PAY FOR PERFORMANCE AT THE CCCN?
A research for the CCCN of IKEA Netherlands B.V. June, 2009
University of Groningen, Faculty of Economics and Business Human Resource Management & Organizational Behavior Department
CHRIS BIJLSMA Studentnumber: 1221523 J.C. kapteynlaan 34 9714 CR Groningen tel: 06-10564316 e-mail: c.j.bijlsma@student.rug.nl
ABSTRACT
Management of the CCCN, questions the motivational effect of the current bonus system. The extent to which pay for performance can be an effective motivational HR-instrument in the context of the CCCN, is researched in this study.
Consistency of the CCCN is assessed because a change in the bonus system could be
inconsistent with the current organization and environment. The SLAP-model (Bax, 2003) is used to asses consistency. The CCCN is fairly consistently organized with only culture scoring more organic than the other elements. The HR-instruments don’t form ‘deadly combinations’ and they all use the cultural norms and values of IKEA to some extent. Literature shows that pay for performance can only be motivational when the employees are mainly extrinsically motivated and when employees can see how their behaviour affects the outcomes. When intrinsic motivation is predominant, pay for performance can even
undermine motivation (Crowding-out, (Deci, 1972)).
The survey shows, that a large group of employees of the CCCN is extrinsically motivated (59%). The majority of the employees however, is also intrinsically motivated (94.9%) and the mean score on intrinsic motivation is .57 higher than extrinsic motivation. Based on the survey outcomes however, crowding-out of motivation is unlikely to occur at the CCCN. The majority (76.6 %) of employees also thinks a change to a system based on CCCN goals will motivate them more.
It appears that a pay for performance system could be an effective motivational
CONTENTS
1. INTRODUCTION... 4
Research background ... 4
Research objective... 5
Central research question... 5
2. THEORETICAL FRAMEWORK ... 6
Consistency ... 7
Motivation ... 11
Pay for performance ... 13
Effectiveness of pay for performance plans ... 16
3. RESEARCH METHODS ... 17
Internal documentation ... 18
Survey ... 18
4. RESULTS... 21
Context of research: The CCCN ... 21
Demand side... 21
Supply side ... 25
Link between the two sides... 25
Fit between HR-instruments ... 26
Consistency at the CCCN and pay for performance... 29
Survey outcomes ... 29
5. CONCLUSIONS... 35
Sub-questions ... 35
Central research question... 39
Practical implications... 40
Theoretical implications and limitations... 41
REFERENCES ... 42
1. INTRODUCTION
This thesis is written for the Customer Contact Center of IKEA Netherlands (CCCN). Management of the CCCN, questions the motivational effect of the current pay for
performance system and would like to know if a change in the pay for performance system could motivate their employees more. Before introducing the central research question, the research background is discussed.
Research background
Employees of the CCCN are covered by the collective labour agreement (CLA) of IKEA Netherlands B.V.. According to this CLA next to the base pay, annual bonus and holiday pay, a bonus is granted when determined targets are met (Article 8, IKEA CLA). These pre-determined targets are specified as a turnover goal which differs for each store. The turnover targets are set every four months and so it also could be paid every four months. This bonus system is not based on individual results but on the effort of the whole store. There are three principles behind this bonus system:
- Everyone in the organization must be able to contribute to the pre-determined targets - The bonus must be paid out as soon as possible after the achievement
- The achievement of the own unit (store) determines the result
The pre-determined turnover target is divided over three periods of four months, because of this, every period of four months has its own target. So in total a maximum of three bonuses a year can be obtained. The height of the bonus is calculated in the following way:
- Exceeding the turnover target by 0.1% results in 40 Euros bonus - Exceeding the turnover target by 0.2% results in 80 Euros bonus
- This continues until the turnover target is exceeded by 1.0% which results in 400 Euros bonus.
The maximum bonus that can be obtained by a full-time employee is 1200 Euros a year. For all employees that belong to a department that operates on a national level, the bonus percentage and thus the height of the bonus, is determined by the average bonus percentage on the national level. The CCCN is one of the departments that does not belong to one
No pre-determined goals are specified for the CCCN, the bonus employees of the CCCN receive is fully dependent on the results of the stores. One of the principles of the bonus system of IKEA, as previously mentioned, is that everyone in the organization must be able to contribute to the pre-determined targets. The CCCN is a service department and cannot directly influence the turnover targets of the stores. The first principle of IKEA’s bonus system is therefore doesn’t apply to the CCCN. One could argue that increasing the quality of customer service means higher customer satisfaction and through customer satisfaction, more customers could come to the store, which means more turnover. This indirect effect is
however, very difficult to measure.
Because of the issues with the pay for performance system at the CCCN, management of the CCCN doubts that the current system has any motivational effect on their employees.
Therefore research to a new bonus system is one of their focal points in their business plan for this year. Management would like to know if and how a bonus system for the CCCN can motivate employees more than it does in the current situation.
Research objective
The main objective of this research is to be able to give management of the CCCN an advice about the potential motivational aspects of a pay for performance plan in the context of the CCCN.
Central research question
The central research question of this thesis is based on the management questions and the theories that are elaborated upon in the next chapter. Consistency between HR-instruments and organizational characteristics is a pre-condition for the whole organization to be able to operate effectively. Taking this into account, the following central research question is formulated:
To what extent can a pay for performance system be an effective motivational HR-instrument for the CCCN, taking into account the environment, structure, culture and other
HR-instruments of the CCCN?
1. Are current HR-instruments consistent with each other and do these instruments fit with the technology, environment, structure and culture of the CCCN?
2. What characteristics of a pay for performance system can influence the motivation of employees?
3. Can the current pay for performance system effectively motivate employees of the CCCN and do employees think a changed system will motivate more?
The first sub-question is helpful because according to several authors (Baron & Kreps, 1999; Bax, 2003; Galbraith, 2002) consistency between HR-instruments, organizational
characteristics and the environment is important. It’s s condition for the whole system to be effective. Researching the potential motivational characteristics of a pay for performance system for the CCCN therefore starts with analyzing consistency between HR-instruments, organizational characteristics and the environment.
The second sub-question is helpful to be able to answer the question to what extent and how pay for performance plans can motivate employees. According to Heneman & Miceli (2000), pay for performance plans have seven characteristics (i.e. height of bonus, frequency of pay). These characteristics are the starting points for the literature review that is performed to answer this sub-question.
The third question is helpful, because after all the employees are the ones to be motivated by the pay for performance system. Literature indicates that intrinsic motivation can be
undermined by extrinsic rewards. A survey is used to make an inventory of the level of intrinsic and extrinsic motivation of the employees. The survey also contains attitudinal questions regarding changing the bonus system.
The theoretical framework of the research is discussed in de next chapter. In chapter 3 the research methods are discussed. The results of the research are discussed after that. In the last chapter of this thesis, the research questions are answered.
2. THEORETICAL FRAMEWORK
performance is defined. To conclude the theoretical framework, pay for performance plan effectiveness and the motivational effect of the pay for performance plan characteristics, are discussed.
Consistency
The following section discusses theories and models, that stress the importance of
organizational fit as well as a fit between HR-instruments. This because changing the pay for performance system at the CCCN, can only be effective if the organization is consistent and if pay for performance fits the organization.
Importance of consistency. The importance of fit between organizational characteristics (i.e.
structure, culture) and the environment is stressed by several authors (Galbraith, 2002; Bax, 2003). Miceli & Heneman (2000) developed a framework that even links, pay for
performance characteristics, to these characteristics. They argue that the organization’s characteristics, can influence the pay characteristics and thus influence the characteristics of a pay for performance system.
Consistency of the organization, the HR-instruments and the environment is necessary for an effective organization.
SLAP-model. Bax (2003) developed the Strategic Labor Allocation Process (SLAP) model
(figure 1). It’s a descriptive model that helps to place HR-problems in a framework in a relation with other business functions. The SLAP-model’s presumption is that the main task of HRM is to optimally fit labor demand and labor supply together. According to Bax (2003) there are three possible ways to achieve this:
1. Change the demand side (tasks and functions)
2. Change characteristics of the labor supply by using the traditional HR-instruments recruitment, selection, rewarding, training and evaluating.
3. Change both sides
Demand side. In developing the SLAP-model, Bax (2003) stressed the importance of the
(hierarchical, bureaucratic) or organic ( decentralized, less emphasis on line of command) organization. Cited from Bax (2003, p70) :
“the core of a logically consistent organization is that environmental requirements, production technology, culture, and structure will all score roughly the same on this continuum” .
Technology, according to the TECS-model, is typed a either paper-ware (emphasis on rules and routines) or human-ware (tacit knowledge and expertise). The environment is typed as hostile or mild, stable or dynamic or simple or complex. Structure is typed as either
centralized or decentralized or hierarchical or flat.
Supply side. The supply side of labor also needs to be consistent, the SLAP-model uses
culture as the perspective to determine this. Cultures based on internalized norms (intrinsic motivated) fit better to an organic organization while cultures based on non-internalized norms (extrinsic motivated) fit better to a mechanical organization. When a culture is based on internalized norms, little external intervention is necessary because people will want to act according to those norms. A downside of internalized norms is, that it takes a long time before people internalize norms, a substantial investment in people is necessary from the employer. A culture based on internalized norms suits an organic organization with intrinsically
motivated employees. Cultures based on non-internalized norms need more external control of employees. Employees don’t necessarily want to act according to the norms, but they do conform to them because they are rewarded (or sanctioned when not conforming) when complying with the norms. These type of cultures are better suited to a mechanical organization. The socialization process of new employees is short and employees can be quickly replaced when necessary. The downside of this, is that control mechanisms have to be present, people need to be supervised.
Fit between the two sides. The last step is assessing the fit between the labor demand and
An overview of the part of the SLAP-model that’s used in this thesis, is displayed in Figure 1. In this research the SLAP-model is used to determine if the technology, culture, environment and structure of the CCCN are consistent. It will also be used to determine if both sides of the labor allocation process are consistent with each other.
FIGURE 1 Slap-model
Fit between HR-instruments. Consistency between HR instruments, is important according to
several authors (Baron & Kreps, 1999; Bax, 2003; Boxall & Purcell, 2008). Macduffie (1995) argues that HR-instruments don’t influence outcomes separately but interdependently in a ‘bundle like’ fashion. In other words : the effectiveness of HR-instruments together is bigger than the sum of all of them separately. Baron & Kreps (1999) call it single-employee
consistency: HR-instruments should be consistent with each other in a complementary way. Changing one HR-instrument can cause an imbalance. That’s why it’s important to check if the current HR-instruments are consistent with each other.
An example: when an organization invests heavily in employees (training), it makes sense to also invest in screening and selection and practices intended to decrease turnover. Bax (2003) adds that in this example, the employees’ learning performance needs to be a subject in the appraisal conversation and the reward system needs to contain some rudiment of seniority. Training employees without policies to maintain employees would be a deadly combination of HR-instruments (i.e. instruments that work against each other).
Boon et al. (2007) did research on how to measure the internal fit of HR-instruments because a model to asses it, was not available. They provide an operationalization of internal fit, consisting of following three criteria:
1. Strength of interaction: The strength of interaction between HR practices. - The extent to which HR practices form synergies.
Environment:
Stable/dynamic Simple/complex
Mild/hostile
Labor demand Labor supply
Technology Culture Structure Recruiting Selecting Training Appraisal Rewarding Mechanical Hard contract External norms
- The number of powerful connections and deadly combinations that can be identified in the HR system.
2. Dominant goals: The alignment of dominant goals with the HR system. - The number of HR practices that focus towards a set of dominant goals. - The extent to which the HR practices support each other in achieving a set of
dominant goals.
3. Employee groups: The degree of consistency of HR systems for different employee groups. - The extent to which employees in a similar situation are treated similarly with respect
to HRM.
- The extent to which the HR system for specific employee groups show powerful connections or deadly combinations
In this thesis, these criteria will be used to asses the consistency of the HR-instruments of the CCCN. Assessed is if a change in the pay for performance plan is consistent with the current HR-instruments of the CCCN.
Consistency and pay for performance. Although the importance of fit between the
organizational characteristics, the environment and between HR-instruments is stressed by several authors. The link between these ‘fits’ and pay for performance of an organization is less well described. Little research has been performed on this subject. Most logical however, is that a mechanical organization with hard contracts and a culture based on external norms suits a pay for performance system based on individual goals. In such an organization a pay for performance system could be a tool to control behavior of employees. In more organic organizations with soft contract and a culture based on internal norms, a pay for performance system based on collective goals would be more appropriate. In these organizations a pay for performance system could be used as a supportive tool to enhance group performance and job satisfaction. The above is however speculation that is not yet researched and supported by literature.
Heneman & Dixon (2001) do however provide a diagram (Appendix H) that uses the alignment of the business strategy (defender or prospector), organizational structure
Motivation
It’s important to define motivation because the main goal of a change in the pay for performance system at the CCCN, is to increase the motivation of their employees. Before defining motivation, it’s discussed that motivation is just one determinant of individual performance.
Determinant of individual performance. According to the Ability, Motivation, Opportunity
(AMO)-framework, motivation is just one determinant of work performance of an individual. Performance is a function of ability (can do the job), opportunity (work structure and
environment makes it possible to perform) and motivation (will do the job). If one of these three determinants is absent, performance is zero. This is important to keep in mind, because this research will focus on influencing motivation through a pay for performance system. As this model shows, motivation is not the only reason why employees perform. Figure 2 shows the AMO-framework (Blumberg & Pringle, 1982).
FIGURE 2
AMO-framework of individual performance
Definition. A definition of motivation provided by Buelens et al. (2006) is the following:
“Motivation is a psychological process that arouses and directs goal-directed behaviour” This definition is useful because one of the questions of management of the CCCN is what goal characteristics can motivate employees.
Motivation is often divided into two different types. According to Frey & Osterloh (2002) these two types go hand in hand and are always to a certain extent present.
Extrinsic motivation. According to Frey (1997) extrinsic motivation serves to satisfy indirect
or instrumental needs, in the context of work-environment it often stems from the desire of the worker to satisfy the non-work related needs. Buelens et al (2006) define extrinsic motivation as being motivated by extrinsic rewards. In the context of this research, extrinsic
Ability
Motivation
motivation is being motivated by money. Intrinsic rewards however, also mean compliments, status and respect from co-workers and supervisors.
Intrinsic motivation. A person is intrinsically motivated to perform an activity if there is no
apparent reward except the activity itself or the feelings which result from the activity (Deci (1972). Frey & Osterloh (2002) support this and add that intrinsic motivation can have three forms. The first form of intrinsic motivation is job satisfaction, the activity itself is a source of satisfaction. The second form is compliance with standards for their own sake, for example ethical standards. The third form of intrinsic motivation is the achievement of personal goals, even when the task itself is not necessarily enjoyable.
Crowding-out effect. Deci (1972) found that along threats of punishment and negative
feedback about performance, extrinsic rewards, negatively influences a person’s intrinsic motivation to perform the job. A meta-analysis of 123 studies (Deci, Ryan and Koestner, 1999) concluded that extrinsic rewards tend to have a negative effect on intrinsic motivation. Extrinsic rewards can undermine people’s taking responsibility for motivating or regulating themselves (Deci, Ryan and Koestner, 1999). Particularly, if organizations use extrinsic rewards to control behaviour of employees, extrinsic rewards can negatively influence intrinsic motivation.
Frey & Osterloh (2002) call this phenomenon the crowding-out effect (p12): “An activity that is carried out for its own sake (intrinsic) can be undermined or even corrupted by external (extrinsic) interventions.”
Frey & Osterloh (2002) argue that the crowding-out effect counteracts the so called price-effect. The price-effect means that a person will exert more effort when the person receives more money for it. Sometimes the crowding-out effect is higher than the price-effect, which means that in the end, effort is lower than before the higher pay. It’s also possible that the crowding-out effect only partially counteracts the price-effect.
Frey (1993) identifies three situations where the crowding-out effect can occur:
• Decreased self-determination: If employees perceive the introduction of the pay for performance plan as a tightening of control of the organization and a as an instrument of controlling their behaviour.
• Lack of fairness: If employees feels that they’re rewarded differently than others in their social reference group.
Frey (1997) also introduces the term crowd-in effect. External interventions ‘crowd-in’ intrinsic motivation if the employees perceive the interventions as supportive.
According to Frey (1993) the intrinsic motivation of employees is often low when the jobs are straightforward. The jobs at the CCCN are diverse but are fairly straightforward. The question is to what extent employees at the CCCN are intrinsically motivated and extrinsically
motivated. This, to determine the potential risk of the crowding-out effect.
Pay for performance
Pay for performance is defined in this section. After that the characteristics of these plans are given and their impact on motivation is discussed. The section is concluded by a model (Theuvsen, 2004) which shows the determinants of an effective pay for performance plan.
Definition. The definition of pay for performance used in this thesis is based on the definition
of variable pay plans of Belcher (2000, p209) and Langedijk & Ykema-Weinen (2000) and is the following:
“Compensation systems that pay bonuses to an individual employee or a defined group of employees based on predetermined measures of individual, group or organizational performance”
Pay for performance plans can be categorized by their measurement level (individual or group level) and the nature of the performance measurements (absolute measurement or
measurement relative to others).
The current bonus system at the CCCN can be typed as a group level (i.e. organization as group) bonus plan, based on absolute performance measurements. The absolute performance measurements are however based on the organization as a whole and not on the CCCN as a group.
Characteristics of pay for performance plans. Heneman & Miceli (2000) formulate seven
TABLE 1
Pay for performance plan characteristics
Characteristic Description
Performance measures The type of measure used to base the pay on Level of performance measures Individual, team, business unit or organizational level
Amount of payout The height of the bonus Payout formula Way the bonus is calculated
Leverage The ratio of the variable pay to total pay Frequency of payout How often is it paid out?
Type of payout Monetary or non-monetary
Performance measures. The main problem with performance measures is often the
extent and the way that they’re measured. Quantitative goals generally can be measured more objectively than qualitative goals, because quality usually is assessed by another person. Both types of performance measures must be SMART (Locke & Latham, 1990) to be able to motivate.
Level of performance measures. The performance measures on which the pay is
based, can be set on three different levels: the organizational, group and individual level. An example of a pay for performance plan at the organizational level is profit-sharing. Heneman & Gresham (1998) argue that profit-sharing contributes to an average of 5 % productivity gain for organizations. This is a lot lower than pay for performance plans that are based on lower organizational levels (i.e. 20 % gain with piece rate plans). An advantage of higher level performance measures is the alignment of organizational goals with the goals of an employee. Identification, job satisfaction and involvement with the organization could therefore increase. Heywood & Wei (2006) support this finding. These type of plans could therefore potentially motivate employees through job satisfaction (i.e. job satisfaction is a form of intrinsic motivation). This motivational effect could be weakened by the weak ‘line of sight’ (Heneman & Gresham, 1998). A weak ‘line of sight’ means that its difficult for
individuals to see how their behaviour contributes to organizational performance. They therefore argue that the motivational effect of group and organizational level pay for performance plans are low. Using lower level measures could make the ‘line of sight’ stronger, and thus should motivate employees more.
Group level performance measures have the advantage that groups or teams are motivated to put group goals before individual goals and it thus stimulates collaboration between
collaborate with each other. A big downside however, is the high chance on ‘free-riders’. They could cause a decrease in motivation for the hard workers in the group. The chance on free-riders increases with an increasing group size, thus to counteract the chance on ‘free-riders’ groups should not be too big.
Individual performance measures have the big advantage of being almost complete controllable by the individual employee. The ‘line of sight’ is very strong and it thus motivates employees (Heneman & Gresham, 1998). The relation between individual
performance and outcomes or rewards is clear and thus motivates (Vroom, 1960:expectancy theory). A big disadvantage is, that employees are only focussing on individual goals and tend to ignore the organizational goals. It’s therefore only suitable in an organization that doesn’t rely on collaboration or when the individual goals are completely aligned with the organizational goals.
Amount of payout. The height of the bonus is obviously important in motivating
employees (Vroom, 1960: expectancy theory). However little research has been performed on the minimal amount of a bonus that is necessary to be able to motivate. Dickinson & Gilette (1993, from Thierry, 2003) argue that it’s not the height of the percentage of the bonus that motivates employees. Instead the dependency of a part of their rewards on their performance, motivates employees. They also argue that a high bonus can make employees insecure, especially when they can’t completely control the output of their work.
Worley et al (1992) showed that pay increase attractiveness was unrelated to current salary level. They also found that the smallest bonus that is still attractive to employees to work harder, is around 5 % of their base salary. Mitra et al (1997) argue that this percentage has to be at least 7 % of the base salary. They add that a percentage lower than 3 % isn’t noticed by employees.
Frequency of payout. The best way is to pay quickly after the performance, because in
that way employees will know what they are rewarded for. This means that frequency of payout is dependent on the timeframe the goals are set for.
Type of payout. This characteristic concerns the type of payout: non-monetary or
person is extrinsically motivated the more he or she is motivated by extrinsic rewards. A more intrinsically motivated employee will be more motivated by the work itself.
Effectiveness of pay for performance plans
Theuvsen (2004) argues that pay for performance plans only work if extrinsic motivation is a major force of individual behaviour. Effectiveness means that the pay for performance plan can motivate people. Through this it can enhance organizational effectiveness.
Several elements of motivational theories can be found in the model developed by Theuvsen (2004) (i.e. expectancy theory of Vroom, 1960; Goal-setting theory of Locke & Latham, 1990) . The model gives a good overview of the existing theories of pay for performance effectiveness.
Theuvsen (2004) identifies two dimensions with each six determinants for pay for performance effectiveness (figure 3).
The dimension ‘relevance of extrinsic rewards’ is a function of three determinants. The first determinant, ‘motivation as the result of a cognitive process’ means that only when
individuals take the financial consequences of their actions into account, pay for performance has a motivational effect. This determinant is based on the concepts ‘expectancy’ and
‘instrumentality’ of the expectancy theory of Vroom (1964). According to that theory, motivation is influenced by the belief of a person that effort leads to a specific level of performance (expectancy), by a person’s belief that performance leads to a specific outcome or reward (instrumentality) and by the value of a reward or performance to that person (valence). The second determinant, ‘valence individuals attribute to higher contingent rewards’ is based on this ‘valence’ concept (Vroom, 1964).
The third determinant, ‘existence of crowding-out effects’ is based on the already discussed crowding-out theory of Frey (1992) and Deci (1972).
The main argument of the dimension ‘relevance of extrinsic rewards’ is that pay for
FIGURE 3
Determinants of pay for performance effectiveness
The other dimension Theuvsen (2004) identifies is, the applicability of output control. Ouchi (1977) (from Theuvsen, 2004) defines output control as an organizational control mechanism which depends on goal setting and the measurement of actual outputs against goals. A pay for performance system is more effective when applicability of output control is high.
The model of Theuvsen (2004) shows that applicability of output control is a function of three determinants. They’re comparable to the ‘ line of sight’ problem discussed earlier and based on principles of the goal-setting theory (Locke & Latham, 1990). Goals have to be SMART, Specific, Measurable, Attainable, Results oriented and Time bound, in order to be able to motivate.
Knowledge of the relevant goals is necessary because if an employee doesn’t know the goals, they can’t motivate. Controllability and compatibility of goals means, that employees must be able influence the goals that are congruent with the overall business goals. Measurability of goals means that the more valid and reliable the outcome measures are the better the
effectiveness of pay for performance plans is.
3. RESEARCH METHODS
Internal documentation
To answer the first sub question, internal documentation was used. Missing information was gathered trough conversations with managers and employees.
The information that is gathered was analyzed by using the SLAP-model (Bax, 2003). HR-instrument consistency is assessed by using the operationalization of internal fit (Boon et al. ,2004).
Survey
A survey is distributed among all employees of the CCCN. The survey measures the motivational orientation (extrinsic, intrinsic or both) of the employees.
It also features four attitudinal items. The goal of the survey is to be able to asses if a pay for performance system for the CCCN can motivate the employees.
The Work Preference Inventory (WPI) of Amabile et al. (1994) was used to determine the level of extrinsic and intrinsic motivation of employees of the CCCN. This instrument measures motivational orientation of people through 30 items. Each motivational orientation is measured through 15 items. The items are formulated in the first person perspective and must be scored on a four-point Likert scale (1= never or almost true to 4 = always or almost always true to me).
All items of the WPI can be found in Appendix A. An example of a question is: ‘I’m strongly motivated by the money I can earn’.
The reason for choosing the WPI is because it is unique in its kind and it’s valid and reliable. This survey is unique because most other scales in literature only focus on intrinsic
motivation and don’t measure extrinsic motivation.
Amabile et al. (1994) found a Cronbach’s α of 0.75 for the intrinsic motivation scale and 0.70 for extrinsic scale, and therefore internal consistencies of the scale are acceptable. Validity of the scale was tested by correlating it to several other surveys and behavioural measures of motivation (i.e., Deci & Ryan’s autonomy scale). Significant correlations were found and these provide strong confirmation of the validity of the WPI as a measure of motivational orientations (Amabile et. Al, 1994).
Another reason for choosing the WPI is because both the intrinsic motivation and extrinsic motivation scales can be divided in two subscales. For intrinsic motivation the scales
the secondary scales outward (10 items) and compensation scale (5 items) are identified. These secondary scales we’re also found to be satisfactory reliable (Amabile et. al, 1994). These secondary scales show, in more detail what motivates employees of the CCCN.
The following four attitudinal items were included: 1. I’m satisfied with the current bonus system
2. A bonus system that pays on the basis of goals that I can influence as an individual, will increase my motivation.
3. A bonus system that is based on CCCN goals instead than on IKEA Netherlands goals, will increase my motivation.
4. Overall I’m satisfied with my work.
These will be scored on a four-point Likert scale. (1=completely disagree, 2=slightly disagree, 3=Agree, 4=completely agree). These two items are added to be able to give a general
impression of the opinions of employees towards a change in the bonus system and the perception of the employees of the motivational effect of changing the system.
Besides these items, some classification questions are added these are: gender, age-category and department (IPS, BKL, MST or IB).
Population. The survey was distributed among all employees of the CCCN, this means that
188 surveys were distributed. In total 117 surveys were returned and completely filled out. The response rate is therefore 62.23 % (n=188).
Representativeness of response. To determine if the data is representative of the population, a
TABLE 2
Representativeness of survey response
Response-frequency Percentage Population-frequency Percentage
IPS 60 51.3% 95 50.5% Backline 34 29.1% 53 28.2% MST 3 2.6% 17 9.0% IB 11 9.4% 12 6.4% Other 9 7.7% 11 5.9% Total 117 100% 188 100% Department Male 22 18.8% 38 20.2% Female 95 81.2% 150 79.8% Total 117 100% 188 100% Gender 15-35 44 37.6% 69 36.7% 36-45 40 34.2% 65 34.4% 46-55 28 23.9% 47 25.5% >55 5 4.3% 7 3.7% Age Total 117 100% 188 100%
The response data, appears to be quite representative for the CCCN as a whole. MST is a little underrepresented while IB and Other are overrepresented because almost all employees of those departments returned the survey.
A chi-square goodness of fit test is performed to determine if the response data is
representative for the CCCN as a whole. No significant differences between response and population frequencies were found for any of the control variables (Department (Chi2=0.10; df=4; p=.99); Gender (Chi2=0.71; df=1; p=.40); Age (Chi2=0.97; df=3; p=.81)). Therefore the response data appears to be representative of the CCCN as a whole.
Scale reliability. Although the reliability of the scales was already tested by Amabile et al.
(1994), scale reliability of the response data was calculated.
Table 3 displays the scale reliabilities of the response data in comparison to the scale
TABLE 3 Scale reliabilities Scale Cronbach’s α response data Cronbach’s α Amabile et al.(1994) Extrinsic motivation .61 .70 Outward .62 .67 Compensation .53 .63 Intrinsic motivation .82 .75 Challenge .83 .73 Enjoyment .61 .67
Statistical procedures. It’s not the intention to test hypotheses with this survey. However, the
correlation (Pearson r) between extrinsic motivation, intrinsic motivation and the four attitudinal items are calculated to see if some remarkable correlations exist between them. To determine if the mean scores on motivational orientations differ between males and females, an independent sample t-test was used. To check differences on mean scores between departments and age categories, a one-way ANOVA was used. A multiple regression analysis is used to asses the relation between intrinsic and extrinsic motivation and job satisfaction. It is also used to determine the chances on the crowding-out effect. Significance level α 0.05 was used for all statistical tests.
4. RESULTS
This chapter will present the result of the consistency analyses and the results of the survey conducted at the CCCN. For a better understanding of the context of the research a short description of the CCCN and their HR-strategy is given.
Context of the research: the CCCN
Business (IB) is responsible for all contacts with business customers of IKEA. Figure 4 shows the organization chart of the CCCN.
FIGURE 4
Organization chart of the CCCN
The HR-strategy of the CCCN is the following:
“We strive for a clear organization that fits into the IKEA organization and by creating flexible, trainable employees we constantly try to improve our service to the customers.”
Although the CCCN has it’s own HR-policies and HR-strategy, a lot of policies are related to the overall HR-strategy and policies of IKEA. Therefore the overall HR-strategy of IKEA is given:
“We are on a constant journey to be better at what we do and what we offer.We want to give down-to-earth, straight-forward people the possibility to grow, both as individuals and in their professional roles. Together we are strongly committed to creating a better everyday life for ourselves and our customers.”
Demand side
The TECS-analysis is used to quickly scan if the demand side of the labor allocation process of the CCCN is internally consistent and aligned with the environment. Each category of the TECS-model is assessed by the use of the checklists provided by Bax (2003). The filled out checklists can be found in Appendix B.
CCCN MANAGER
BACKLINE IKEA BUSINESS MONTAGE SERVICE TEAM
MANAGER MANAGER
HUMAN RESOURCES CONTROLLING
90 Staff members 50 staff members 16 staff members 10 staff members SAMS & iSell
SUPERUSER
PERSONLIG NAVIGATOR
IT Call Support HR staff member
IKEA PERSONAL SERVICE
TRAINERS
Technology. Technology at the CCCN can’t be typed as either completely paperware or
humanware, it’s somewhere in the middle. Both types are present at the CCCN, however humanware is a little more predominant than paperware. The CCCN, especially the IPS department, relies heavily on rules and procedures (paperware) but without the expertise and experience of employees (humanware) the procedures can’t be followed. The other
departments rely more heavily on humanware but within the framework of rules and
procedures. Direct contact with customers always relies on the skills of employees, rules and procedures are always only a general framework.
When using the TECS checklist the technology at the CCCN scores somewhere in the middle on the continuum mechanical-organic. Because of the relatively high dependency on the experience and expertise of employees, the technology is a bit more suited to an organic organization.
Environment. The CCCN is a customer contact center that doesn’t have any competition. The
reason for this is that the CCCN is a only contact center of IKEA Netherlands. Based on this, the environment of the CCCN could be typed as simple and mild and suited to a mechanical organization. The environment of the CCCN is however not always stable, demand for services is sometimes fluctuating (fluctuating amount of incoming calls) and hard to predict. On the continuum mechanical-organic the CCCN again scores somewhere in the middle but it’s a bit more suited to a mechanical organization because of the lack of competition and therefore relatively stable environment.
Culture. IKEA has a strong culture that is based on the values formulated by the founder Ingvar Kamprad. One of the nine principles of Ingvar is ‘Most things still remain to be done –
cost-conscientiousness and community feeling. Maintaining this strong culture is one of the focal points of IKEA’s global HR-strategy.
Using the checklist of the TECS-model to assess the culture at the CCCN, it appear to be more suited to an organic organization. At the CCCN, collaboration within departments is important (especially at Backline). Between department collaboration is also very important. Employees at the CCCN are also open to new employees and outsiders.
On the other hand there is one characteristic that is better suited to a mechanical organization. The separate departments of the CCCN have a strong identity of their own and it appears that employees feel first committed to their own department, before being committed to the CCCN as a whole. Departments also focus on their own goals more than on the goals of the CCCN as a whole.
Structure. At a first glance, the organizational chart of the CCCN (figure 4) could give the
impression of a highly centralized, classic mechanical (based on departments) organization. However the span of control is quite loose (a quite large number of subordinates under one supervisor) which fits a flat organization. The amount of hierarchical levels is also quite low, with only one supervisor level between subordinates and the management team. The TECS checklist shows that employees communicate more with each other than their supervisors and that contacting others in the organization is easy. On the other hand there’s also a lot of top down communication which more common in a mechanical organization.
Structure is therefore also scored on the middle of the continuum, but it suits an organic organization a little more.
Figure 5 shows the outcome of the TECS analysis of the CCCN. The demand side of labour of the CCCN is not entirely in balance. Culture is more organic than the other elements of the CCCN.
FIGURE 5 TECS model at the CCCN
T E C S
Supply side
The SLAP-model uses culture as the perspective to see if the supply side of the labor allocation process is consistent.
The question is, to what extent the CCCN uses internalized norms or non-internalized norms to get employees to conform to the rules and procedures. In other words, are external rewards and other control mechanisms used to get employees to conform to rules and procedures? Or does the CCCN rely more on the internalized norms (of the culture of IKEA) of employees and therefore doesn’t need these external interventions as much.
After six months of employment, all employees follow the IKEA-way course. The values, culture and social responsibilities of IKEA are emphasized in this course. This course is a part of the socialization process: to internalize the norms, values and culture of IKEA. In all aspects employees of the CCCN are treated the same as employees of the stores. The IKEA culture is therefore also present at the CCCN and acts as an internalized norm.
In the context of the SLAP-model however, the CCCN relies more heavily on
non-internalized norms. Employees can be replaced relatively easy and quickly. The time before a new employee can start working is also relatively short. The CCCN is not a classic
professional organization with for example long socialization processes and traineeships. The jobs are fairly straightforward but not routine and it’s therefore to some extent logical to assume that employees conform because of the benefits they receive for it.
So again the CCCN does not score extreme on this continuum, but it’s relies more on non-internalized norm than on non-internalized norms. The labor supply side of the CCCN leans more heavily towards a mechanical organization.
Link between demand and supply side
To determine whether the labor demand and labor supply side fit to each other, the SLAP-model uses hard or soft contracts.
Most employees of the CCCN are paid on the basis of the hours they’ve worked. Within the CCCN there are career opportunities (e.g. work at another department or different function within the departments or IKEA), and people with ambition are encouraged to participate in projects to develop themselves as managers.
are however not found in the contracts of the majority of employees of the CCCN. In the contracts both parties remain relatively autonomous. Therefore, contracts at the CCCN resemble ‘hard contracts’ more than ‘soft contracts’.
Fit between HR-instruments
In this section the HR-instruments of the CCCN are briefly discussed. The instruments are based on the policies of IKEA globally. After that, the extent to which the HR-instruments complement each other is discussed.
Recruitment. One of the most important aspects of the recruitment strategy of IKEA globally,
is to recruit through the IKEA brand, the IKEA values and the IKEA culture. The idea is that a strong internal employer brand results in lower turnover and proud employees that act as ambassadors towards people outside of the company. Employer branding will establish IKEA as a dynamic employer and working life partner who meets the needs of modern, active professionals in different life situations.
External recruitment is always preceded by internal recruitment. Vacancies always emphasize the IKEA values, culture and brand because it attracts the people that values those aspects. IKEA tries to attract employees that are uncomplicated, humble and honest and are interested in a life-long career.
At the CCCN most departments are now in full force. Recruitment policies are therefore not focused on growth but on consolidation. The CCCN mainly recruits through the IKEA website. So called “recruitment nights” are organised to inform groups of candidates about vacancies simultaneously.
Selection. The selection strategy of IKEA, is to evaluate the candidates’ value set, attitude
and motivation and to match these to the demands of IKEA and the specific job. The right attitude is just as important as the right skills.
The CCCN selects employees on the basis of the following hard criteria: flexibility, computer skills, communicative skills, education (dutch MBO level), experience with direct customer contact or call center experience, age categories 20-60, customer service experience.
Performance appraisal. All employees have two or three appraisal conversations a year: an
appraisal conversation, an agreement conversation and a progress conversation. Employees are assessed on their behaviour, duties and responsibilities (based on job descriptions and department goals) during the appraisal conversation. Behavioural criteria are based upon cultural values (e.g. Collaboration, results oriented, customer-oriented and ‘ambassador’). During the progress conversation, the progress of the development points and agreements is discussed. Besides individual development, team development is also important.
The outcome of the appraisal, affects the yearly salary raise. For example, an employee, who on average is assessed as inadequate, only receives half of the yearly CLA pay raise when he or she is currently paid under the salary scale middle (table 4).
TABLE 4
Pay-raises through CLA and appraisal
Appraisal result Scale position Inadequate According expectations Exceeding expectations Far exceeding expectations Lower than scale middle 0.5 CLA CLA + 2% CLA + 3% CLA + 4% Higher than scale middle 0.5 CLA CLA + 1% CLA + 2% CLA + 3% 100% -107,5% of scale max. No raise CLA CLA + 1% CLA + 2% 107,5% - 115% of the scale max. No raise CLA CLA CLA + 1%
Rewarding. Compensation and benefits should reflect IKEA’s vision, values, culture and
HR-idea. A general principle is that terms of employment within the IKEA group are consistent with national legislation, regulation, and standards. Salaries also should never be the only competitive tool. Salaries must reflect the content of the position, the local market within and outside IKEA and also, whenever possible, the performance of an individual. Benefits should be competitive and reflect the IKEA vision, values and culture and wherever possible reflect individual needs.
Training. IKEA believes in each person’s capability to develop. All employees are
responsible for their own development and for sharing knowledge with others. Managers have a key role in stimulating and recognising learning and development. Diversification of skills as well as upwards development is possible, it’s up to the employee in what way he or she would like to develop.
Of course training in basic skills, enabling employees to perform their jobs, is mandatory for every employee. At the CCCN training of middle managers in HR-subjects like employee absence, employee turnover and recruitment and selection is one of the focal points of this year
Extent of fit. The three criteria of Boon et al. (2007) are used to asses the fit between the
HR-instruments at the CCCN.
1. Strength of interaction: The strength of interaction between HR practices.
A powerful connection is present between the recruitment and selection instruments. Both are focused on attracting and selecting employees that suit the culture of IKEA. The rewarding policy is also consistent with these instruments. The focus is to attract honest, humble, uncomplicated people, the reward strategy is not overly competitive and emphasizes benefits over money. This reward strategy is likely to attract honest, humble and uncomplicated people. The same behavioural aspects that are used to assess employees during appraisal are used to select new employees. Because of this it’s much less likely an employee doesn’t fit within the CCCN, and it reduces the chances on hiring unsuitable employees. Generally, it’s easier to identify potential deadly combinations of HR-instruments. At the CCCN no obvious deadly combinations of HR-instruments are present. However, that doesn’t mean that they all form synergies.
2. Dominant goals: The alignment of dominant goals with the HR system.
The dominant overall goal of all HR-instruments, is attracting, developing and maintaining proud, uncomplicated, humble and honest employees. This is also the main goal of the HR-strategy of IKEA globally. All HR-instruments use the cultural values and norms of IKEA to some extent. This emphasises on culture aligns the instruments. Training is the only HR-instrument that doesn’t rely on the culture as much. All the HR-HR-instruments (training
3. Employee groups: The degree of consistency of HR systems for different employee groups. At the CCCN (and IKEA in general) the principles of the HR-instruments are always the same, there’s no different treatment of different employee groups and all employees in the same situation are treated equally.
Consistency at the CCCN and pay for performance
As discussed in the theoretical framework it’s often stressed that organizational fit or balance is necessary for an effective organization. However it’s not described how pay for
performance could fit in. The TECS analysis showed that all elements except culture scored in the middle of the organic-mechanical continuum. This means that pay for performance shouldn’t be based on individual goals, because that fits a mechanical organization. It also means that a pay for performance system based on group or business goals is also not entirely suitable because that fits a completely organic organization. Because of the organic culture of the CCCN, the pay for performance system also leans more heavily towards being more organic and thus more based on group goals. The above arguments are, because of the lack of research performed on the subject, speculative.
It’s also difficult to follow the diagram of Heneman & Dixon (2001) (figure H1, appendix H) because the structure of the CCCN scores in the middle of the organic-mechanical continuum. However, because the structure of the CCCN leans more heavily towards organic, reward system four should be the most appropriate according to the diagram. Characteristics of this type of reward system are: reward measures based on results instead of behaviors, emphasis on the business unit performance instead of individual performance and emphasis on variable pay instead of fixed pay. This supports the speculative part of this paragraph. The pay system (and therefore the pay for performance system) of the CCCN should be based on the business unit level and on results and not on individual behavior.
Survey outcomes
In this section the results of the survey are discussed.
Extrinsic and intrinsic motivation scores. Table 5 displays the means, median, modes and
standard deviations of each of the scales.
TABLE 5
Extrinsic and intrinsic motivation scores (primary and secondary scales)a
Extrinsic motivation Extrinsic motivation: Outward scale Extrinsic motivation: Compensation scale Intrinsic motivation Intrinsic motivation: Challenge scale Intrinsic motivation: Enjoyment scale Mean 2.55 2.54 2.58 3.12 3.09 3.15 Median 2.53 2.50 2.60 3.07 3.14 3.13 Mode 2.60 2.60 2.40 2.93 3.14 3 S.d. .31 .37 .50 .37 .49 .35 Variance .10 .14 .25 .14 .25 .13 Skewness .25 .11 .08 -.03 -.37 -.22 a n=117
The intrinsic motivation scale is somewhat skewed to the right, while the extrinsic scale is somewhat skewed to the left. This can also be seen in tables 5 and 6.
TABLE 6
Frequency table for primary motivational scales
Score category Extrinsic motivation Intrinsic motivation Very low: < 2.00 6.0% 0.0% Low to medium: 2.01-2.50 35% 5.1% Medium to high: 2.51-3.00 50.5% 41.1% High to very high: 3.01-3.50 8.5% 36.7% Very high: >3.50 0.0% 17.1%
When categorizing the employees by their motivational orientation, it appears that 4.3% of the respondents score low on both motivational scales (lower than 2.5 on both scales). Only 0.9% is mainly extrinsically motivated (extrinsic motivation > 2.5 and intrinsic motivation <2.5). A large group of 36.8%, scores only high on intrinsic motivation (extrinsic motivation < 2.5 and intrinsic motivation >2.5) while 58.1 % scores high on both scales simultaneously (both scales higher than 2.5) (Figure 6).
FIGURE 6
Motivational orientations at the CCCN
Amabile et al. (1994) found in their sample of working adults a mean of 2.54 for extrinsic motivation and a mean of 2.99 on intrinsic motivation. The mean of intrinsic motivation at the CCCN (3.14) is significantly higher than those results (t=3.87, p<0.0001). The mean level of extrinsic motivation (2.54) doesn’t significantly differ from the results of Amabile et al. (1994) (t=-.258, p(.797)>0.05) (Appendix D).
Table 7 displays the mean scores on extrinsic and intrinsic motivation for males and females. The difference between males and females on the means of intrinsic motivation and extrinsic motivation, is however not significant (intrinsic motivation: t=.56 , p=.58 & extrinsic
motivation t=1.22, p=.23) (Appendix D).
TABLE 7
Mean scores on the motivation scales by gender a
Scale Gender N Mean s.d. s.d. mean Male 22 3.16 .40 .09 Intrinsic motivation Female 95 3.11 .36 .04 Male 22 2.63 .29 .06 Extrinsic motivation Female 95 2.54 .32 .03 a n=117
Table 8 shows the mean levels of extrinsic and intrinsic motivation sorted by department. No big differences between departments are immediately visible.
TABLE 8
Mean scores on the motivation scales by department a
Extrinsic motivation Intrinsic motivation Department N Mean s.d. Mean s.d.
IPS 60 2.56 .31 3.06 .40 BKL 34 2.48 .30 3.18 .27 MST 3 2.56 .38 3.04 .57 IB 11 2.71 .28 3.17 .35 Other 9 2.59 .39 3.26 .45 Total 117 2.55 .31 3.12 .37 a n=117
A test for homogeneity of variances (p=.97 for extrinsic motivation, p=.09 for extrinsic motivation) and an one-way ANOVA (Appendix D) show no significant difference in mean scores between the departments of the CCCN (F(4,112) = 1.20 , p=.323 for extrinsic
Table 9 shows the mean levels of extrinsic and intrinsic motivation sorted by age-category. Both means of extrinsic motivation and intrinsic motivation appear to decrease with
increasing age.
TABLE 9
Mean scores on the motivation scales by age a
Extrinsic motivation Intrinsic motivation Age
category N Mean s.d. Mean s.d.
<30 20 2.80 .28 3.24 .28 30-35 24 2.64 .36 3.16 .36 36-40 21 2.53 .26 3.15 .42 41-45 19 2.45 .29 3.05 .38 46-50 17 2.45 .20 3.07 .38 51-55 11 2.42 .29 3.12 .29 >55 5 2.27 .23 2.81 .48 Total 117 2.55 .31 3.12 .37 a n=117
A one-way ANOVA tells that a significant difference in mean scores on extrinsic motivation between the age-categories, exists (F(4,112)=4.72, p=0.0001). The means on intrinsic
motivation however, don’t differ significantly between the age-categories (F(4,112)=1.22, p=.30).
The multiple comparison table (Appendix D) shows that the mean score on extrinsic
motivation for the <30 category differs significantly from the following age-categories: 41-45 (mean difference= .35, p=0.005), 46-50 (mean difference= .35, p=0.009), 51-55 (mean
difference= .38, p=0.015) and >55(mean difference= .53, p=0.007). Younger employees appear to be significantly more extrinsically motivated than those age-categories.
Scores on the attitudinal variables. Table 10 presents the mean scores of the other four
variables.
TABLE 10
Mean scores on the four attitudinal variables a
Satisfaction current Bonus system
Higher motivation if bonus is based on goals
that I can influence
Higher motivation if bonus is based on CCCN goals
instead of IKEA goals
Job satisfaction Mean 2.49 2.89 2.97 3.39 Median 3.00 3.00 3.00 3.00 Mode 3.00 4.00 3.00 4.00 S.d. .92 .99 .94 .67 Variance .86 .98 .89 .45 Skewness -.09 -.43 -.77 -.81 a n=117
The frequency tables (appendix E) of these variables show that 47.8% of the employees is not satisfied with the current bonus system, 38.5% however is satisfied while 13.5% is
completely satisfied. A bonus system based on goals that can be influence by the individual, is thought to be motivational by 65.8 % of the employees. A bonus system that is based on CCCN goals instead of on IKEA Netherlands goals is thought of as even more motivational: 76.6 % of all employees feel that such a change will motivate them.
Almost all employees of the CCCN are satisfied with their job, 91.5 % of the employees of the CCCN is currently satisfied with his or her job. Only 7.7 % of employees are somewhat dissatisfied with their job and just 0.9 % is completely dissatisfied about their job.
Correlation between extrinsic and intrinsic motivation. According to Amabile et al. (1994),
some authors (e.g. Lepper & Greene, 1979) claim that extrinsic and intrinsic form a
continuum. This means that when the extrinsic motivation of a person increases, the intrinsic motivation would decrease. Amabile et al. (1994) question this assumption and hypothised that the two motivational orientations are independent from each other. The results of their research indeed reveal that intrinsic and extrinsic motivation are relatively independent. They only found modest and negligible correlations found between the scales and subscales (e.g. r=-.08 between primary scales). No evidence for a continuum between the two was found by Amabile et al. (1994).
The outcome of the survey at the CCCN also doesn’t support the assumption that extrinsic and intrinsic motivation form a continuum. It’s more the opposite, when extrinsic motivation increases, intrinsic motivation also (moderately) increases.
Relations between motivation and the attitudinal variables. Appendix F, also displays two
correlation matrices of extrinsic and intrinsic and the attitudinal variables.
Extrinsic motivation and intrinsic motivation both have a moderate positive relationship with the variable ‘Higher motivation if bonus is based on goals that I can influence as an
individual’ (also called ‘bonus based on individual goals’)(extrinsic motivation, r=.316, p=0.001 and intrinsic motivation, r=.28, p=.002).
They both don’t relate to ‘Higher motivation if bonus is based on CCCN goals instead of IKEA goals’.
Another remarkable finding is that, extrinsic motivation has a weak negative relation with job satisfaction (r=-.238, p=0.01). Intrinsic motivation on the other hand has a weak positive relation to job satisfaction (r=.235, p=.01).
Correlations to the same variables and the secondary extrinsic motivation scale (compensation), were calculated but no correlations were found.
Following the calculation of correlations, hierarchical (two step) multiple regression analyses(Appendix G) were conducted. This to determine if the variables ‘bonus based on individual goals’ and ‘bonus based on CCCN goals instead of IKEA Netherlands goals’ predict intrinsic motivation and extrinsic motivation. Another multiple regression analysis is performed to determine if intrinsic and extrinsic motivation significantly predict job
satisfaction. In this last multiple regression analysis, the potential interaction effect of the two motivational orientations on job satisfaction is also calculated.
Each multiple regression analysis was performed in two steps. In the first step it was assessed if the two main variables predict the dependent variable. In the second step the control
variables age, department and gender were added.
In this way it’s possible to determine the unique effect of the independent variables on the dependent variables while controlling for the other variables (age, department and gender). The outcomes of the regression analyses can be used to asses the occurrence of the crowding-out effect at the CCCN when a new bonus system is introduced.
The overall variance predicted by ‘bonus based on individual goals’ and ‘bonus based on CCCN goals instead of IKEA Netherlands goals’ on intrinsic motivation is 8,1%. When also taking into account age, gender and department, 13,4% of variance is explained. The only significant parameter that was found to predict intrinsic motivation is ‘bonus based on individual goals’ (B=.12, t=3.04, p=.003).
The overall variance predicted by ‘bonus based on individual goals’ and ‘bonus based on CCCN goals instead of IKEA Netherlands goals’ on extrinsic motivation is 13%. When also taking into account age, gender and department, 33,9% of variance is explained. The
following parameters were found to predict extrinsic motivation significantly: ‘bonus based on individual goals’ (B=.11, t=3.67, p=.000) , ‘bonus based on CCCN goals instead of IKEA Netherlands goals’ (B=-.092, t=-2.83, p=.006) and the age category <30 (B=.48,
t=3.29,p=0.001).
It appears that extrinsic and intrinsic motivation predict 15.7% of variance of the variable ‘job satisfaction’. All predictors together predict 30.2% of overall variance.
When taking all predictors into account, it appears that the only significant predictors are intrinsic motivation (B=.72, t=.39, p=.00) and extrinsic motivation (B=-.70, t=-3.36, p=.00). Age, gender and department don’t significantly predict ‘job satisfaction’ when taking all the predictors into account.
A non-significant predictive parameter (B=-.026, t=.75, p=.453) for the interaction variable (intrinsic motivation * extrinsic motivation) on job satisfaction was found. This means that no interaction effect between intrinsic and extrinsic motivation was found.
The outcomes of the multiple regression analyses don’t provide evidence for the crowding-out effect. There’s no significant negative predictor found for intrinsic motivation. For extrinsic motivation on the other hand, a significant negative and positive predictor was found.
5. CONCLUSIONS
In this last chapter, the central research question will be answered. After that, the practical and theoretical implications of the research are discussed.
Sub-questions
Consistency. The first sub-question concerned the consistency between the current
HR-instruments and their consistency with the technology, environment, structure and culture of the CCCN. This is important because a change in the compensation system could cause imbalance and be inappropriate for the CCCN.
The HR-instruments that are currently used at the CCCN appear to be consistent with each other. No obvious deadly combinations of HR-instruments are present. However that doesn’t mean they all form synergies. The overarching and aligning factor of all HR-instruments are the values and norms of the IKEA culture. Because of this alignment, it’s expected that the HR-instruments complement each other in attracting, maintaining en developing, honest, humble and uncomplicated employees.
Overall it appears that the CCCN is fairly consistent. It’s not a typical mechanical organization, but it’s not completely organic either. The only element that scores heavily towards an organic organization is culture. The values and norms that belong to the culture are apparent in all the HR-instruments and therefore suit the organization. The change in the pay for performance system should therefore also be consistent with the norms and values of the IKEA culture. This to ensure it fits the goal to attract, maintain en develop, honest, humble and uncomplicated employees. To be more in balance CCCN should become a bit more organic to be completely in balance with the culture. In September of this year, the CCCN will be reorganized to become ‘fit for the future’. The goal is to become a leaner organization, so the CCCN should be more organic and decentralized after the
implementation.
By using the diagram of Heneman & Dixon (2001) (figure H1, appendix H), it was
determined that a pay for performance system for the CCCN should be based on business unit goals, on results and not on individual behavior. This is based on the alignment of the current structure, culture and business strategy of the CCCN. This seems also logical because the CCCN leans more towards an organic organization. In such a case group level measures and pay for performance as a supportive HR-tool seems logical because it fits the values of an organic organization.
Motivational characteristics. The second sub-question concerned the characteristics of pay
A bonus should be minimal 5% of the base salary to be able to motivate (Worley et al., 1992). Mitra et al. (1997) argue that this should be 7 %. Gilette (1993) however, argues that the height of the bonus doesn’t matter. As long as a part of the compensation is dependent on performance, it should motivate employees.
Theuvsen (2004) provides a good model of pay for performance effectiveness that covers most literature on the subject. He formulated two dimensions that determine the effectiveness of pay for performance plans, one being ‘relevancy of extrinsic rewards’ and the other being ‘applicability of output control’.
The first dimension concerns the extent to which employees are motivated by money. This depends on the valence (Vroom, 1960) they put on money. Extrinsically motivated people are more likely to be motivated by money than intrinsically motivated people. Deci (1972) argues that monetary rewards can crowd-out (reduce) intrinsic motivation when it’s perceived to be controlling. Frey (2002) argues that it could also crowd-in motivation when it’s perceived to be supportive.
The second dimension concerns the ‘line of sight’ (Heneman & Gresham, 1998). Employees need to be able to see how their behaviour affects the outcome. Lower level performance measures have a stronger ‘line of sight’. A downside is that it stimulates competition between employees or groups of employees. The second dimension also says that performance
measures must be SMART (Locke & Latham, 1990) to be able to motivate.
In sum, pay for performance plans only work if extrinsic motivation is a major force of individual behaviour and employees can see how they can influence the goals.
Current bonus system. The last sub-question concerned the opinion of the employees towards
change and the question if the current pay for performance plan effectively motivates employees of the CCCN.
