Within 24 hours after managers of the Heavy Duty Division of Springfield Remanufacturing Company (SRC) gather to discuss a multipage financial document, every plant employee will have seen the same information. If the employees can meet shipment goals, they’ll all share in a large year-end bonus.58 Many organizations of various sizes involve their employees in workplace decisions by opening up the financial statements (the “books”). They share that information so that employees will be motivated to make better decisions about their work, be better able to understand the implications of what they do and how they do it, and see the ultimate impact on the bottom line. This approach is called open-book management and many organizations are using it.59

The goal of open-book management is to get employees to think like an owner by seeing the impact their decisions have on financial results. Because many employees don’t have the knowledge or background to understand the financials, they have to be taught how to read and understand the organization’s financial statements. Once employees have this knowledge, however, managers need to regularly share the numbers with them. By sharing this information, employees begin to see the link between their efforts, level of performance, and operational results.

Employee recognition programs consist of personal attention and expressions of interest, approval, and appreciation for a job well done.60 They can take numerous forms. For instance, Kelly Services introduced a new version of its points-based incentive system to better promote productivity and retention among its employees. The program, called Kelly Kudos, gives employees more choices of awards and allows them to accumulate points over a longer time period.61 And it’s working. Participants generate three times more revenue and hours than employees not receiving points. Most managers, however, use a far more informal approach. For example, when Julia Stewart—currently chairman and CEO of DineEquity Inc.—was president of Applebee’s Restaurants, she would frequently leave sealed notes on the chairs of employees after everyone had gone home.62 These notes explained how important Stewart thought the person’s work was or how much she appreciated the completion of a project. Stewart also relied heavily on voicemail messages left after office hours to tell employees how appreciative she was for a job well done. And recognition doesn’t have to come only from managers. Some 35 percent of companies encourage coworkers to recognize peers for outstanding work efforts.63 For instance, managers at Yum Brands Inc. (the Kentucky-based parent of food chains Taco Bell, KFC, and Pizza Hut) were looking for ways to reduce employee turnover. They found a successful customer-service program involving peer recognition at KFC restaurants in Australia. Workers there spontaneously rewarded fellow workers with “Champs cards, an acronym for attributes such as cleanliness, hospitality, and accuracy.” Yum implemented the program in other restaurants around the world and credits the peer recognition with reducing hourly employee turnover from 181 percent to 109 percent.64

And do employees think these programs are important? You bet! A survey of a wide range of employees asked them what they considered the most powerful workplace motivator. Their response? Recognition, recognition, and more recognition!66

Consistent with reinforcement theory (see Chapter 11), rewarding a behavior with recognition immediately following that behavior is likely to encourage its repetition. And recognition can take many forms. You can personally congratulate an employee in private for a good job. You can send a handwritten note or e-mail message acknowledging something positive that the employee has done. For employees with a strong need for social acceptance, you can publicly recognize accomplishments. To enhance group cohesiveness and motivation, you can celebrate team successes. For instance, you can do something as simple as throw a pizza party to celebrate a team’s accomplishments. Some of these things may seem simple, but they can go a long way in showing employees they’re valued.

Here’s a survey statistic that may surprise you: 40 percent of employees see no clear link between performance and pay.67 You have to think: What are the companies where these employees work paying for? They’re obviously not clearly communicating performance expectations.68 Pay-for-performance programs are variable compensation plans that pay employees on the basis of some performance measure.69 Piece-rate pay plans, wage incentive plans, profit-sharing, and lump-sum bonuses are examples. What differentiates these forms of pay from more traditional compensation plans is that instead of paying a person for time on the job, pay is adjusted to reflect some performance measure. These performance measures might include such things as individual productivity, team or work group productivity, departmental productivity, or the overall organization’s profit performance.

Pay-for-performance is probably most compatible with expectancy theory. Individuals should perceive a strong relationship between their performance and the rewards they receive for motivation to be maximized. If rewards are allocated only on nonperformance factors—such as seniority, job title, or across-the-board pay raises—then employees are likely to reduce their efforts. From a motivation perspective, making some or all of an employee’s pay conditional on some performance measure focuses his or her attention and effort toward that measure, then reinforces the continuation of the effort with a reward. If the employee, team, or organization’s performance declines, so does the reward. Thus, there’s an incentive to keep efforts and motivation strong.

Pay-for-performance programs are popular. Some 80 percent of large U.S. companies have some form of variable pay plan.70 These types of pay plans have also been tried in other countries such as Canada and Japan. About 30 percent of Canadian companies and 22 percent of Japanese companies have company-wide pay-for-performance plans.71

Do pay-for-performance programs work? For the most part, studies seem to indicate that they do. For instance, one study found that companies that used pay-for-performance programs performed better financially than those that did not.72 Another study showed that pay-for-performance programs with outcome-based incentives had a “positive impact on sales, customer satisfaction, and profits.”73 If an organization uses work teams, managers should consider group-based performance incentives that will reinforce team effort and commitment. But whether these programs are individual based or team based, managers need to ensure that they’re specific about the relationship between an individual’s pay and his or her expected level of appropriate performance. Employees must clearly understand exactly how performance—theirs and the organization’s—translates into dollars on their paychecks.74

During times of economic and financial uncertainty, managers’ abilities to recognize and reward employees are often severely constrained. It’s hard to keep employees productive during challenging times, even though it’s especially critical. It’s not surprising, then, that employees feel less connected to their work. In fact, a recent study by the Corporate Executive Board found that declining employee engagement has decreased overall productivity by 3 to 5 percent.75 But there are actions managers can take to maintain and maybe even increase employees’ motivation levels. One is to clarify each person’s role in the organization. Show them how their efforts are contributing to improving the company’s overall situation. It’s also important to keep communication lines open and use two-way exchanges between top-level managers and employees to soothe fears and concerns. The key with taking any actions is continuing to show workers that the company cares about them. As we said at the beginning of the chapter, the value in companies comes from employees who are motivated to be there. Managers have to give employees a reason to want to be there.