The Chief Executive Officer of Papa John’s, John Schnatter took an interesting stance when he shared that executives, managers and subordinates should be paid the same amount of dividends to positively effect their workplace behaviour. As a result, “ In 2015, $60 million in bonuses was divvied up between workers at all levels of the company.” (Taylor) Schanatter, himself, obliged to only receive a third of his worth as value by the company, and wants the remaining profits to be rewarded to the employees. (Taylor)
In her blog, Natasha Widjaja’s presents the view that this is “definitely a guaranteed way to drive the workforce.” (Widjaja) Yet, her evaluation seems to focus on the effectiveness of bonuses in general, rather than focusing on the practice of awarding employees of all level in the same way. I agree that, through the needs theory, that bonuses will motivate, but, as the two-factor theory states, it would not be effective after the employees’ basic needs are met. That applies to all financial incentives awarded in any way.
The focus of this policy is that executives, managers, and subordinates are paid the same amount. In theory, it seems to make sense. This places an importance on the organizational climate, which is the shared perceptions of organizational members about their work environment. This view effects the organizational culture, as the organization can be seen as more people-oriented and supportive of all employees, not just the upper management (Langton et al.) This leads employees to be content that everyone is rewarded the same way, regardless of their level in the organization, which creates an increased level of teamwork and a positive climate. This climate is strongly related to job satisfaction, involvement, commitment, and motivation, which benefits the organization and the employees (Carr et al.)
However, in practice, this will not be effective. According to the expectancy theory and the value of instrumentality, employees need to believe that their performance will lead to increased rewards. (Langton et al.) But if employees of all levels get the same reward, there is no extended reward associated with a high level of performance. Therefore this link will be broken and the employees will no longer be motivated to strive for excellent performance.
Moreover, the equity theory explains that this policy may even discourage the upper management. The equity theory states that employees compare what they get from their job to what they put into it. They take the ratio of their outcomes to their inputs and compare it to the ratio of others, usually someone doing the same job. (Langton et al.) If an upper management member sees that his equals in different organizations are getting paid better than he is, then he loses his loyalty to Papa John’s and his motivation to continue working hard. The idea of paying all employees the same level of dividend may seem as a positive, ethical practice, but its real effects are against the interests of the organization.
Carr J. Z., Schmidt A. M., Ford J. K., DeShon R. P. (2003). Climate perceptions matter: A meta-analytic path analysis relating molar climate, cognitive and affective states, and individual level work outcomes. Journal of Applied Psychology, 88, 605–619. doi:10.1037/0021-9010.88.4.605 Google Scholar CrossRef, Medline
Langton, Nancy, Stephen P. Robbins, Tim Judge, and Katherine Breward. Organizational Behaviour: Concepts, Controversies, Applications. Toronto: Pearson, 2016. Print.
Taylor, Kate. “Papa John’s CEO Says Executive Salaries Are ‘immoral’ and Give Corporate America a Bad Name.” Business Insider. Business Insider, 26 Jan. 2017. Web. 03 Apr. 2017. <http://www.businessinsider.com/papa-john-schnatter-slams-overpaid-ceos-2017-1>.
Widjaja, Natasha. “The Effectiveness of Money as Motivation.” Blog post. Natasha Widjajas Blog. N.p., n.d. Web. 02 Apr. 2017. <https://blogs.ubc.ca/nwidjaja/>.