Analyzing patterns of employee involvement
stimulation through reward systems as a marketing element of strategy in an
industrial region South of Rio de Janeiro
Heitor M. Quintella, Érika Lorandes, Sergio Silva*
Abstract
Human
capital is undergoing major changes in organizations throughout the world. As a
result, several management policies and actions are being suggested and
deployed. In particular they are staring to be used as an element of marketing
strategy in Brasil first to attract top professionals, executives and managers
and secondly to promote corporate image with the aura of best employee
relations.
One of the
theories exploited is a philosophy
developed at the University of Southern California Center for Effective
Organizations holding that, in order to achieve employee involvement, every
organization should provide employees with training, information,
decision-making power and rewards, so as to maximize their participation,
increase their productivity, and improve service and products quality.
This paper was
based on a seminar delivered by Heitor Quintella and Edward Lawler at IBM
Brazil. The speakers have decided to apply to Brazilian organizations part of a
questionnaire adopted in the organizations surveyed by Lawler. This study gave
birth to a master’s degree thesis at the Universidade Federal Fluminense,
Estado do Rio de Janeiro, Brazil, presented by ÉRIKA LORANDES within the scope
of the Human and Technological Factors for Competitiveness Project (0)
developed at the Production Engineering Department, headed by Dr. Heitor
Quintella.
The partial
results of this research were published by Quintella in 1999, and indicate a
slow trend towards the adoption of strategic pay methods in the southern region
of the Rio de Janeiro state as an element of marketing strategy.
1- Introduction
One
can not deny the influence of globalization on organizational life today. For
that reason, organizations had to learn to survive in a new environment that
requires high productivity and quality levels for their products/services in
order to assure their survival and lead them to leadership positions in their
markets.
In their
ongoing quest for survival and leadership, some organizations are ahead of
others. What distinguishes the ones that are gaining competitive edge from
those lagging behind is the fact that, in the former, managers have realized
the crucial role of human capital.
In those
organizations, managers came to realize that financial capital and technology
can be obtained and copied; however, they can not guarantee competitive edge.
Human capital is taking on an all-important role today. Employee motivation, as
well as attraction and retention of good professionals, are major concerns for
organizations nowadays.
As a result,
organizational structures are undergoing great changes, so that rewards can be
provided for employee motivation.
2- Goals*
This paper has
the following goal:
Þ
Analyzing the practices adopted by national organizations and
multinational corporations based in the southern area of the Rio de Janeiro
state for promoting employee involvement.
3- Hypotheses
Three
hypotheses have been proposed for this research. The first one examined whether
or not the surveyed organizations use varied compensation systems to promote
employee involvement.
The second
hypothesis examined whether or not the multinational corporations have a better
performance than national organizations at linking their pay methods to
employee involvement.
Finally, the
third hypothesis analyzed if the multinational corporations can promote better
access to information than the national organizations.
Training and
power-sharing practices were approached in the key-questions developed. Those
key-questions examined how the surveyed organizations are training their
employees and how they are sharing power in different organizational levels.
4- Methodology
This is
research paper based on descriptive testing hypotheses. Action and field
research approaches have also been used.
According to
Quintella (2), the action research’s goal is to develop new skills so that the
study can be directly applied to the real world. It is characterized by: having
a practical nature, directly relevant to real performance at work; providing an
orderly structure for problem resolution and new developments; having an
empirical nature, once it is based on real opinions and behavioral
observations; showing flexibility, in
order to allow for changes during the experimentation period, and sacrifice the
concept of control over variables in favor of local experimentation and
innovation in research methods and results collection.
Several
key-questions were developed to help analyze the hypotheses. Answers to the
key-questions are shown in item 6 – presentation and discussion of results –
and the hypotheses are analyzed in item 7 – conclusions.
This research
was carried out in one of the most important industrial parks in Brazil.
Several organizations, considered crucial for the domestic economy, are located
in this industrial park; some of them were included in the research.
Organizations
included in this study are multinational corporations and domestic companies
with at least 300 employees and at most 2,500 employees, and represent several
types of business, including the steel, metallurgy, chemical, food,
technology/computer, and automobile industries. The industry analysis of the
surveyed sample is shown on Chart 1.
The surveyed
organizations were the following:
Þ Schweitzer-Mauduit do Brasil S/A
Þ Cia Metalúrgica Barbará
Þ Metalúrgica Barra do Piraí Ltda.
Þ Siderúrgica Barra Mansa S/A
Þ Thyssen Fundições Ltda
Þ Nestlé Industrial e Comercial Ltda. – Barra Mansa Unit
Þ Carese Pintura Automotiva Ltda.
Þ Sociedade Michelin de Participações Ind. e Com. – Itatiaia
Unit
Þ Tubonal Tubos de Aço Ltda. Fornasa Division.
Þ Xerox Comércio e Indústria Ltda. – Itatiaia Unit.
Data were collected during visits to the organizations
using a questionnaire similar to the one presented by Lawler, Ledford &
Mohrman (3). Data collection took place during the 1998/1999 period.
For the
purposes of this research, multinational corporations were defined as companies
owned by foreign capital and domestic companies as those owned by domestic
capital.
5-
Employee involvement
According
to Galbraith, Lawler & Associados (4), due to competitive pressures
organizations are being forced to reduce costs, improve quality of their
products/service and respond better to their customers. As a result, many
organizations are adopting teams and business units and moving the decision
making process closer to the teams that keep direct contact with the product,
the project, and the customer in order to streamline the decision-making
process. Once the decision making power is in their hands, they must also have
access to knowledge and information. Besides, there must be rewards linked to
the team’s and to organization’s
performance.
In this line of
thought, we will be using a concept referred to as employee involvement (other
authors may use the term ’commitment’), in which information, power, knowledge
and rewards are share with all organization levels, in order to maximize the
overall company performance.
Some types of
information have been thus surveyed. They include: information about the
company’s operating results and each business unit results, new technologies,
competition, business plans and goals.
The sharing of
this kind of information to all organizational levels helps to promote greater
employee involvement. . According to Lawler, Mohrman, and Ledford (3), without
information, the employees will not be able to fully understand the business
processes and, therefore, will not be able to give their contribution to
improve them. The employees will also have greater difficulty to participate in
the decision-making processes related to the improvement of the daily work,
acquisitions, and implementation of new technologies.
Another
important variable for employee involvement is the training provided to each
employee. In this research, the following training practices were included in
the data collection process: decision making and problem solving skills;
leadership skills; skills in understanding the business; statistics and quality
control; job skills training; and cross-training.
The importance
of those types of training is the fact that they help the development of
collective tasks and social interaction, improve group-work efficiency; help
the monitoring and improvement of processes and allow greater team flexibility,
once training promotes cross-training within the team and the organization.
Besides
information and training, the employee must also have the power to make
suggestions and decisions, contributing for a better individual performance and
for the overall company performance.
The power
sharing practices included in this research were: suggestion system, feedback
systems, job enrichment or redesign, quality circles, mini business units, and
self-managed teams.
Reward is the
fourth variable that makes up the employee involvement philosophy. It has a
crucial role in employee motivation, providing skills and performance-based
rewards that are maximized when power and information are distributed
throughout the organization.
The
relationship between motivation and reward is often critical. According to
Lawler (5), employees shall choose their own rewards. In some performance-based
reward systems, employees can choose stock ownership plans or monetary rewards,
or a trip and a money-equivalent reward. This way, the employee can appreciate
the reward he/she is receiving and, at the same time, appreciate the actions
that led to the reward. Rewards will thus allow the attraction and retention of
“good employees”.
The reward
systems analyzed in this research were: profit sharing, gain sharing,
individual incentives, team incentives, non-monetary recognition awards for
individual or group performance, employee stock ownership plans, skills-based
pay, flexible benefits, employment security and open pay information.
The combination
of these types of reward systems can promote employee involvement and attract
their interest in the overall company performance, the team performance and
his/her own professional development.
One specific
item – pay information -- is not characterized as a reward; however, it is
highly important. Without this piece of information, a link between performance
and reward can no be established. That is, the employee is not aware that the
award or bonus was granted as a reward for his/her individual or group
performance, for instance. Only then the motivation/ reward relationship can be
made clear.
The use of all
the practices herein presented requires much discussion in all organizations.
There is not a one-fits-all formula; each organization is unique, composed of
unique people. So, what worked for one may not work for another. The solution
is to promote discussions in which people can decide what is better for them,
taking part in all the changes promoted by the deployment of those practices in
their organizations.
6- Research results: presentation and discussion
The sample used
for this research is quite varied. Both multinational corporations and domestic
companies were used. Some had a participative structure; others were still in
the process of modernizing their organizational structures.
The analysis of
the first hypothesis – whether or not the surveyed organizations use diverse
pay systems to promote employee involvement – and the answers to the
key-questions – first, if the executives believe that the use of reward systems
can increase employee involvement; and second, if the management system can
better link reward practices effectiveness to employee involvement – revealed
that most multinational corporations have adopted innovation, for some years
now, and promote greater employee involvement, relating them with the rewards
assigned to them. In the domestic companies, the use of such innovations is
more recent, and some are still in the process of being implemented. The
innovations herein included are: suggestion systems, survey feedback, job enrichment
or redesign, quality circles, mini business units and self-managed teams (the
use of such innovations is shown on Table 2).
The second
hypothesis analyzed whether multinational corporations are better than the
domestic organizations at linking reward systems to employee involvement. The
answers to the first key question – if the multinational corporations use
several types of reward systems – revealed that this was true. As shown on
Table 1 (figures in blue), except for item 6 – employee stock ownership plans –
the multinational corporations adopt all the other items. In the domestic
companies, (see Table 1 – figures in red) several items are not used (item 3-
individual incentives, item 4- work group/team incentives, item 6- employee
stock ownership plans, item 8- flexible benefits), and all the surveyed
organizations answered that they do not adopt this type of rewards, being rated in the None (0%) category. Two other items
(item 2- gain sharing and item 7- knowledge/skills-based pay) are used only by
one company (each is by a different organization).
The second
key-question analyzed whether the multinational corporations offer better pay
to their employees when compared to domestic companies. In the global
landscape, the answer is yes, once the multinational corporations tend to
follow the international standards when developing their pay systems. The
analysis of the data collected for this research has shown that the
multinational corporations adopt several reward systems, thus providing better
pay to their employees.
Table 1 Results
of employee involvement in pay systems in the multinational corporations and
domestic companies included in the survey.
|
Reward Systems |
Level of employee involvement in the reward systems
* |
|||||||||||||
|
|
None |
Very
Few (1-20%) |
Few (21-40%) |
Half (41-60%) |
Most (61-80%) |
Almost All (81-99%) |
All (100%) |
|||||||
|
1- Profit sharing |
0 |
1 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
1 |
0 |
4 |
4 |
|
2- Gain
sharing |
3 |
4 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
2 |
1 |
|
3- Individual incentives |
0 |
5 |
2 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
3 |
0 |
|
4- Work group/team incentives |
2 |
5 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
3 |
0 |
|
5- Nonmonetary recognition rewards |
2 |
2 |
1 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
2 |
3 |
|
6- Employee stock ownership plans |
5 |
5 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
|
7- Knowledge/skills based pay |
1 |
4 |
1 |
1 |
0 |
0 |
1 |
0 |
0 |
0 |
0 |
0 |
2 |
0 |
|
8- Flexible benefits |
4 |
5 |
0 |
0 |
0 |
0 |
0 |
0 |
1 |
0 |
0 |
0 |
0 |
0 |
|
9- Employment security |
0 |
1 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
5 |
4 |
|
10- Open pay
information |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
5 |
5 |
* Number
of organizations having each kind of reward system. Figures in blue represent
multinational corporations; figures in red represent domestic companies.
In the third
key question, based on data from Table 1 (figures in blue), data reveal that
the multinational corporations provide a better distribution of the reward
systems in their several hierarchy levels, as compared to the data from the
domestic companies (figures in red)
The forth
key-question examined whether or not organizations adopt innovations to promote
power sharing in order to increase employee involvement. Comparing data
presented on Table 2 (figures in blue represent multinational corporations, and
figures in red represent domestic companies), one can see that both the
multinational corporations and the domestic companies use those innovations,
encompassing a large number of employees.
Table 2 Employee participation data in the types of
innovations both in multinational corporations and in domestic organizations
|
Type of innovation |
Level of employee involvement in the types of
innovation * |
|||||||||||||
|
|
None |
Very
Few (1-20%) |
Few (21-40%) |
Half (41-60%) |
Most (61-80%) |
Almost All (81-99%) |
All (100%) |
|||||||
|
1- Suggestion
system |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
1 |
0 |
4 |
5 |
|
2- Survey
feedback |
0 |
0 |
0 |
0 |
2 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
3 |
5 |
|
3- Job enrichment or redesign |
0 |
0 |
0 |
0 |
1 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
4 |
5 |
|
4- Quality
circles |
0 |
0 |
2 |
0 |
0 |
1 |
0 |
0 |
1 |
0 |
0 |
0 |
2 |
4 |
|
5- Mini
business units |
1 |
0 |
1 |
3 |
0 |
0 |
1 |
0 |
0 |
0 |
0 |
0 |
2 |
2 |
|
6-
Self-managed work-teams |
0 |
4 |
1 |
1 |
1 |
0 |
0 |
0 |
1 |
0 |
0 |
0 |
2 |
0 |
* Number
of organizations having each type of innovation. Figures in blue represent multinational
corporations; figures in red represent domestic companies.
All individuals
that took part in the survey believe that the practices presented on Table 2
improve employee involvement and the organizations that do not adopt some of
them are interested in implementing them in the short or long term.
The third
hypothesis examined whether or nor the multinational corporations promote
better access to information as compared to the domestic companies.
Three
key-questions have been developed to test this hypothesis.
The first one analyzed whether or not the multinational corporations
provide business information to their employees. Comparing data from
multinational corporations – figures in blue – with data from the domestic
companies – figures in red, Table 3, one can see that, in item 4 (information
on business plans/goals), there is a slightly better distribution in
multinational corporation as compared to the domestic companies (one
multinational corporation distributes such information to very few
employees(1-20%), two share information with few employees (21-40%), and two
share them with all employees(100%); in the domestic companies, three share
information with very few employees (1-20%), and two share information
with all employees (100%).
Table 3 Data
from multinational corporations and domestic companies surveyed about
information sharing practices adopted.
|
Types of information |
Level of employee involvement in the types of
information* |
|||||||||||||||||
|
|
None |
Very
Few (1-20%) |
Few (21-40%) |
Half (41-60%) |
Most (61-80%) |
Almost All (81-99%) |
All (100%) |
|||||||||||
|
1-
Corporation’s operating results |
0 |
0 |
0 |
1 |
0 |
0 |
0 |
0 |
0 |
0 |
1 |
0 |
4 |
4 |
||||
|
2- Units’
operating results |
0 |
0 |
0 |
1 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
5 |
4 |
||||
|
3- New
technologies |
0 |
0 |
1 |
2 |
1 |
0 |
0 |
0 |
0 |
0 |
1 |
0 |
2 |
3 |
||||
|
4- Business
plans/goals |
0 |
0 |
1 |
3 |
2 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
2 |
2 |
||||
|
5- Competitor’s performance |
0 |
0 |
1 |
3 |
3 |
1 |
0 |
0 |
0 |
0 |
0 |
0 |
1 |
1 |
||||
* Number of
organizations sharing information with employees, Figures in blue represent multinational
corporations; figures in red represent domestic companies.
The lack of information prevents employee involvement, once it has a
direct influence over their perception about the organization’s future.
Employees are not aware of the organization’s strategic plans and can not feel
they are a crucial part of the organization, which interferes with their
motivation.
The second key-question is related to the other types of information
surveyed. It examined whether or not the multinational corporations share with
their employees information relevant for their involvement. Again, the
comparison of data on Table 3 reveals that all types of information are adopted
by an organization. However, information related to the development of new
technologies (item 3), business plans and goals (item 4), and competitors’
performance (item 5) are restricted to only 40% of the employees (the very few and few categories on Table 3) in nearly half the multinational and
domestic companies.
Information about the corporation’s operating results, as well as about
each business unit’s results, are shared among all employees in nearly every
organization surveyed (see items 1 and 2, Table 3). This can be explained by
the fact that this piece of information is part of a profit sharing program
adopted by most companies.
The third key question examined how the surveyed organizations manage
the forth employee engagement variable: training. In this key-question, we investigated
whether or not multinational corporations provide routine training to their
employees.
The analysis of data on Table 4
(figures in blue represent multinational corporations, figures in red
represent domestic companies) reveals that all companies use all types of
training. What distinguishes them is the number of employees to whom training
is provided. The employee participation profile in multinational corporations
and domestic companies is quite similar, meaning that the multinational corporations
are not superior to domestic companies in this aspect.
Table 4 Data from multinational corporations and domestic
companies about training practices.
|
Types of
training |
Level of employee involvement in the types of
training * |
|||||||||||||
|
|
None |
Very
Few (1-20%) |
Few (21-40%) |
Half (41-60%) |
Most (61-80%) |
Almost All (81-99%) |
All (100%) |
|||||||
|
1- Group decision making/problem solving skills |
0 |
0 |
2 |
1 |
0 |
2 |
0 |
0 |
2 |
0 |
0 |
0 |
1 |
2 |
|
2- Leadership skills |
0 |
0 |
1 |
1 |
2 |
2 |
1 |
0 |
0 |
0 |
0 |
0 |
1 |
2 |
|
3- Skills in understanding the
business |
0 |
0 |
1 |
2 |
2 |
0 |
0 |
2 |
1 |
0 |
0 |
0 |
1 |
1 |
|
4- Statistics and quality control |
0 |
0 |
0 |
0 |
2 |
1 |
1 |
0 |
0 |
1 |
0 |
0 |
2 |
3 |
|
5- Team work |
0 |
0 |
1 |
0 |
2 |
1 |
0 |
2 |
0 |
1 |
1 |
0 |
1 |
1 |
|
6- Job skills training |
0 |
0 |
0 |
0 |
1 |
0 |
0 |
0 |
1 |
1 |
1 |
0 |
2 |
4 |
|
7-
Cross-training |
1 |
0 |
0 |
2 |
1 |
2 |
1 |
0 |
1 |
0 |
0 |
0 |
1 |
1 |
* Number of organizations providing each type of training. Figures in blue
represent multinational corporations; figures in red represent domestic
companies.
7- Conclusion
The following conclusions, in principle, apply only to the geography of
an industrial area South of Rio de Janeiro that has recently received a great
influx of new industries. And for that reason new companies were trying to
attract good professionals, executives
and managers with the appeal of
a strategic pay policy and a deliberate effort towards creating a
challenging work environment. As a result of this effort they expected to use
this policy as a means of reinforcing their image with clients. Although with a restricted sample in
national terms (but with very high significance in the region) it is possible
to drive some interesting trends of new industrial patterns of management in
Brasil.
In
this particular context, this research concludes that multinational
corporations and domestic companies show both similarities and differences. As
a general rule, all of them are trying to modernize their organizational
structures.
The
multinational corporations use reward systems more often, while the domestic
companies adopt less than half of the systems analyzed. However, the scope of
the systems adopted by the multinational corporations is restricted to a few
employees.
The
modernization of the reward systems takes an all-important role, because they
allow organizations to count on their employees’ contribution and participation
for potential improvement. To make that happen, managers and directors must
encourage and accept the employee’s participation when choosing the better
reward package.
Information
sharing practices is similar in both the multinational corporations and in the
domestic companies. In most organizations, information about competitors,
business and new technologies are restricted to the higher hierarchical levels.
Power
sharing practices and training are managed differently by the companies. In
some, employees are entirely involved, while in others their involvement is
only partial.
Apparently the result in terms of marketing has been
very promising for the companies studied have been successful in attracting
good professionals, executives and managers form larger centers such as Rio and
other cities. As a result many clients felt that reliability of their products
would improve by this policy. Finally, although progress in the area is slow,
marketing devoted to attract good people and to create an image of a ‘good company
to work in’ has been accepted by companies as a rewarding alternative specially
in new development circumstances.
8- Bibliography
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