Summary:

AIG is an American financial company. It is in financial turmoil. It is facing heavy losses and
Govt has given a bailout package for the company as well to rescue this company. This case4
study deals with the motivation and commitment of employees’ shown in the time when it is
on the verge of bankruptcy. Management is planning to shut it down slowly and for that
purpose it has made an agreement with employees to keep working in the company and get
retention bonus as a reword.s

1. What types of work behaviours did AIG intend to encourage through its retention
bonus plan?

American International Group was facing financial losses in its financial product unit. It was
on its knees and dying when American Govt bails out a package to rescue AIG. In 2008
company decided to shut down slowly and for that purpose company asked its employees to
remain in unit and work for the company. They will be given retention bonus and these will
be honoured as well.

Company used motivational technique for employees to keep working in the company which
was bearing financial loses. Because money is the most important thing for an employee. It is
the part of internal motivation. Internal motivation for fulfilling necessary needs that Moslow
has discussed in his theory of needs as well. This financial motivation was highly in favour
of employees encouraged their committed work behaviour. Through this internal motivational
technique affected the work behaviour in working value sense. Employees had been working
in AIG since long and now company is in trouble. So employees also giving value to the
company and want to contribute when it is in financially at the verge of bankruptcy. This
work behaviour has been explained by cognitive process theory of motivation.

2. Which needs seem to be important to the employees of AIG’s Financial Products

unit?

When Obama’s administration and American public was annoyed on the policy of the
company of high retention bonuses even in the time loses. Company’s management decided
to ask employees to return half of their bonuses to the company. This may cause employees to
face retaliation from groups against this announcement.

This was the time when safety need was the most important to employees who were ready to
return their bounces. Reason behind other group who was not willing to return their bounces
retaliate and sent emails to employees who returned their bonuses. Even children at schools
were abused. Along with this some of employees were so much in trouble that they kept their
identity unknown. Therefore safety and security needs are most important. Self actualisation
also played its part when they decided to leave half of the bonus. Giving moral support to the
business unit as well.
 3. Using the model of the individual-organizational exchange relationship, explain
the relationship that employees of AIG’s Financial Products unit believed they
had with the company. How was this exchange relationship violated?

According to (Nelson, D. And James, Q, 2012) relationships are either committed or

calculated. In committed relationships there is no demand from either party. It is mostly n
religious cases. But in calculated relationship each party demands certain things. Therefore
social exchange theory is the best way to explain this give and take relationship.

In AIG case company is facing and financial crises and management ask employees to keep
working for the company and its mission and goals retention bonus will be constituted in
response of their effort for the company. Employees had this exchange relationship in which
company demanded their skills and efforts and employees contributed that for the AIG. In
exchange of this company will pay retention bonus to employees.

But when Obama administration and American people outraged retention bonus policy of the
company management had to for cut half bonuses. Mostly employees in company’s trust and
affiliation returned their bonuses. But some employees resigned. They thought that they have
been treated unfair (Nelson, D. And james, Q, 2012). Therefore commitment was not fulfilled
by the company and this relationship was violated.

4. Which motivation theory do you think has the most relevance for understanding
the responses of the Financial Product employees to the implementation and
unravelling of the retention bonus plan? Explain the reasoning behind your
answer.

According to (Nelson, D. And James, Q, 2012) motivation deals with achieving goals and
completing objectives to fulfil the mission. Motivational theories can be categories in
three different categories like internal, external and process (ibid). There are different
theories like Maslow’s theory of needs, Expectancy theory and different other theories of
motivation.
Our AIG case study deals with different motivational theories. It is a mix of different
motivational theories. Like internal category of motivation contains elements of Maslow’s
theory of needs. When employees faced retaliation. At that time safety and security needs
were important. But in my mind expectancy theory of motivation is most relevant for
understanding employees’ motivation of AIG. Since they need to make effort and perform
and contribute to the company which was facing financial crises. When company asked
for return of bonus this made employees restless and resign from the company. Some of
them shown commitment and others were demotivated.
 5. The amount of compensation earned by executives—as well as by professional
athletes and famous actors/actresses and musicians—often sparks emotionally
charged debate. Do you believe the $1 million plus retention bonuses received by
seventy-three employees of AIG’s Financial Products was excessive? Why or why
not?

Yes of course it was excessive amount despite the fact that company is facing huge losses. In
2009 company faced financial losses in its investment unit along with soured trades of the
company in addition to its collapse. It paid $ 165m for retention bonus despite loses. Obam’s
administration had to accept a bailout package for its rescue. In 2007 and 2008 despite the
paper lose employees were paid bonus of $ 423m. Therefore we can say that retention
bonuses received by seventy-three employees of AIG’s Financial Products was excessive.

6. What would you have done if you were one of the seventy-three Financial
Products employees who received a retention bonus of $1 million or more?
Explain the reasoning behind your answer.

As an employee I would rather return the bonus to prove my commitment with the
company, loyalty for an organisation that paid me when it was in financial crises. Now it
is my turn to help my organisation. I will prove a commitment in its real sense.

Reference:
Nelson, D and James, Q. (2012). Organisational Behaviour: Science, The Real
World and You. 8th Ed. Cengage Learning.