CASE 1: Bonuses Can Backfire

It might seem obvious that people will be motivated by bonuses, but many scholars question this premise.
Alfie Kohn has long suggested that workers are “punished by rewards” and urges that organizations avoid
tying rewards to performance because of the negative consequences that can result. As an alternative to
rewards, some experts recommend that managers foster a positive, upbeat work environment in hopes that
enthusiasm will translate into motivation.

Although rewards can be motivating, they can reduce employees’ intrinsic interest in the tasks they are
doing. Along these lines, Mark Lepper of Stanford University found that children rewarded for drawing
with felt-tip pens no longer wished to use the pens at all when rewards were removed, whereas children
who were not rewarded for using the pens were eager to use them. Similar experiments in which children
completed puzzles have also shown that increasing rewards can decrease interest in the rewarded task.
Some have questioned the extent to which these results generalize to working adults, but concern about
rewards diminishing intrinsic motivation persists.

Rewards can also lead to misbehavior by workers. Psychologist Edward Deci notes, “Once you start
making people’s rewards dependent on outcomes rather than behaviors, the evidence is people will take
the shortest route to those outcomes.” Consider factory workers paid purely based on the number of units
they produce. Because only quantity is rewarded, workers may neglect quality. Executives rewarded
strictly on the basis of quarterly stock price will tend to ignore the long-term profitability and survival of
the firm; they might even engage in illegal or unethical behavior to increase their compensation. A review
of research on pay-for-performance in medicine found that doctors who were rewarded for treatment
outcomes were reluctant to take on the most serious cases, where success was less likely.

Although there might be some problems with providing incentives, the great majority of research cited in
this and the previous chapter shows that individuals given rewards for behavior will be more likely to
engage in the rewarded behaviors. It is also unlikely that individuals engaged in very boring, repetitive
tasks will lose their intrinsic motivation if the task is rewarded, because they never had any intrinsic
motivation to begin with. The real issue for managers is finding an appropriate way to reward behaviors
so desired behavior is increased while less-desired behavior is reduced.

QUESTIONS
1. Do you think that, as a manager, you would use bonuses regularly? Why or why not?

2. Can you think of a time in your own life when being evaluated and rewarded on a specific goal lead
you to engage in negative or unproductive behavior?

3. Do you think providing group bonuses instead of individual bonuses would be more effective or less
effective? Why or why not?

4. How would you design a bonus/reward program to avoid the problems mentioned in this case?
CASE 2: ETHICAL DILEMMA Spitting Mad
How would you like to be spat at? The answer to that question is pretty obvious, but what may surprise
you is that spit is an occupational hazard of New York City bus drivers. The outcomes of these incidents
are even more interesting.

In a typical 1-year period, roughly 80 New York City bus drivers are spat upon by disgruntled passengers.
These spitting incidents (no other injury was involved) generate an average of 64 days off work—the
equivalent of 3 months’ pay. In 2009, one spat-upon driver took 191 days of paid leave. The union
representing the bus drivers said the leave was justified because being spat upon “is a physically and
psychologically traumatic experience.”

The causes of passenger spitting are varied, ranging from the Metro Card not working to perceived delays
in schedules. Driver Raul Morales was spat upon by a passenger irate over the fare. After the incident,
Morales stopped at a nearby McDonald’s, cleaned himself off, then finished his shift. “I just kept on
going,” he says. As any watcher of the TV series World’s Toughest Jobs knows, there is a lot of
dangerous work out there, and bus drivers face their own hazards. Some bus drivers have been assaulted
by passengers, including one New York City bus driver who was stabbed to death by a passenger in 2008.
Nancy Shevell, chair of the New York City transit authority, questions whether the time off is justified by
the injury. “You have to wonder if you can go home and shower off, take a nap, take off the rest of the
day and maybe the next day,” she said. “When it gets strung out over months, you start to wonder.”

Questions
1. Do you think bus drivers should be able to take time off in return for being spit at? If so, how long do
you think they should have?

2. People react differently to stressful situations. One of the flight attendants on US Airways Flight 1549
that Captain Chesley “Sully” Sullenberger landed on the Hudson River has not been able to go back
to work 3 years after the incident. Yet her two fellow flight attendants have. How do you judge ethical
responsibilities and develop policy in situations where different people react differently?

3. What ethical responsibility does New York City’s Transit Authority have toward its bus drivers?
CASE 3: It‟s Not Fair!
Few topics in the business press have grabbed more headlines recently than highly lucrative annual
bonuses for top management. Critics bemoan the multimillion-dollar compensation packages offered in
the financial services industry in particular, following the dire consequences of the meltdown of this
sector a few short years ago.

How is executive compensation determined by compensation committees? Some researchers suggest that
principles from equity theory (making comparisons to referent others) might explain variations in
executive pay. To set what is considered a “fair” level of pay for top executives, members of the board
find out how much executives with similar levels of experience in similar firms (similar inputs)
are being paid and attempt to adjust compensation (outcomes) to be equitable. In other words, top
executives in large oil firms are paid similarly to top executives in other large oil firms, top executives in
small hospitals are paid similarly to top executives in other small hospitals. In many
cases, simply changing the referent others can change the salary range considered acceptable. According
to one view of justice theory, this should be perceived as equitable, although executives may encourage
boards to consider specific referent others who are especially well-paid.

Critics of executive compensation change the debate by focusing on the ratio of executive compensation
to that of the company’s lowest-paid employees. Researcher Cary Cooper notes, “In business, it is
important to reward success and not simply status.” Cooper believes all employees should share the
company’s good fortune in profitable periods. He has recommended that CEO compensation be capped at
20 times the salary of the lowest paid employee. In fact, the average S&P 500 CEO is paid 263 times
what the lowest-paid laborer makes. This is eight times more than the ratio from the 1950s, which might
serve as another reference point for determining what is considered “fair.”

Questions

1. How does the executive compensation issue relate to equity theory? Who do you think should be the
referent others in these equity judgments? What are the relevant inputs for top executives?

2. Can you think of procedural justice implications related to the ways pay policies for top executives
have been instituted? Do these pay-making decisions follow the procedural justice principles outlined in
the chapter?

3. Do you think the government has a legitimate role in controlling executive compensation? How might
we use distributive and procedural justice theories to inform this debate?

4. Are there any positive motivational consequences of tying compensation pay closely to firm
performance?
CASE 4: Is There a Price for Being Too Nice?
Agreeable people tend to be kinder and more accommodating in social situations, which you might think
could add to their success in life. However, we’ve already noted that one downside of agreeableness is
potentially lower earnings. We’re not sure why this is so, but agreeable individuals may be less aggressive
in negotiating starting salaries and pay raises.

Yet there is clear evidence that agreeableness is something employers value. Several recent books argue
in favor of “leading with kindness” (Baker & O’Malley, 2008) and “capitalizing on kindness” (Tillquist,
2008). Other articles in the business press have argued that the sensitive, agreeable CEO—such as GE’s
Jeffrey Immelt and Boeing’s James McNerney—signals a shift in business culture (Brady, 2007). In
many circles, individuals desiring success in their careers are exhorted to be “complimentary,” “kind,”
and “good” (for example, Schillinger, 2007).

Take the example of 500-employee Lindblad Expeditions. It emphasizes agreeableness in its hiring
decisions. The VP of HR commented, “You can teach people any technical skill, but you can’t teach them
how to be a kindhearted, generous-minded person with an open spirit.”

So, while employers want agreeable employees, agreeable employees are not better job performers, and
they are less successful in their careers. We might explain this apparent contradiction by noting that
employers value agreeable employees for other reasons: they are more pleasant to be around, and they
may help others in ways that aren’t reflected in their job performance. Most evidence suggests that
agreeable people like agreeable people, which you might expect because people like those
who are similar to themselves. However, even disagreeable people like agreeable people, perhaps because
they are easier to manipulate than individuals who are lower in agreeableness. Perhaps everyone wants to
hire agreeable people just because everyone likes to be around them.

Moreover, a 2008 study of CEO and CEO candidates revealed that this contradiction applies to
organizational leaders as well. Using ratings made by an executive search firm, researchers studied the
personalities and abilities of 316 CEO candidates for companies involved in buyout and venture capital
transactions. They found that what gets a CEO candidate hired is not what makes him or her effective.
Specifically, CEO candidates who were rated high on “nice” traits such as respecting others, developing
others, and teamwork were more likely to be hired. However, these same characteristics—especially
teamwork and respecting others for venture capital CEOs—made the organizations they led less
successful.

Questions

1. Do you think there is a contradiction between what employers want in employees (agreeable
employees) and what employees actually do best (disagreeable employees)? Why or why not?

2. Often, the effects of personality depend on the situation. Can you think of some a job situation in which
agreeableness is an important virtue? And in which it is harmful?

3. In some research we’ve conducted, we’ve found that the negative effect of agreeableness on earnings is
stronger for men than for women (that is, being agreeable hurt men’s earnings more than women’s).
Why do you think this might be the case?
CASE 5: “Lessons for „Undercover‟ Bosses”
Executive offices in major corporations are often far removed from the day-to-day work that most
employees perform. While top executives might enjoy the perquisites found in the executive suite, and
separation from workday concerns can foster a broader perspective on the business, the distance between
management and workers can come at a real cost: top managers often fail to understand the
ways most employees do their jobs every day. The dangers of this distant approach are clear. Executives
sometimes make decisions without recognizing how difficult or impractical they are to implement.
Executives can also lose sight of the primary challenges their employees face.

The practice of “management by walking around” (MBWA) works against the insularity of the executive
suite. To practice MBWA, managers reserve time to walk through departments regularly, form networks
of acquaintances in the organization, and get away from their desks to talk to individual employees. The
practice was exemplified by Bill Hewlett and Dave Packard, who used this management style at HP to
learn more about the challenges and opportunities their employees were encountering. Many other
organizations followed suit and found that this style of management had advantages over a typical desk-
bound approach to management. A recent study of successful Swedish organizations revealed that
MBWA was an approach common to several firms that received national awards for being great places to
work.

The popular television program Undercover Boss took MBWA to the next level by having top executives
from companies like Chiquita Brands, Direct TV, Great Wolf Resorts, and NASCAR work incognito
among line employees. Executives reported that this process taught them how difficult many of the jobs
in their organizations were, and just how much skill was required to perform even the
lowest-level tasks. They also said the experience taught them a lot about the core business in their
organizations and sparked ideas for improvements.

Although MBWA has long had its advocates, it does present certain problems. First, the time managers
spend directly observing the workforce is time they are not doing their core job tasks like analysis,
coordination, and strategic planning. Second, management based on subjective impressions gathered by
walking around runs counter to a research and data-based approach to making managerial decisions.
Third, it is also possible that executives who wander about will be seen as intruders and overseers.
Implementing the MBWA style requires a great deal of foresight to avoid these potential pitfalls.

Questions
1. What are some of the things managers can learn by walking around and having daily contact with line
employees that they might not be able to learn from looking at data and reports?
2. As an employee, would you appreciate knowing your supervisor regularly spent time with workers?
How would knowing top executives routinely interact with line employees affect your attitudes toward
the organization?
3. What ways can executives and other organizational leaders learn about day-to-day business operations
besides going “undercover?”
4. Are there any dangers in the use of a management by walking around strategy? Could this strategy lead
employees to feel they are being spied on? What actions on the part of managers might minimize these
concerns?