employee motivation and incentives at apple

Christoph Müller

Employee motivation and incentives at Apple

Do incentives really help to motivate employees?

Essay

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This paper critically evaluates whether incentives really help to motivate employees.

For this purpose it provides a clear definition of motivation, points out why existing

theories are partly outmoded and introduces a new model in order to gain a holistic

view of the motivation concept. As the paper progresses it will be dealt with

appropriate theories and practical examples in order to promote understanding of the

key aspects of incentives and highlight under which circumstances threats might

motivate.

Successful organisations share a common attribute: They came quickly to realise

that employees play a significant role in terms of business performance (Tidd and

Bessant, 2009). A key contribution to current understanding comes from Boxall and

Purcell (2003), who argue that an employee’s performance is a function of his or her

ability, motivation and opportunity. Given this notion, the adverse effects of zero

motivation on an organisation’s bottom line are already conceivable. But what is

motivation and what role do incentives or threats play in the motivation process?

Motivation can best be described as the force “that gives impetus to our behaviour by

arousing, sustaining, and directing it toward the attainment of goals” (Wortman, et al,

1999, p. 364).

For decades, numerous theorists have attempted to find a way of describing the

concept of motivation. Much has been told about Maslow’s hierarchy of needs

(Maslow, 1970), MC Gregor’s XY theory (McGregor, 1960) or Herzberg’s two factor

theory (Herzberg, 2003) and there is no doubt that these content theories do provide

valuable insights into motivation. Yet they also have limitations and do not

necessarily apply nowadays (Wilson, 2010). Likewise, process theories like Vroom’s

Expectancy-Valence-theory (Vroom, 1964) might be considered more meaningful as

they are based on the assumption that motivation depends on different variables, but

they still lack clarity as they overlook important interrelationships.

It was therefore necessary to develop a model that takes into account the major

factors that influence motivation in order to promote understanding. For example, the

effect of a financial crisis, the introduction of new technology and government

regulations or competitive pressure might compel organisations to adapt to changing

circumstances if they are to survive. Any changes, in effect, can also influence

employee motivation, whereas the latter will be affected by factors such as the

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organisation’s leadership capability, its culture or benefits as well as individual

differences in terms of needs, personality or aspirations.

The inference which can be drawn from the model is that motivation depends on

various external, individual and organisational factors. Moreover, the model makes

clear that both incentives and threats are only part of the whole process.

French and Raven, as cited by Wilson (2010, p. 302), identified incentives and

threats as key bases of power in order to “change beliefs, attitudes or behavior of a

target.” Yet doing so is easier said than done.

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In this respect, it is worth considering John Adair’s 50/50 theory (Adair, 2006), which

stresses that one half of motivation is attributed to intrinsic factors (e.g. culture or job

design) and the other half to extrinsic factors (e.g. incentives or threats). This implies

that extrinsic factors alone do not help to motivate employees. Organisations

therefore, first of all, need to align the various organisational factors in a way that

they become an employer of choice and contribute to intrinsic motivation.

For example, Apple, which is considered the most innovative and admired company

in the world (BusinessWeek, 2009; Fortune, 2009), attracts and retains employees in

part owing to the benefits, or expected and non-performance related incentives, it

offers, such as product discounts or insurances (Apple, 2010). But even more

important is its outstanding creative culture. Steve Jobs, Apple’s CEO, argues that

the latter is the gravitational force that puts all the bright and creative people together

(Burrows, 2004).

With regard to innovative organisations like Apple it is argued that employees’

motivation is a key success factor and hence they need to be given incentives in

order to foster creative thinking and sustain high motivation (Tidd and Bessant,

2009). As Gilmore et al (2009, p. 184) point out, “managing employee reward is a

crucial element in encouraging flexibility, leveraging performance and competing for

talent in tight labour markets.”

However, many authors disagree over which incentives are most appropriate.

Wallace and Szilagyi (1982), for instance, believe that money is a key incentive as it

enables people to satisfy their needs. On the contrary, Herzberg (2003) contends

that monetary rewards only boost motivation in the short term. Kohn (1993) shares

this view, as he states that there is no evidence for the contribution of money to

sustainable employee motivation. Likewise, Pfeffer (1998) and Trott (2002) stress

that people are not only driven by financial incentives.

Given the controversies in regard to incentives it is arguable that the whole concept

is too complex to come to a universally valid conclusion. There are only a few

authors who acknowledge this, among them are Thomson (2003) and Armstrong

(1993).

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According to Silverman (2004), in order to understand the effect of incentives it is

paramount to make a clear distinction between reward and recognition. He contends

that performance-related rewards can adversely affect intrinsic motivation. Edward

Deci, as cited by Latham (2007), also observed that employees who receive rewards

for performing tasks feel threatened and out of control. Likewise, people might be

inclined to put in only as much effort as is required to reach a goal. It is also worth

remembering that “trivial rewards will result in trivial amounts of effort and thus trivial

improvements in performance” (Robinson, et al, 1992, p. 29).

Silverman (2004) therefore believes that organisations should rather place more

emphasis on incentives in terms of recognition. Apple, for instance, rewarded its

executives by giving them a recognition bonus of 3 to 5 percent of their base salary,

despite the fact that they missed their target (ZDNet, 2003). This implies that Apple

was aware of the “fundamental attribution error” (Hogg, et al, 2008, p. 91) and tried to

sustain employee commitment and motivation.

Silverman (2004) further argues that money has no significant symbolic value,

despite the fact that is often “the only reward organisations and their managers

provide” (Thomson, 2003, p. 143). Rather, organisations need to embrace incentives

which can be remembered, such as holidays, gifts or a simple verbal thank you and

praise (Trott, 2002). These incentives might also be more effective and cheaper

accordingly. For example, Apple’s employees received a free iPod Shuffle or iPhone

as a thank you for their achievements (AppleInsider 2005; Meinck, 2007).

According to Legge (2009) and Armstrong (2007) organisations should embrace a

total reward system that incorporates both financial and non-financial incentives. This

is exactly what Apple has done to date and given its success, this approach has

proven to be effective. It comes with no surprise, then, that Apple’s employees might

even be motivated by Steve Job’s autocratic leadership style (Thomke, et al, 2009),

as the positive aspects of working for the company outweigh the negative aspects of

being threatened. And this is crucial because otherwise they might “engage in

‘defense routines’ designed to protect themselves and their colleagues” (Morgan,

2006, p. 86), which could decrease motivation accordingly.

However, despite the effort spend to motivate employees, it is vital to bear in mind

that “sometimes, no matter what a leader does, employees are dissatisfied with their

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jobs, attain or exceed their work goals, and perform at a high level without a leader’s

exerting much influence at all” (George, et al, 2008, p. 407).

In conclusion, there is no doubt that employee motivation is a critical determinant of

success and prosperity. In this regard it is crucial to see employee motivation as a

consequence of interrelated external, organisational and individual factors and the

way in which employees perceive their job and their employer. Apple is a perfect

example of a company that was not only capable of getting employees to do

something, but also of getting them to want to do it. In order to achieve this,

organisations need to foster both intrinsic and extrinsic motivation through

organisational factors such as a culture that encourages commitment or a total

reward system that recognises employees’ achievements and value by offering

financial and non-financial incentives. Only in this case, and perhaps in times of high

unemployment, might threats help to motivate employees.

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