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The influence of downsizing on employee motivation through the lens of Maslow's Hierarchy of Needs and Herzberg's Two Factor Theory. the importance of motivation factors for employees, the dissimilarity between employees, and the various stages of downsizing strategies. It also examines the effects of downsizing on Maslow's hierarchy of needs and Herzberg's two factor theory, as well as the impact on different categories of employees.
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ANR : 724169 Name : R.M.J.C. Hagen
Topic : Organization & Strategy Study Program : Premaster strategic management 2009/
Supervisor : Mrs. A.D. Timmers Room : K1.
Words : 6698
This bachelor thesis is written as a part of the program for the MSc in Strategic Management at the department Organization and Strategy.
Due to the development of this thesis it helped me to understand how scientific papers should be written. This knowledge creates the basis for the development of future research at the Tilburg University and during my career afterwards.
Within a period of 4 months ( from February 2010 til June 2010) I have been written this thesis. Without the help of my supervisor Mrs. A.D. Timmers, Msc and my group members I could never achieve this result. I would like to thank them for their guidance and suggestions.
Tilburg, June 10, 2010
R.M.J.C. Hagen
Preface
Management Summary
Chapter 1 Introduction 1.1 Problem indication 5 1.2 Problem statement 5 1.3 Research questions 6 1.4 Methodology 6 1.5 Structure 6
Chapter 2 Motivation factors 2.1.1 Maslows’ hierarchy of needs 8 2.1.2 The motivational system theory 9 2.1.3 Maslows’ hierarchy of Fords’ needs versus Fords’ MST 10 2.2 Different kinds of motivation factors 10 2.3 The ‘job characteristics’ model 12 2.4 Conclusion 13
Chapter 3 Dissimilarity between employees 3.1 Motivational preferences 14 3.2 Dissimilarity between groups 14 3.3 Conclusion 16
Chapter 4 Downsizing 4.1 Reasons for downsizing 17 4.2 Different stages of a downsizing strategy 18 4.3 Conclusion 19
Chapter 5 Influence of downsizing on employee motivation 5.1 The effect on Maslows´ hierarchy of needs 20 5.2 The effect on Herzbergs´ two factor theory 21 5.3 The effect on the different categories of employees 21 5.4 Downsizing and the communication within the organization 21 5.5 Theories and downsizing stages 22 5.6 Conclusion 23
Chapter 6 Conclusion, discussion and recommendation 6.1 Final conclusion 24 6.2 Managerial implication 25 6.3 Recommendations 25
References 26
1.1 Problem indication In order to survive in a rapidly changing business environment, organizations use different kinds of strategies. One could argue whether organizational downsizing is a strategy or not. Nevertheless, downsizing is a frequent used phenomenon. In 2009 different organizations were forced, due to the economic crisis, to downsize their organizations. Some examples of large downsizers in the Dutch labour market were ING (with 7000 discharges), Philips ( discharges) and Océ (1200 discharges) (Bizz, 2009). According to Cameron (1994), organizational downsizing is a common understanding for different organizational activities. The author stated that “organizational downsizing refers to a set of activities, undertaken on the part of the management of an organization and designed to improve organizational efficiency, productivity and/or competitiveness” (Cameron, 1994, p. 192). In this thesis, the perception of downsizing is the declination of an organization through the reduction of the amount of employees.
The result of a downsized organization is the need for reorganization. Questionable is whether the remained employees, who are remained, are motivated enough to pass through such a reorganization. Or as stated by Denton (2009), “How does one create trust that can weather the storms of downsizing, outsourcing and the temporariness of today’s world? How does one keep people coming in every morning and working hard?” (p. 11). Getting employees to do the work and enjoy doing it can be related to the motivation of the employees (Stoffels, 1978). In addition, motivation can be linked to the satisfaction and dissatisfaction of employees (Tietjen, & Myers, 1998).
The purpose of this thesis is to describe how downsizing influences the motivation of the remaining employees.
1.2 Problem statement The main problem statement of this thesis can be formulated as: What is the influence of a downsizing reorganization on the motivation of the remaining employees?
Chapter four discusses different downsizing aspects. A description will be given when the downsizing strategy can be adapted. There are different types of downsizing; workforce reduction, organization design and systematic design (Cummings & Worley, 2001). According to Cummings and Worley (2001), there are five stages which have to be followed in order to realize a successful downsize process.
The influence of downsizing on motivation of the remaining employees will be described in the fifth chapter. The main purpose of this chapter is to describe which theoretical aspects out of chapter two, three and four are applicable to each other.
Finally, chapter six gives a final conclusion based on the theory as described, managerial implications, and recommendations for further studies.
Employees in organizations affect, at least partly, the overall performance. In order to get people to work harder and enjoy it, they have to be motivated. Certain factors have an influence on the motivation (Stoffels, 1978). As stated by Hammer (1978) most theories about employee motivation and attitude are focussed on a two-way interaction. On the one hand there is the need for individual structure. On the other hand the need for an employing organizations’ formal and informal reward system. Therefore organizational performance, absenteeism and/or turnover can be reflected in terms of behaviour by the employees through policy, supervision, technology and hierarchical structure. As stated in chapter one, motivation in this article can be described as getting things done by employees while they enjoy it (Hammer, 1978). In the following paragraph a distinction will be made between different needs of employees.
2.1.1 Maslows’ hierarchy of needs Employees’ motivation is an element to the common needs of people (Stoffels, 1978). The theory of Maslow describes the hierarchy of these needs with five layers in the shape of a pyramid starting with the base (Maslow, 1943): Layer 1 Physiological needs; these are the basic needs which are required to stay alive. These needs include food, clothes, and shelter; Layer 2 Safety and security; this layer represents the need for freedom without fear of physical danger, the need for basic psychological needs, and the need for self- preservation; Layer 3 Belonging; represents the need the social need for meaningful relationships and acceptance by different groups; Layer 4 Self-esteem; the need for recognition as well as personally from others. The individual feels useful and that they have affect on the environment; Layer 5 Self actualisation; this top layer represents the need to maximize one’s potential and become what one is capable of becoming.
Fig.1: Maslow, 1943, pyramid of needs
2.1.3 Maslows’ hierarchy of Fords’ needs versus Fords’ MST The MST describes substantially more needs/goals than the hierarchical model of Maslow. Though, a management is able to influence their employees more specific. Questionable is whether an organization has got the time and ability to identify the most important needs/goals for each employee. The MST has, because of the detailed determination of needs/goals, also an interface with the dual factor theory of Herzberg.
Based on the obtained information it can be concluded that Maslows’ hierarchical model still remains popular as a theory of motivation at work. As stated by Mullins (2005): Despite criticism and doubts about its limitations, the theory has had a significant impact on management approaches to motivation and the design of organizations to meet individual needs. It is a convenient framework for viewing the different needs and expectations that people have, where they are in the hierarchy, and the different ‘motivators’ that might be applied to people at different levels. (p. 182) Many researchers have used the hierarchical model of Maslow (Parkin, Tutesigensi & Büyükalp, (2009); Tsai, Wu, Yen, Ho & Huang, (2005); Warsi, Fatima & Sahibzada, (2009); Hornstay, (2000); Mullins, 2005). Therefore Maslows’ hierarchy of needs, in combination with Herzbergs’ dual factor theory which is discussed in the following paragraph, will be the essence of this study.
2.2 Different kinds of motivation factors Motivation can be divided into two categories: intrinsic and extrinsic factors (Fernández, Castro, Otero, Foltz & Lorenzo, 2006). A prior study (Herzberg, Maunser & Snyderman, 1959) describes the distinction between the so called ‘motivators’ (job factors) which are the intrinsic motivation factors and the ‘hygiene factors’ (extra-job factors), which are the extrinsic motivation factors. Motivators promote the attitudes and satisfaction on the long run. Therefore, job satisfaction is a result of the job ‘motivation’ factors (Tietjen & Myers, 1998). This model is called the ‘dual factor’ theory (Herzberg, Maunser & Snyderman, 1959).
Intrinsic motivation or Herzbergs’ motivators “Intrinsic motivation is the motivation or desire to do something based on the enjoyment of the behaviour itself rather than relying on or requiring external reinforcement” (Fernández et. al. 2006, p. 269). The ‘motivators’ are (Herzberg, Maunser & Snyderman, 1959) are:
Extrinsic motivation or Herzbergs’ ‘hygiene factors’ According to Fernández et al.: “Extrinsic motivation is defined as the desire or urge to perform a certain behaviour based on the potential external rewards that may be received as a result (2006, p. 269). The ‘hygiene factors’ are (Herzberg, Maunser & Snyderman, 1959):
The most important difference between the two factors (‘motivators’ and ‘hygiene factors’) is the level of satisfaction/dissatisfaction. Motivators are factors which are needed by the employee for its goals on the long run, create positive job attitudes and satisfaction. On the other hand, ‘hygiene factors’ have a more temporarily characteristic. Although they can cause great dissatisfaction, the absence of ‘hygiene factors’ will not lead to a high level of satisfaction. There will be a lack of satisfaction instead of dissatisfaction as the opposite of job satisfaction (Herzberg, Maunser & Snyderman, 1959).
2.4 Conclusion Employees have to be motivated in order to stimulate them to work harder and let them enjoy it. The motivation creation of people can be reduced to the common needs of people as discussed with Maslows’ hierarchy of needs (1943). This model shows that there are five different layers of needs. Each need has to be fulfilled before starting fulfilling the next need on a higher level. Especially at the fourth layer, an organizations’ management is able to create motivation among their employees.
To improve the motivation of employees it is important for managers to respects the three aspects of Lazenby (2008): delegating authority, recognizing achievement and communicating important facts. The theory of peoples’ needs also can be divided with the motivational system theory (Ford, 1992). This theory describes 24 needs/goals which are separated in 6 categories. In contrary to Maslows’ theory, the MST shows that there are not hierarchies between each need/goal and it is possible to fulfil more needs/goals at the same time.
Motivation is a common expression which can be divided in two types; intrinsic (also called as ‘motivators’) and extrinsic (also called as the ‘hygiene factors’) (Herzberg, Maunser & Snyderman, 1959). Employees need the intrinsic factors for the long term goals, the creation of positive attitudes and job satisfaction. On the contrary, the ‘hygiene factors’ have a temporary characteristic. ‘Hygiene factors’ will not lead to a high satisfaction level. However, the absence of ‘hygiene factors’ can cause great dissatisfaction. As discussed finally within this chapter, the ‘job characteristics’ model (Hackman & Oldham, 1975). This model reflects the theory to practical facets. Due to the influence of the facets on job satisfaction it is possible to relate this ‘job characteristics’ model to the intrinsic ‘job’ factors of Herzbergs’ dual factor theory (1959).
Based on the theory so far, it can be stated that there is a possibility to create motivation through affection of the employees. Motivation improvement can be achieved by setting up specific measurable goals and also take care of an appropriate communication. Therefore it is important to get to know which aspects are preferred by the employees.
3.1 Motivational preferences Based on the article from Kovach (1995), it is clear that personal motivation preferences changes over some time. According to a most recent list from 1995 the top 10 of important preferences are:
3.2 Dissimilarity between groups Referring to the theory discussed in the second chapter it seems that the employees can be seen as equal. However, according to Kovach (1995), organizations have to recognize that employees can be divided into several various sub groups. It is important to recognize these sub groups because each sort of group can have its own characteristics concerning motivation factors.
The difference between skilled white-collar workers and skilled blue-collar workers is less differentiated. Most noticeable is the fact that blue-collar workers do not rank the factor of “full appreciation of work done” as important, in contrary to their unskilled blue-collar colleagues. The most important factors of the skilled employees can be compared with the unskilled ones, which are stated earlier (Kovach, 1995).
3.3 Conclusion In order to influence motivation, it is important to determine which aspects are preferred by the employees. In this chapter a list of ten common preferences of employees has described. It can be concluded that the most important preferences are not financial but personal related. The weakness of this preference list is its commonness: not all employees can be considered as equal. So the preference list can be different depending on several employee characteristics. Hence, a separation of sub groups is made with use of several employee characteristics: gender, age group, income group, job types, and organizational level (Kovach, 1995). It can be concluded that there are different motivation factors for each kind of employee within each sub group.
Organizations implement different strategies in order to survive. One could argue whether an organizational downsizing is a strategy or not. Nevertheless, downsizing is a frequent used phenomenon. Downsizing is a business strategy to improve an organizations’ financial position by a reduction and reorganization of the workforce (Appelbaum & Donia, 2001). Furthermore, downsizing has become an intervention for organizations in order to demonstrate its flexibility, bureaucratic structure reduction, increase of efficiency towards decision-making, communication improvement, and cultivate entrepreneurship (Appelbaum, 2001; Bruton, Keels & Skook, 1996; Mroczkowski & Hanaoka, 1997). According to Bruton, Keels & Shook (1996) also productivity becomes better after downsizing.
4.1 Reasons for downsizing Downsizing in general is a response to one or more of the following four conditions: mergers and acquisitions, loss of revenues and market share through technological and industrial change, implementation of a new organizational structure, and the belief that smaller is better (Cameron, 1994; Cummings & Worley, 2001). Several downsizing strategies can be differentiated (Cameron, 1994; Cummings & Worley, 2001): Workforce reduction; The focus of this downsize strategy is the reorganization of employees (Cameron, 1994). Some examples of activities are early retirements, transfers/outplacements, buy out packages, and golden parachutes. As stated by Bruton, Keels & Shook (1996) it is questionable whether workforce reduction leads to the desired results. The bulk of the downsized organizations do not achieve the expected profit increase. Furthermore, half of the organizations do not have a reduction of the expenses as high as expected. It is also stated that many organizations discover after downsizing that some dismissed employees fulfilled too important functions. Finally, these organizations have to acknowledge the loss and rehire new employees. Organization redesign; In order to reduce the number of employees another downsize strategy is to reduce the work within an organization. Some of these redesign activities may involve restructuring tasks and/or reorganization functions, hierarchical levels, groups, or products. (Cameron, 1994).Organizational redesign can not be implemented quickly, which is the main problem of this kind of downsizing strategy. However, due to a simplified organizational structure a downsized organization is able to improve its efficiency. According to Bruton, Keels & Shook (1996), efficiency can also be achieved if organizations not only reduce the number of employees but also the absolute asset size as well.
Several decisions have to be made while there is also a ‘maintaining perspective’ with people who try to preserve their own function. That is why the implementation of a downsizing strategy should be carried out from a top-down perspective. Further, it is important to maintain the organizations’ focus on the main target and remind the individuals that the restructuration is necessary for the performance improvement. Stage 4 : Survivor Syndrome: Behavioural implications of remaining workforce Within a restructured organization, employees have to accept an expansion of the responsibilities and learn new activities/jobs. In contrary to this expansion, employees often do not notice an increase of their compensation. This can result in an environment in which employees do not strive for organizational success but are preoccupied whether there will be additional lay offs. Also the feeling of guilt towards struggling co-workers while receiving payments and uncertainty of career advancement are important aspects for the organization to deal with. Survivor syndrome can be described as “emotional after effects” (Mirabal & Young, 2005). In the workforce this exhibits with anger, frustration, anxiety, and mistrust. The restructured organization needs to deal with a workforce which is willing to take fewer risks at the expense of the productivity. Stage 5 : Organizational renewal and growth: New or modified strategies This is the final stage in which implementing the organizations’ renewal and growth process. Despite all efforts, organizations often fail at this stage because a lack of communication with the employees. Especially at this stage it is important to communicate the growth plans and renewal strategies in order to prevent ineffectiveness. Important is, once a downsize strategy has been chosen, that the whole organization has to anticipate and keep itself focussed.
4.3 Conclusion Downsizing is a business strategy to improve a organizations’ financial position by a reduction and reorganization of the workforce. As stated, there are several reasons for organizations to choose a downsizing strategy. However, there are different kinds of downsize strategies; workforce reduction (in which a number of employees will be eliminated), organizational redesign (which starts with the reduction of work and afterwards with a limited employee reduction), and systematic redesign (this strategy is focussed on the organizations’ culture, attitude and values of the employees). In order to implement a downsizing strategy successfully, five stages of Cummings & Worley (2001) are discussed. Stage four, the survivor syndrome, is the most important stage for managers to influence the motivation of their employees.
Organizations have to treat their employees, who have been terminated, with dignity and appreciation. Otherwise in a reaction, survivors of the employee reduction can become angry and retaliate because of the improper attitude towards their exiting colleagues (Cangemi & Miller, 2004). Besides the reorganization of certain employees there is also the influence on the employees who are remained. The survivors can lose trust and motivation which therefore, on the long run, can seek for other ways out. A strategic human resource management, in order to maintain and motivate, a viral human capital is essential (Tsai, Wu, Yen, Ho & Huang, 2005). In addition to this, in order to achieve a successful downsize strategy there are some critical factors. The human resource system has to be managed effectively. Downsizing organizations need to involve their employees, stimulate teamwork, provide training, and rewarding. Human resource professionals have the critical function to take care of the implementation of the downsizing strategy (Cameron, 1994).
Highly committed employees are proud of their membership in the organization and expend therefore extra effort at work. Due to a change of the organizational environment, such as downsizing, this commitment can easily be disrupted. A common downsizing has been found to have a negative influence on the loyalty of the maintained workers. Therefore it is important to determine how to maintain a positive motivation of the employee under changing situations (Chen & Chen, 2008) (Tsai, et al., 2005). The factors ‘job satisfaction’ and ‘continuance commitment’ are critical for the creation of motivated human resources (Tsai, et. al. 2005).
In order to improve the employees’ willingness to remain, organizations should pay attention to the most important aspects; salary/benefits, support for personal well-being and family life, the nature of work, working environment, and management style of immediate supervisors. (Tsai, P.C.F., et al., 2005).
5.1 The effect on Maslows´ hierarchy of needs Referring to the perspective of Maslow’s hierarchy of needs it can be stated that employees make a shift after experiencing a downsizing. People focus themselves more on their basic needs. The social and ideal needs are getting of minor importance. The main reason for this shift can be related to the lost of trust in their organization (Tsai, et al., 2005).
