Motivating employees for long term company success
Rutkowski, Kevin John
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There have been many recent examples in the news of how employees were motivated by their companies to take actions that were not best for the long term success of the company. Mortgage companies gave financial incentives to brokers for each loan approved regardless of quality, which resulted in a large number of defaults several years later. BP, the oil company, gave financial incentives to employees based on short-term profits, which motivated management to perform cheaper and less frequent maintenance on the Alaskan Pipeline. This led to increased bonuses until a pipeline failure several years later. And numerous financial institutions gave employees big performance bonuses based on short-term profits one year before their institutions failed. Many analysts have stated that lucrative bonuses that did not take into account long-term company performance motivated many employees to take dangerous financial risks. In addition, in my 16 years of software development consulting, I have first-hand experience with seeing how companies' motivation techniques influence people to ignore the long-term success of their company. I have seen incentives for delivering a project on time influence project managers and developers to push low quality software into production in order to meet that deadline. Similarly, I have seen incentives (for meeting budget numbers on a project) influence managers to eliminate planning and quality assurance in order to lower the cost of implementing the project. In each of those cases, the resulting low quality software caused long-term damage to the company that could have been avoided if the project were higher quality but slightly late or over budget. I have also seen that incentives, intended to encourage call center employees to take more calls per hour, ended up motivating employees to hang up on customers without solving their problems. This resulted in low customer satisfaction, which led to a long term reduction in sales. These are only a few of the many examples I have seen in my career of how the wrong motivational techniques can have unintended, negative, long-term results for a company. Regardless of whether the motivational techniques are based on profits, revenues, productivity, stock price, or some other factor, many motivational techniques include financial incentives that are based on monthly, quarterly, or yearly results without regard for longer periods of time. Long term incentives, such as vesting in a 401(k) or increased vacation time, are typically focused solely on retaining employees rather than on long-term company performance. This thesis explores the ways in which companies currently motivate employees. The motivation may be extrinsic, using tools such as financial incentives or it may be intrinsic, using tools such as company culture or hiring practices. This thesis will review both academic research and practical management experience related to employee motivation with a goal of identifying practical recommendations for improving the current, common motivational practices. These improvements should encourage employees to take the best actions for the long-term success of the company.