher degree of employee commitment to the organization can take place. Thus, companies such as Keller Williams promote mottos like "God, Family, Business" in that order to show that in their workplace environment what comes first is not business but that which is more important than business: family and God. In effect, the workplace environment under this direction becomes familial and fosters a "spirit of mission" that is located in the overall objective of the employees to not only be successful in their careers but also to be successful as people, i.e., good, understanding, ethical, supportive, unified, and giving. In other words, the theory of servant leadership is combined with the theory of directional leadership in order to enhance employee development and facilitate employee commitment to the organization and its objectives. This is made easier and more possible because it is emphasized under these two theoretical approaches that the organization's objectives are identical to the employee's objectives.

How It Works

At Southwest, for instance, the workplace culture is represented by the public company's ticker symbol on the NYSE: LUV. The "Luv" (love) culture embodied by Southwest is rooted in the founders' concept of an airline that prides itself on delivering first-class customer service -- which, to do so, requires first-class employee service; i.e., by taking care of its employees, Southwest believes its employees will in turn take care of its customers. It is very much a pay-it-forward type of mentality that is encouraged in the organization and one that has succeeded at a high level in establishing a winning track record of high employee performance ratings among patrons (Gallo, 2013). Southwest is not alone either in the airline industry: it is joined by Virgin Airlines in offering the kind of employee care and incentivizing that makes workers want to be part of the team. Part of that incentivizing is found in ideas like profit-sharing -- but not all of it. Some of the most important incentives are found simply in the way that managers give support to employees.

Few companies embody the concept of managerial support the way that Keller Williams does. While the individual real estate agents who work for Keller Williams brokerage houses around the world are technically not employed and therefore do not "have" managers, the KW offices utilize a system of agent reciprocity rooted in the management support system doctrine. In other words, senior agents provide guidance (often 24/7) to young or inexperienced agents in order to help them establish and further their careers as well as their commitment to the office. The world of real estate is one in which various brokerages are often competing for talent, so keeping top-performing agents at any given company is a task in and of itself. The Keller Williams approach to recruiting and keeping talent is found in its vision of reciprocity: if you give us your talents, we will give you everything we have. Thus, the KW profit-sharing program is set up in such a way that each office divides the profits "so that the owners who risked their investments enjoy roughly 52% of the profit and the associates who helped grow the company enjoy roughly 48% of the profit" (Thompson, 2009, p. 3). This nearly equal spit of profits has a two-fold strategy at its heart: first, it indicates that owners and associates are on an equal footing and that both depend upon one another for success; second, it rewards employees for growing the market center by bringing in new agents. The profit-sharing system is set up to share the profits of agents with those in the office who helped to recruit them. Thus, if Agent X brings three new agents to the company, a percentage of their profits will be shared between the owners of the market center Agent X since he is responsible for their being there in the first place.

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It is a system of reciprocity that is attractive for agents and in return they are compelled to help teach, guide and support new agents who require assistance (Larcker, Tayan, 2015).

The Essence of Employee Development

Employee development is a crucial aspect of corporate success, as these companies show (their growth is literally off the charts when compared to that of more conventional, less employee-centric companies) (Gallo, 2013). At the same time, successful companies realize that their success is dependent upon attracting and hiring the "right" sort of employee: people-skills and an ability to serve others are a must; qualities like emotional intelligence (EI) and communication are viewed by managers as assets that are valuable in a service economy. This indicates that in developing employees and incorporating motivational tools like profit-sharing and other incentives, managers look to first have a solid base in terms of employee suitability. The "right" kind of employee in service sector companies is one who is aware of the need to provide high-quality customer care and is more people-focused than data-focused. Data-driven types, however, can also be incorporated into the profit-sharing plan and the incentivizing aspect of the motivational program, but their job description will pertain to other elements of the company's business and will typically be placed in analytical departments. In an organization that values all types of employees, both people and data focused individuals will be looked after because both will be viewed as important for the different skill set that they bring. For Southwest, Virgin and KW, the right kind of asset is one who is people-friendly. For a company like Kroger, however, which has expanded its footprint substantially in recent years thanks in large part to its data-driven focus on building a product base that is in demand among consumers, the numbers-crunching employee is one who is invaluable. Maintaining employee commitment begins by recognizing "that an effective corporate wellness mission starts from the inside out" (Dudlicek, 2014).

In Kroger's case, this beginning inside approach is rooted in the incentivizing "total rewards" program, which has been recognized by the American Heart Association and the National Business Group for its policy on committing to the health of its employees by implementing "well-being programs for employees and their families" (Dudlicek, 2014). Thus, it is not just profit-sharing but also concern, regard and commitment to the actual lives of employees that can drive a company to achieve even greater things. As Kroger realizes, by committing to its workers, its workers in turn are more incentivized to commit to the company. With nearly 400,000 workers across the U.S., Kroger's success is evident in its growth in terms of franchises supermarkets and employee motivation.

Applying the Right Theory

In every instance, the theory of servant leadership as well as directional leadership can be seen as companies take to assessing just how their role in the manager-employee relationship can be best supported. Managerial support embodies the servant leadership mindset and fosters the bond that facilitates growth; directional leadership allows companies to assess the needs of its employees in an economic environment that is subject to fits and starts and to make the proper decisions regarding which direction to take to help incentivize its work force. The key is to develop high-performance level skills in employees and to secure commitment and the object is to accomplish this using motivational tools like Kroger's "total rewards" program which highlights the important need among workers to know that their health is being looked after. For a company like Keller Williams, it motivates by giving its agents the tools they need to generate success independently and in groups through programs like BOLD and Ignite (Larcker, Tayan, 2015).

And as Jacqui, Cairncross and Lamont (2014) note, identifying the needs of employees allows managers to steer their workers towards the goals of the organization by supporting them from behind. For example, by meeting the emotional needs of workers through the implementation of EI, a positive workplace culture can be effected and substantial employee development undertaken. Moreover, by focusing on the positive effects that employees have not only on each other and the organization but also in the community, managers can support the sense of self-worth in employees that helps to build stronger relationships and a more productive environment. Workers respond well to the idea that they are engaged in work that is both beneficial to themselves and to the world around them, according to Rogers, Jiang, Rogers and Intindola.....

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