ORGB 3 3rd Edition Nelson Solutions Manual 1

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5 MOTIVATION AT WORK
IN THIS CHAPTER, YOU’LL FIND:

Chapter Overview
Learning Outcomes
Key Terms
PowerPoint Guide
Review Questions and answers
Discussion & Communication Questions and suggested answers
Ethical Dilemma
Self-Assessments
Issues in Diversity
Experiential Exercises
Additional Examples
Case Study: AIG
Videos: Friday Night Lights and Urban Escapes
Student Handouts:
Ethical Dilemma
What About You?: Protestant Ethic
What About You?: What’s Important to Employees?
Issues in Diversity: Using Cash to Bridge the Achievement Gap
Chapter 5 ♦ Motivation at Work 1

Experiential Exercise: What Do You Need from Work?
Experiential Exercise: What to Do?
Experiential Exercise: Motivation: Three Incidents
Case Study: AIG
CHAPTER OVERVIEW
This is the first of two chapters on motivation, behavior, and performance. This chapter
addresses internal and process theories of motivation, beginning with individual needs theories.
Next, it presents Herzberg's two-factor theory, and then concludes with discussions of two
individual-environment process theories of motivation, including equity theory and expectancy
theory.
LEARNING OUTCOMES
After reading this chapter, you should be able to do the following:
1 Define motivation and articulate different views of how individuals are motivated at work.
Motivation is the process of arousing and sustaining goal-directed behavior. Motivation theories
may be broadly classified into internal, process, and external theories. A comprehensive
approach to understanding motivation, behavior, and performance must consider three elements
of the work situation—the individual, the job, and the work environment—and how these
elements interact.
2 Explain Maslow’s hierarchy of needs and its two main modifications.

Douglas McGregor used Maslow’s need theory to explain motivation. McGregor‘s Theory X
assumptions are appropriate for employees motivated by lower order needs: physiological and
safety needs. Theory Y assumptions apply to employees motivated by higher order needs: social,
esteem, and self-actualization. Clayton Alderfer’s ERG theory of motivation grouped human
needs into three basic categories: existence, relatedness, and growth. He explains both
progressive need gratification and regression when people face frustration.
3 Discuss how the needs for achievement, power, and affiliation influence an individual’s
behavior in the workplace.
David McClelland identified three learned or acquired needs, called manifest needs. The
need for achievement encompasses excellence, competition, challenging goals, persistence,
and overcoming difficulties. The need for power includes the desire to influence others, the
urge to change people or events, and the wish to make a difference in life. The need for
affiliation means an urge to establish and maintain warm, close, intimate relationships with
others.
4 Describe the two-factor theory of motivation.

Frederick Herzberg’s two-factor theory examined experiences that satisfied or dissatisfied people
at work. Motivation factors relate to job satisfaction; hygiene factors relate to job dissatisfaction.
Motivation factors were responsibility, achievement, recognition, advancement, and the work
itself. Hygiene factors were company policy and administration, technical supervision, salary,
interpersonal relations with one’s supervisor, working conditions, salary, and status. Excellent
hygiene factors result in employees’ being not dissatisfied.
5 Explain two new ideas in human motivation.

Positive organizational scholarship links eustress to investing in strengths, finding positive
meaning in work, displaying courage and principled action, and drawing on positive
emotions at work. A second new idea by Jim Loehr centers on positive energy and full
engagement. This approach suggests that individuals do not need to be activated by unmet
needs but are already activated by their own physical, emotional, mental, and spiritual
energy.
6 Describe the role of inequity in motivation.

Equity theory is a social exchange process theory of motivation that focuses on the individual–
environment interaction. Individuals and organizations want an equitable arrangement for both
members of the relationship. Inequity occurs when a person receives more, or less, than the
person believes he or she deserves based on effort and/or contribution.
7 Describe the expectancy theory of motivation.

Vroom’s expectancy theory of motivation focuses on personal perceptions of the performance
process. The key constructs in the expectancy theory of motivation are valence, expectancy, and
instrumentality. Valence is the value or importance one places on a particular reward.
Expectancy is the belief that effort leads to performance. Instrumentality is the belief that
performance is related to rewards.
8 Describe the cultural differences in motivation.

Most motivation theories in use today have been developed by and about Americans. When
researchers have examined the universality of these theories, they have found that the studies
did not replicate the results found in the United States due to cultural differences.
KEY TERMS
motivation 75
psychoanalysis 76
self-interest 76
Theory X 78

Theory Y 78
ERG theory 78
manifest needs 79
need for achievement 79
need for power 79
need for affiliation 79
motivation factor 80
hygiene factor 81
eustress 82
inequity 85
equity sensitive 86
benevolent 86
entitled 86
valence 87
expectancy 87
instrumentality 87
moral maturity 88
POWERPOINT GUIDE
Introduction
Slide 1 – Learning Outcomes
LO1 Define motivation and articulate different views of how individuals are motivated at
work.
Slide 3 – Motivation Slide 5-6 – Early Motivational Theorists

Slide 4 – Three Theories of Motivation
LO2 Explain Maslow’s hierarchy of needs and its two main modifications.
Slide 8 – Maslow’s Hierarchy of Needs Slide 12 – McGregor’s Assumptions about

Slide 9 – Needs and Theory X and Y People Based on Theory Y
Slide 10 – Theory X and Y Slide 13 – Alderfer’s ERG Theory
Slide 11 – McGregor’s Assumptions about
People Based on Theory X
LO3 Discuss how the needs for achievement, power, and affiliation influence an individual’s
behavior in the workplace.
Slide 15 – McClelland’s Theory Slide 18 – McClelland’s Need Theory: Need

Slide 16 – McClelland’s Need Theory: Need for Affiliation
for Achievement Slide 19 – Need Theories of Motivation
Slide 17 – McClelland’s Need Theory: Need
for Power
LO4 Describe the two-factor theory of motivation.

Slide 21 – Herzberg’s Two-Factor Theory Slide 23 – Critique of Herzberg
Slide 22 – Motivation-Hygiene Theory of
Motivation
LO5 Explain two new ideas in human motivation.
Slide 25 – New Ideas: Eustress, Strength, Slide 27 – Beyond the Book: Does
Hope Motivation Work?
Slide 26 – New Ideas: Positive Energy and
Full Engagement
LO6 Describe the role of inequity in motivation.
Slide 29 – Social Exchange & Equity Slide 32 – Equity and Inequity at Work
Theory Slide 33 – Strategies for Resolution of
Slide 30 – Individual-Organizational Inequity
Exchange Slide 34-36 – New Perspectives on Equity
Slide 31 – Adam’s Theory of Inequity Theory
LO7 Describe the expectancy theory of motivation.
Slide 38 – Expectancy Theory Slide 41 – Expectancy Model of Motivation

Slide 39 – Two Basic Notions of Slide 42– 3 Causes of Motivational
Expectancy Theory Problems
Slide 40 – Key Constructs of Expectancy Slide 43– Moral Maturity
Theory Slide 44 – Moral Maturity and Motivation
LO8 Describe the cultural differences in motivation.
Slide 46 – Cultural Differences Slide 47 – Beyond the Book: Motivation in

Beijing
Slide 48 – Friday Night Lights

Slide 49 – Urban Escapes
REVIEW QUESTIONS AND ANSWERS

1. How can knowledge of motivation theories help managers?
The workforce is increasingly diverse. Knowledge of motivation theories can help managers
use a variety of techniques for motivating employees with a wide range of needs, interests,
and abilities.
2. What are the five categories of motivational needs described by Maslow? Give an
example of how each can be satisfied.

The needs hierarchy begins with fulfilling physiological needs, such as food and shelter. The
second level involves safety and security needs that are satisfied by a feeling of safe
surroundings, such as a well-lit environment in which to work. Family and friends can meet
third level needs for love and social relationships. Fourth is the esteem need, which can be
satisfied by titles and actions that earn respect from others. The final level is the self-
actualizing need, which is the need to achieve one's full potential.
3. What are the Theory X and Theory Y assumptions about people at work? How do they
relate to the hierarchy of needs?
Theory X is a skeptical, negative view of individuals and their relationship to tasks and work.
Theory Y views individuals as highly motivated and responsible for their actions. Theory X
individuals would be concerned with the lower three levels of Maslow's needs, and Theory Y
individuals are concerned with the higher-order needs.
4. What three manifest needs does McClelland identify?
McClelland identifies needs for achievement, power, and affiliation. These needs are
learned. Individuals and cultures differ in their levels of these needs.
5. How do hygiene and motivational factors differ? What are the implications of the two-
factor theory for managers?
Hygiene factors are factors such as supervision, work policies, and working conditions.
Hygiene factors can prevent dissatisfaction, but do not lead to satisfaction. Motivational
factors include a sense of achievement, recognition, and responsibility. Motivational factors
may lead to satisfaction. Managers need to realize that both contribute to workers' attitudes
toward the job.
6. What are two new ideas in motivation that managers are using?
The first of two new ideas in motivation being used by managers focuses on eustress,
strength, and hope. This perspective focuses on individuals’ interpretations of events. The
second centers on positive energy and full engagement. In this view, the manager’s task is to
help individuals learn to manage their energy so that they can experience periodic renewal
and recovery and thus build positive energy and capacity for work.
7. How is inequity determined by a person in an organization? How can inequity be

resolved if it exists?
Individuals in organizations calculate equity through a concept of social exchange. This

intuitive exchange compares the demands versus the contributions of individuals in an
environment. A person compares his/her input/outcome ratio to the same ratio for another
person. The strategies for remedying an inequitable situation include (1) altering one's
outcomes, (2) altering one's inputs, (3) alter the comparison other's outputs, (4) alter the

comparison other's inputs, (5) change who is used for comparison, (6) rationalize the
inequity, and (7) leave the organizational situation.
8. What are the key concepts in the expectancy theory of motivation?
This theory focuses on personal perceptions of desired outcomes of behavior, in conjunction

with effort and performance. Valence is the value placed on the anticipated reward.
Expectancy is the belief that effort will lead to performance. Instrumentality is the belief that
performance is related to the rewards.
DISCUSSION & COMMUNICATION QUESTIONS AND

SUGGESTED ANSWERS
1. What do you think are the most important motivational needs for the majority of people?
Do you think your needs differ from those of most people?
This is similar to the research question that asks what motivates supervisors versus what
motivates employees. Most of us think our motives are superior and deeper than the rest of
the organizational members. No one wants to be merely normal or average. Most of us may
share lower level needs, but there may be differences in the higher level needs.
2. At what level in Maslow's hierarchy of needs are you living? Are you basically satisfied
at this level?
One of the difficulties with this question is that we typically move up and down the scale in
different phases of our lives, or different surroundings. Students may not grasp this readily.
3. Assume you are leaving your current job to look for employment elsewhere. What will
you look for that you do not have now? If you do not have a job, assume you will be
looking for one soon. What are the most important factors you will seek?
This should relate to where students are on their needs hierarchy. Encourage students to use
the terminology of motivational factors that they learned in this chapter. Students may also
use equity theory and expectancy theory concepts to explain what they seek in a job.
4. If you were being inequitably paid in your job, which strategy do you think would be the
most helpful to you in resolving the inequity? What tactics would you consider using?
Adams's Theory of Inequity is a logical approach to this problem. The resolution of inequity
strategy could be to alter the input, to leave the organization, to alter the comparison other's
input, or any of the ways of restoring equity. Students can also compare themselves in terms
of equity sensitivity, benevolence, or entitlement.
5. Do you believe you can do a better job of working or studying than you are currently
doing? Do you think you would get more pay and benefits or better grades if you did a

better job? Do you care about the rewards (or grades) in your organization (or
university)?
The first portion of the question relates to tangible, self-motivated goals. Most students will
answer yes to being able to do a better job. Occasionally students are so overloaded that they
have assessed the obligations in their lives (work, school, and family) and determined that
they will have to balance their efforts. The underlying theme is whether all of their current
motivation rests in predicable, tangible, outcomes.
6. What important experiences have contributed to your moral and ethical development?
Are you working to further your own moral maturity at this time?
This is a difficult, but thought-provoking question, to answer in class. This question is better
for a homework review question, and is an excellent question for an essay exam. Students
can assess their own level of moral maturity.
7. Prepare a memo describing the two employees you work with who most closely operate
according to Theory X and Theory Y assumptions about human nature. Be as specific
and detailed in your description as you can, using quotes and/or observational examples.
Students who are not in a work setting could describe other students with whom they have
worked closely (e.g., in group projects). During discussion of these memos, it would be
interesting to also discuss how managers in each of the work settings dealt with each of these
employees.
8. Develop an oral presentation about the most current management practices in employee
motivation. Find out what at least four different companies are doing in this area. Be
prepared to compare these practices with the theory and research in the chapter.
This is an excellent opportunity for students to learn about motivational programs that are
actually being used by companies. During class discussion encourage students to evaluate
the effectiveness of these programs based on the theories and research from the chapter.
9. Interview a manager and prepare a memo summarizing the relative importance she or he
places on the needs for achievement, power, and affiliation. Include (a) whether these
needs have changed over time and (b) what job aspects satisfy these needs.
In class, students can compare the perspectives of the different managers they interviewed.
Encourage the students to see if a pattern emerges among the managers regarding the
importance of these needs. Discuss why students think there is or is not a pattern.

ETHICAL DILEMMA
The purpose of the Ethical Dilemmas is to encourage students to develop their awareness of
ethical issues in the workplace and the managerial challenges they present. The dilemmas are set
up to present situations in which there is no clear ethical choice. The goal for the instructor is to
guide students through the process of analyzing the situation and examining possible alternative
solutions. There are no “right” answers to the questions at the end of each scenario, only
opportunities to explore alternative generation and generate discussion of the appropriateness of
each alternative. The student portion of the activity is on a handout at the end of this chapter
guide.
1. Using consequential, rule-based, and character theories, evaluate Jim’s options.
Jim’s options are to retain Bill and try to find a way to motivate him, or fire Bill due to his
substandard performance.
Consequential—If Jim can find a way to motivate Bill, the result will be that Bill returns to
his formerly excellent performance. Bill will keep his job and the company will benefit from
his contribution. If Jim fires Bill, Bill will be out of work and the company will have to find
someone to replace him, which could mean a costly search and substantial training at worst,
or a series of internal changes at best.
Rule-based—Jim’s obligation is to do what is best for the company, whether that means
finding a way to motivate Bill again or firing him. This view of ethics is somewhat irrelevant
in this particular situation because it doesn’t drive the decision.
Character—Jim has always valued Bill as an employee and likes him as a person. He seems
to be the kind of manager who tries to do everything he can to help his employees succeed.
Retaining Bill and trying again to find a way to motivate him would be consistent with these
traits, while firing him would contradict these traits.
2. What should Jim do? Why?
Jim should retain Bill and try again to find a way to motivate him, or at least find out if
Bill’s change in performance has something to do with the departure of his youngest son
for college. Although Jim has to be careful about prying into Bill’s home situation, he
already knows about the youngest son’s departure and Jim and Bill are likely to be friends
who discuss personal issues anyway. This course of action allows Jim to act in an ethical
manner based on both the consequential and character views of ethics.

SELF-ASSESSMENTS—WHAT ABOUT YOU?
5.1 PROTESTANT ETHIC
The notion of a “Protestant ethic” has its roots in the writings of Max Weber, an early German
organizational scholar, who believed that the meaning of work lay in its potential for
contributing to a person’s ultimate salvation. This exercise enables students to get a sense of the
extent to which they share the values of the Protestant ethic. The exercise could lead into an
interesting and perhaps provocative discussion of the role of spirituality in work. Another option
might be to divide students into groups to debate the meaningfulness of work—is the purpose of
work 1) to improve mental, emotional, and spiritual well being, or 2) to create financial wealth
for the organization and its stockholders?
This challenge provides an opportunity to discuss the implications for work behavior in
organizations due to different orientations toward the Protestant ethic. Also, discuss the
different approaches to managing and motivating that might be needed for an employee with
a pro-Protestant ethic score and an employee with a non-Protestant ethic score. The student
portion of the activity is on the review card in the student edition of ORGB and on a handout
at the end of this chapter guide.
5.2 WHAT’S IMPORTANT TO EMPLOYEES?

The perceptions of employees and their supervisors differ considerably in regard to employee
motivation. One thousand employees were asked to rank what was important to them. Their
rankings of “job reward” factors follows. The rewards are listed from most to least popular. The
student portion of the activity is on the review card in the student edition of ORGB.
-interesting work
-full appreciation of work done
-a feeling of being in on things
-job security
-good wages
-promotion and growth in the organization
-good working conditions
-personal loyalty to employees
-tactful discipline
-sympathetic help with personal problems
Supervisors’ rankings of the same factors follow, from most valuable to least valuable.
-good wages
-job security
-promotion and growth in the organization
-good working conditions
-interesting work
-personal loyalty to employees
-tactful discipline
-full appreciation of work done
-sympathetic help with personal problems

-a feeling of being in on things
Comparing these results to Maslow’s hierarchy of needs and Herzberg’s two-factor theory of
motivation suggests that organizations in the United States more effectively satisfy workers’
basic needs than they satisfy ego needs or self-fulfillment needs. Discuss with students why they
think this is the case.
SOURCE: “Crossed Wires on Employee Motivation.” Training and Development, 49 (1995): 59-60.
ISSUES IN DIVERSITY: USING CASH TO BRIDGE THE

ACHIEVEMENT GAP
Paying a child $200 to go one month without watching TV? That’s the kind of extreme action
some parents will take to get their children to cooperate. Bribery? Maybe. Whether called bribery
or motivation, the practice of linking monetary incentives with desired behavior has existed for
years. Evidence shows providing financial incentives works to change employee behavior. Can
similar financial incentives change student behavior?
That’s the question Harvard economist Roland Fryer, Jr., set out to answer using a series
of experiments in underperforming inner-city elementary schools across the country. Why inner-
city schools? According to Fryer, “the average black 17-year-old reads at the same level as the
average white 13-year-old.” Something had to be done to bridge that gap. Fryer conducted the
experiments at elementary schools in four cities: Chicago, Dallas, Washington, and New York.
He used various incentives. For example, in New York City, fourth graders could earn
a maximum of $25 for good test scores; seventh-graders, 50 dollars. Students in Chicago were
paid $50 for each A, $35 for each B, and $20 for each C with a maximum possible “salary” of
$2,000 per year. Similar pay-for-performance schemes were tested in Washington and Dallas.
Using mostly private funds, Fryer paid 18,000 kids a total of $6.3 million to boost their
performance.
As with any experiment, researchers often do not get the results they expect, and Fryer’s
was the same. The “treatment” had no effect on student performance in one of the cities where he
expected the most success. In two of the other cities, his experiment yielded mixed results. Yet in
another city, the results exceeded his expectations. Students who were paid all year performed
better on standardized tests than those who were unpaid. Fryer’s plan did not come without its
detractors. While some school officials were willing to try anything new to motivate students to
learn, others strongly believed students should learn for learning’s sake and not for cash. The fact
that Fryer’s test subjects were students in predominately minority schools hurt the case. One
think-tank scholar called the plan racist.
1. How is using extrinsic measures to motivate students any different from using intrinsic
measures if the outcome is the same?
The difference is that even if the outcomes are the same, the outcomes resulting from
extrinsic measures tend to be short lived, while the outcomes resulting from intrinsic
measures tend to last much longer. With intrinsic measures, the outcome is more meaningful

and thus has a greater likelihood of generating repeated behavior.
2. Do you believe using financial incentives to improve performance in predominantly minority

schools is a racist strategy? Why or why not?
Fryer’s strategy could be interpreted as racist, and some will interpret it that way. However,
his strategy may have been as simple and innocent as selecting schools based on their current
performance levels and the range over which they could potentially improve. The fact that
most of the schools he chose for this reason were predominantly minority schools may be
coincidental rather than the result of a racist motivation.
SOURCES: A. Ripley, “Should Kids Be Bribed to Do Well in School?” Time (April 8, 2010); N.C. Strauss, “Fryer
Hopes to Institute Pay for Performance Plan,” The Harvard Crimson (June 29, 2007).
EXPERIENTIAL EXERCISES
5.1 WHAT DO YOU NEED FROM WORK?
This exercise encourages students to think broadly about what they desire from a work
experience. During Step 2 of this exercise (sharing of group results with the class) encourage
discussion across groups regarding similarities and differences in ratings that might have
occurred. In particular, have students consider why differences in ratings exist (i.e., because
of differences in length of work experience, type of work experience, etc.). Discussion could
also center on organizations’ effectiveness at meeting these needs (and why they are or are
not effective). The student portion and steps for the activity are on a handout at the end of
this chapter guide.
5.2 WHAT TO DO?

This exercise presents students with a true-to-life illustration of equity theory. Discussion
may focus on attributions for the inequity stemming from factors such as gender or parental
status. Factors such as external labor market conditions, which also may contribute to pay
inequity, may be discussed. The student portion of the activity is on a handout at the end of
this chapter guide.
5.3 MOTIVATION: THREE INCIDENTS

Instructor's Notes:
Students are provided three incidents with 5 choices of actions. For each of the following
incidents, students are asked to determine whether the individuals will be motivated to behave as
desired. This exercise takes approximately thirty minutes of class time, with groups of 4-6 in
each group. The first example is very quick, and students believe they have motivation theory
"wrapped up.” The second example gets more complicated, and by the third example, most of
them miss the issues. Expectancy theory, job characteristics model, and effort-performance
relationship are all relevant for these examples. Student handouts are at the end of this chapter
guide.

I. The key sentences in this example are, (1) He also knows that Walter needs a scholarship
to be able to go to college, and (2) However, an article in the Sunday Sports section
reports that two of the major state university coaches are recruiting him.
A. Has nothing additional for motivation. Walter already knows this.

B. This isn't Walter's valence; probably knows this as well.
C. This answer does not increase valence for THIS school.
D. Best answer; this approach would be unique to this school and deals with Walter's
needs.
E. Doesn't deal with the problem.
II. Joyce's sales are instrumental to incentive bonus; therefore, there is high valence for
Joyce.
A. This approach is useful only if you need to build effort to performance expectancy.
B. She knows this already.
C. Goal is high valence, not necessarily the answer.
D. Best answer. Use if problem-solving or ability is the issue. Looks like a "know-how"
problem.
E. Apparently, she doesn't know how to improve.
III.. They are likely to begin cooperating now anyway.
Very few students select E because they believe we are always to DO SOMETHING.
Many students pick up on the issues of the U.S. in another country. The key to this
answer is that none of the previous choices, A-D provide anything in motivation theory
that has not already been provided. This is wasted effort to duplicate the same
approaches.
SOURCE: Conrad Jackson, The University of Alabama, Huntsville.

ADDITIONAL EXAMPLES
BEYOND MOTIVATION TO INSPIRED
Kenexa is the leading human resources services company in America with 60 percent of the
Fortune 100 companies as its clients. The company’s success rests on a blend of psychology and
technology that enables it to understand employee needs, often taking these employees beyond
motivation to inspiration. The company gets into the minds of client organization employees and
helps build strong loyalty by listening deeply to the people. Measuring employee motivation and
inspiring employees to excel and be loyal has more than feel-good results. Kenexa has found
that companies with higher employee satisfaction scores had 700 percent higher shareholder
return.
NEED ENERGY, TAKE A NAP

Some people may wonder if toy manufacturer Worlds Apart is practicing bizarre HR. The
company has an approved practice for employees who get fatigued and low on energy during
the workday. Worlds Apart says that it is fine to take out your inflatable bed at the office and
take a twenty-minute nap. This is an energy recovery practice that has been practiced over
the ages by accomplished and talented people. The Worlds Apart practice is a targeted,
focused strategy consistent with the practice of high-performance athletes who engage in
short energy recovery activities so they can then achieve peak performance when fully
engaged in an event.
SOCIAL AND ECONOMIC EXCHANGE IN TRANSITION

The People’s Republic of China is in transition to a market economy and entry into the World
Trade Organization. These forces have prompted the use of various kinds of organizational forms
and management mechanisms by companies. A recent study was designed to examine the
relative importance of these multiple mechanisms for inducing employee commitment and
performance in an emerging economic context and rising world economic power. Two studies
were conducted, one with graduate business students in Chinese universities and the other with
middle and top managers in thirty-one companies located in a variety of large Chinese cities such
as Beijing. The two studies together examined the effects of executive leadership style,
organizational culture, and employment approaches on both social and economic exchange
relationship perceptions. These exchange relationship perceptions were expected to influence
employee commitment, task performance, and organizational citizenship behavior. The results of
the tests suggest that social exchange relationship perceptions are influenced by executive
leadership style, organizational culture, and employment approach, which in turn has an effect on
commitment and performance, but not organizational citizenship behavior. The results further
suggest that economic exchange relationship perceptions have partial mediating influences too
yet are not as important at social exchange perceptions. The research does make an important
contribution to employee–organization linkages and social exchange theory. In addition, the
research suggests the universality of social exchange theory.
SOURCE: L. J. Song, A. S. Tsui, and K. S. Long, “Unpacking Employee Responses to Organizational Exchange
Mechanisms: The Role of Social and Economic Exchange Perceptions,” Journal of Management 35 (2009): 56–93.

CASE STUDY AND SUGGESTED RESPONSES
COMPENSATION CONTROVERSIES AT AIG
Linkage of Case to Chapter Material
This case focuses on the controversial $165 million in retention bonuses paid to employees of the
Financial Products unit of the American International Group (AIG), a behemoth insurance and
financial services company. In early 2008, employees in the Financial Products unit were asked
to remain with the company through the unit’s shutdown and, essentially, to work themselves out
of a job. To entice talented employees to stay and work through the shut-down, a contractual
retention bonus plan was instituted. When the bonuses were paid in early 2009, controversy and
outrage arose given that AIG was the recipient of a substantial amount of United States
government bailout money under its Troubled Assets Relief Program (TARP). Amid this
controversy, Edward Liddy, AIG’s CEO, requested the bonus recipients to return half of the
bonus amount. Some Financial Products employees decided to return their bonuses; others opted
to keep their bonuses. Many affected Financial Products employees felt betrayed by AIG
because of repeated reassurances of the bonus payments under contractual obligations.
Subsequently, Kenneth Feinberg, the federal government’s overseer of executive compensation
at AIG and other major TARP recipients, played a key role in addressing the controversy over
the AIG retention bonuses. He made several controversial decisions with respect to
compensating AIG’s executives.
The case is related to multiple motivational concepts. Internal needs reflect the reasons for
which the employees chose to remain employed with AIG during the process of winding down
the Financial Products business. External incentives reflect the retention bonus payments. In
addition, needs theories of motivation can be invoked to provide perspective on what seem to be
important motivational factors for the Financial Products employees. Equity theory and the
individual/organizational exchange (or social exchange) relationship are highly relevant to the
case⎯and, arguably, provide the best explanation of the behavioral dynamics described in the
case. Both perspectives help in explaining and understanding employees’ reactions to being
asked to return part of their bonuses in the wake of the outrage expressed by the public and the
federal government. Expectancy theory also can be applied to the case facts by examining the
impact of expectancy, instrumentality, and valence on the motivation of the Financial Products
employees.
Suggested Answers for Discussion Questions

1. What types of work behaviors did AIG intend to encourage through its retention bonus plan?
Because the employees of the Financial Products unit were actually being asked to work
themselves out of a job by helping to wind down the business, AIG had to engender the
commitment and loyalty of those same employees. In addition to these key behaviors, AIG
needed the employees to exercise business acumen and shrewdness to realize the best
possible price in selling off the assets of the Financial Products unit.
2. Which needs seem to be important to the employees of AIG’s Financial Products unit?

Given that some of AIG’s Financial Products employees contracted for an annual salary of
$1 with the opportunity to earn substantial bonuses, a powerful argument can be made that
lower-order needs are not especially relevant here. In addition, the fact that 73 Financial
Products employees received $1 million or more in bonus payments indicates that basic
human needs certainly were not unfulfilled.
The Financial Products employees very likely were motivated by the higher-order
needs⎯esteem and self-actualization in Maslow’s need hierarchy, achievement motivation in
McClelland’s needs theory, and motivation factors in Herzberg’s two-factor theory.
Employees of the Financial Products unit probably viewed winding down the business to be a
challenge that they could meet. They also may have viewed the bonuses as symbolic
representations of the value of their contributions to the Financial Products unit. Moreover,
since they were being paid large sums of money to stay with AIG and help wind down the
Financial Products unit, these employees may have thought, “I must be really good if AIG is
paying me this much money to retain me through the wind-down process!” Such a
perception certainly indicates ego-involvement, which in turn is suggestive of the higher-
order needs.
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?
The individual-organizational exchange relationship (or social exchange relationship) is

based on the demands and contributions of the employees (i.e., individuals) and AIG (i.e., the
organization). AIG initiated the process of shutting down the Financial Products unit, and in
doing so asked the employees of that unit to remain with the organization while winding
down the business and essentially working themselves out of their jobs. Substantial bonuses,
which were not linked to performance on the downside, were offered as an inducement to
remain on the job. In short, AIG demanded loyalty and help in unwinding the business,
making as much money for the company as possible. In exchange, the employees would
receive substantial bonuses, without AIG imposing any risk on the employees for poor
performance (i.e., paper losses). The employees’ contributions were: working to sell off the
assets of the Financial Products unit for the best price possible; working long hours and
sacrificing family time; working themselves out of a job; and, in some instances, having
already supplied many years of dedicated service and/or accepting an annual salary of $1 in
the final year. The employees’ demands were to receive the bonuses⎯many of which were
very substantial⎯for which they had contracted when agreeing to remain with AIG and help
wind down the Financial Products unit. Instead, the employees were subject to much
criticism for getting bonuses subsequent to the government bailout, and in response to AIG’s
CEO, Edward Liddy, request that employees to return half their bonus.
Without a doubt, the employees perceive that an inequitable exchange relationship exists.
The employees expected to receive the retention bonuses for which they had contracted in
exchange for working themselves out of jobs. Then AIG’s leadership, reacting to
governmental and public pressure, sought to alter a contractual obligation. This sense of
inequity in the individual- organizational exchange relationship for the employees of the

Financial Products unit is perhaps best conveyed in the comments of Jake DeSantis, the
Financial Products unit executive who wrote the following in his New York Times Op-Ed
open letter to CEO Liddy:
“After 12 months of hard work dismantling the company—during which A.I.G. reassured
us many times we would be rewarded in March 2009—we in the financial products unit
have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In
response to this, I will now leave the companyI take this action after 11 years of
dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in
this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to
work for an annual salary of $1, and I agreed out of a sense of duty to the company and to
the public officials who have come to its aid. Having now been let down by both, I can no
longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those
who have let me down.”
4. Which motivation theory do you think has the most relevance for understanding the
responses of the Financial Product employees to the implementation and unraveling of the
retention bonus plan? Explain the reasoning behind your answer.
The equity theory of motivation has the most relevance for explaining the situation with the
implementation and unraveling of the retention bonus plan. The facts cited in the suggested
answer to the previous question with respect to the demands and contributions of the
employees in the individual/organizational exchange relationship are relevant here as well.
With respect to inputs, the employees worked to sell off the assets of the Financial Products
unit for the best price possible; worked long hours and sacrificed family time; worked
themselves out of a job; and, in some instances, had contributed many years of dedicated
service and/or accepted an annual salary of $1 in the final year. In terms of outcomes, the
employees received bonuses, part of which they were asked to return subsequent to the
governmental and public outrage about the bonuses. In addition, some employees and their
families were being harassed and some employees felt they were betrayed by AIG’s
leadership. From an equity theory perspective, this is a clear case of perceived
underpayment⎯even though, in absolute monetary terms, the bonuses were astronomical
compared to the ordinary citizens’ frame of reference.
In discussing this question, students could invoke the motivational perspective of expectancy
theory. In expectancy theory, motivational force is a multiplicative function of expectancy,
instrumentality, and valence. Expectancy is the belief that effort leads to performance, which
in the case of AIG’s employees would reflect the belief that, by remaining with the company
and working on selling off the assets of the Financial Products unit (i.e., effort), the result
would be the closing of the business, while minimizing losses but hopefully making a profit,
and working themselves out of a job (i.e., performance). Instrumentality is the belief that
performance is related to rewards; in this case, employees winding down the Financial
Products business and working themselves out of job would generate the bonuses for which
they had contracted (i.e., the rewards). Valence is the value or importance the employees
place on a particular reward; the bonuses are a highly valued reward for AIG employees.
From the expectancy theory perspective, expectancy is high and valence is strongly positive

but instrumentality is low. Rather than performance leading to desired rewards, performance
led to public and governmental outrage, harassment, and the request to return 50 percent of
the bonus payment. Because of the multiplicative relationship among expectancy,
instrumentality, and valence, work motivation would be diminished because instrumentality
is low even though expectancy and valence are high.
5. The amount of compensation earned by executives⎯as well as by professional athletes and

famous actors/actresses and musicians⎯often spark emotionally-charged debate. Do you
believe the $1 million plus retention bonuses received by 73 employees of AIG’s Financial
Products was excessive? Why or why not?
For most people a $1 million (or more) bonus is a dream, a fantasy, something that will
never, ever be realized! Yet such extraordinary compensation does occur, and many times
the individuals receiving it are high profile individuals. These cases invoke a lot of
discussion, not to mention admiration, aspiration, envy, jealousy, anger, disgust, and a whole
host of other emotions. Thus, this question has the potential for generating some rather
interesting, and perhaps heated, debate among students.
In discussing this question, students might draw on the ideas embedded in the suggested
answers to the preceding two questions. In particular, focus should be on what contributions
these highly compensated individuals make to their organizations and to society, and whether
those contributions merit extraordinary compensation. The students should consider the
contributions/salary equation for highly paid professional athletes or actor/actresses or
musicians, for example, in relation to say, elementary school teachers would are charged with
the intellectual development of youngsters but who are paid much more modestly. Of
course, students will think of many other comparative examples to discuss, but the crucial
element of the discussion should focus on the value of the contribution made by the work
being done relative to the amount of compensation being earned. It is in this type of analysis
that the question of whether or not compensation is excessive can be explored more
rationally.
6. Do you think that the various decisions made by Kenneth Feinberg with respect to executive
compensation at AIG were justified? Explain the reasoning behind your answer.
The case describes five decisions made by Kenneth Feinberg. First, he rejected much of the
proposed pay package that AIG put forth for “a group of highly paid employees as being
inconsistent with the ‘public interest’.” Second, he decided that the base salary for these
employees should not exceed $500,000 annually. Third, he did not rule out bonuses for
financial-products employees which were scheduled to be paid in 2010. Fourth, he allowed
AIG to “compensate executives with ‘stock units’ tied to the value of four of its insurance
units, which would be payable in three equal annual installments, starting two years after
they were granted. Fifth, he decided that five high-paid officials at the financial-products
unit should get only the cash salaries that were in effect at the end of 2008 rather than
‘significant increases in cash base salary.’
Because Feinberg represented the federal government and in turn the American taxpayers,

these decisions should be evaluated primarily from the perspective of what best serves the
public interest. All of his decision could be argued to put the public interest foremost in
making decisions. However, Feinberg did not neglect the interests of AIG and it executives.
He kept their interests in mind by not ruling out bonuses scheduled for 2010. He also
promoted AIG’s interests in becoming a sustainable business by linking executive stock
bonuses to their continuing employment with the company.
Students will likely have varying viewpoints of Feinberg’s decisions. Such diversity of
opinion should be encouraged, but the reasons behind those differences should be explored
very rigorously.
SOURCE: This case solution was written by Michael K. McCuddy, The Louis S. and Mary L.
Morgal Chair of Christian Business Ethics and Professor of Management, College of Business,
Valparaiso University.
VIDEOS
FRIDAY NIGHT LIGHTS
The Odessa, Texas passion for Friday night high school football (Permian High Panthers) comes
through clearly in this cinematic treatment of H. G. (Buzz) Bissinger’s well-regarded book of the
1
same title. Coach Gary Gaines (Billy Bob Thornton) leads them to the 1988 semifinals where
they must compete against a team of much larger players. Fast-moving pace in the football
sequences and a slower pace in the serious, introspective sequences give this film many fine
moments.
This scene starts with a panning shot of the Winchell’s house. Coach Gaines says to Mike
Winchell (Lucas Black), “Can you get the job done, Mike?” The scene follows a harsh practice
and Mike talking to someone from a telephone booth. The film continues with the Odessa-
Permian vs. Cooper football game.
Discussion Questions and Solutions
1. This chapter defined motivation as “the process of arousing and sustaining goal-directed
behavior.” Does Mike Winchell show the characteristics of this definition early in the scene?
Do you expect him to show any of the characteristics after the scene ends and he returns to
the team?
Mike’s early behavior in the scene shows extreme uncertainty about going forward. He is
more concerned about his mother than himself. Mike also answers the coach’s questions with
uncertainty while he plays with the toy car. Coach Gaines helps him focus on his future.
Gaines urges Mike to get out of that house and focus more on himself than on his mother.
1
J. Craddock, ed., VideoHound’s Golden Movie Retriever (Detroit: Gale Cengage Learning, 2008), 368.

2. Which needs discussed earlier in this chapter does Mike appear focused on early in the
scene? Which needs can become his focus later in the scene? See the “The Hierarchy of
Needs” and “ERG Theory” sections earlier in this chapter for some suggestions.
Mike focuses on lower order needs, especially safety needs early in the scene. Coach Gaines
guides him to a focus on higher order needs such as esteem and self-actualization.
3. Apply “McClelland’s Need Theory” to this scene. Which parts of that theory appear in this
scene? Give specific examples.
Coach Gaines tries to focus Mike on the need for achievement. Mike does not have that focus
early in this scene. It begins to show toward the end of the scene as Coach Gaines continues
his encouragement.
URBAN ESCAPES
Founded in 2008 by Maia Josebachvili and Bram Levy, Urban Escapes has earned high praise
for its vast array of exciting outdoor adventures. For the Urban Escapes employees working
behind the scenes to deliver “Zen Escape Yoga Hikes” and “Boulder and Brew Tours,”
motivation comes naturally. The company’s managers and guides are driven by the freedom and
opportunity that only a start-up company can offer. “We gave everyone a lot of ownership in
their cities,” Josebachvili says of her guides. “Initially, we said every time you want to run a trip,
you run it by us. Within a few months, I was like, ‘Okay, if you know it’s going to work, don’t
come to us—you got this’. After a year, I felt really good about what they were doing.”
Discussion Questions and Solutions
1. Which needs in Maslow’s hierarchy are most important to the employees who work for
Urban Escapes, and how can managers use this information to develop a highly
motivated workforce?
Urban Escapes is about adventure, new life experiences, and the great outdoors. People
who work at the social travel firm are dedicated to fulfilling their higher order needs,
such as self-actualization needs, esteem needs, and belongingness needs. The guided trips
bring together large groups of travelers, and the destinations include action-filled outdoor
activities. Levy conveys the mindset of his employees when he notes that they worked
“for virtually no income and no stability because they enjoyed what we had to offer and
were having fun.”
Managers can utilize this knowledge to better reward individuals who experience life at
the higher levels of Maslow’s needs pyramid. For the typical Urban Escapes employee,
traditional pay and benefits packages may pale in comparison to special travel perks, paid
leave for personal trips, or gifts related to outdoor gear and apparel.
2. According to equity theory, how might an Urban Escapes guide react if he or she feels
underpaid or unappreciated?

Although employees at Urban Escapes aren’t necessarily “in it for the money,” every
employee desires equitable pay and treatment, and people are motivated to act when they
find themselves in situations of inequity or unfairness. People who feel underpaid relative
to their contributions or in comparison to others may respond in several ways. For
instance, if an employee of Urban Escapes feels underpaid, he or she might gradually
make less of an effort on the job or begin to miss work more frequently (decrease inputs).
An assertive employee, however, might ask superiors for a raise or promotion (increase
outcomes). Another employee may cope with perceived inequity by artificially inflating
the status of his or her position (change perceptions of outcomes). Finally, an employee
who cannot change his or her situation is likely to leave the company and look elsewhere.
New perspectives on equity theory suggest that three individual dispositions may also
influence the response to inequity: Equity Sensitives respond as the original theory
suggests, Benevolents will tolerate an equity ratio less than that of their comparison other,
and Entitleds feel comfortable with an equity ration greater than that of their comparison
other.
3. What outcomes or rewards possess high valence for the managers and guides who work
at Urban Escapes?
According to the expectancy theory of motivation, employees find some rewards to be

highly attractive and motivational. The value or importance one places on a particular
reward is called valence. For local guides, pay does not necessarily possess high valence;
however, the freedom to plan and lead amazing trips at the company expense is highly
attractive. For the company’s city managers who fulfill traditional managerial duties,
high pay and good benefits are likely to prove motivational, along with bonus rewards for
hitting goals. For all Urban Escapes employees, profit sharing or ownership is likely to be
a desired outcome, as Urban Escapes is a startup company, and founding employees of
start-ups typically share in the financial rewards of ownership and acquisitions.
For any valence to be motivational, Urban Escapes employees must believe that their
work efforts will lead to performance (expectancy). They must also believe that
performance will lead to the desired outcome (instrumentality). Any breakdown in this
chain of expectancy can threaten employee motivation.

STUDENT HANDOUTS
ETHICAL DILEMMA
Bill Lawrence has been an employee at Huntington Manufacturing for nearly fifteen years; he’s
steadily worked his way up a frontline worker to management. Plaques and awards hang on the
walls of his office, and he’s received excellent remarks on past annual reviews.
In short, Bill was an exemplary employee. Until six months ago, the normally prompt
Bill began arriving at least fifteen minutes late and now he is always the first to leave, whether
the day’s work was done or not. He stopped arriving to meetings with ideas fully formulated, and
slowly he stopped offering ideas or comments. Bill had always been committed to working
weekends during the times when labor was particularly busy, to make sure the products got out
one way or another—now, Bill is content to sign a piece of paper and rest the project completion
on hope and the efforts of the foremen beneath him.
Jim Donavan is Bill’s direct supervisor, and is completely befuddled by the drastic
changes in Bill. Jim’s never had to worry about motivating Bill, because Bill was the first to
energize everyone else on the team. But now Bill is not only not meeting his previous standard of
achievement, he’s falling below the minimum standard of performance. Jim has always valued
Bill as an employee, and beyond that, he personally likes Bill.
First, Jim tried simply talking with Bill about current goals and objectives, but Bill’s
performance has not changed. Jim reminded Bill frequently about how many people were
depending on his leadership, but Bill did not change his work pattern. Jim wondered if, after
fifteen years, Bill was finding himself bored in his current position, so Jim proposed a lateral
move within Huntington or the opportunity for professional development. Neither have seemed
to change Bill’s behavior.
Jim knew that Bill’s youngest child just left for college about six months ago, but Bill
hadn’t expressed any concern about that prior to the event. Jim wonders if there was something
else going on at home that was deeply affecting his once model employee’s motivation to
achieve. Jim begins to wonder how much longer he could afford to retain Bill in his current
situation?
Questions:
1. Using consequential, rule-based and character theories, evaluate Jim’s options.
2. What should Jim do? Why?

WHAT ABOUT YOU?
PROTESTANT ETHIC
Rate the following statements from 1 (for disagree completely) to 6 (for agree completely).
____ 1. When the workday is finished, people should forget their jobs and enjoy themselves.
____ 2. Hard work makes us better people.
____ 3. The principal purpose of people’s jobs is to provide them with the means for enjoying
their free time.
____ 4. Wasting time is as bad as wasting money.
____ 5. Whenever possible, a person should relax and accept life as it is rather than always
striving for unreachable goals.
____ 6. A good indication of a person’s worth is how well he or she does his or her job.
____ 7. If all other things are equal, it is better to have a job with a lot of responsibility than one
with little responsibility.
____ 8. People who “do things the easy way” are the smart ones.
____ Total your score for the pro-Protestant ethic items (2, 4, 6, and 7).
____ Total your score for the non-Protestant ethic items (1, 3, 5, and 8).
A non-Protestant ethic score of 20 or over indicates you have a strong nonwork ethic; 15–19
indicates a moderately strong nonwork ethic; 9–14 indicates a moderately weak nonwork ethic; 8
or less indicates a weak nonwork ethic.
A pro-Protestant ethic score of 20 or over indicates you have a strong work ethic; 15–19
indicates a moderately strong work ethic; 9–14 indicates a moderately weak work ethic; 8 or less
indicates a weak work ethic.
SOURCE: M. R. Blood, “Work Values and Job Satisfaction,” Journal of Applied Psychology 53 (1969): 456–459.
Copyright © 1969 by the American Psychological Association. Reprinted with permission.

WHAT ABOUT YOU?
WHAT’S IMPORTANT TO EMPLOYEES?
There are many possible job rewards that employees may receive. Listed below are ten possible
job reward factors. Rank these factors three times. First, rank them as you think the average
employee would rank them. Second, rank them as you think the average employee’s supervisor
would rank them for the employee. Finally, rank them according to what you consider important.
Your instructor has normative data for 1,000 employees and their supervisors that will help
you interpret your results and put them in the context of Maslow’s need hierarchy and
Herzberg’s two-factor theory of motivation.
Employee Supervisor You

1. job security
2. full appreciation of
work done
3. promotion and
growth in the
organization
4. good wages
5. interesting work
6. good working
conditions
7. tactful discipline
8. sympathetic help
with personal
problems
9. personal loyalty to
employees
10. a feeling of being

in on things
SOURCE: “Crossed Wires on Employee Motivation,” Training and Development 49 (1995): 59–60. American
Society for Training and Development. Reprinted with permission. All rights reserved.

ISSUES IN DIVERSITY
USING CASH TO BRIDGE THE ACHIEVEMENT GAP
Paying a child $200 to go one month without watching TV? That’s the kind of extreme action
some parents will take to get their children to cooperate. Bribery? Maybe. Whether called bribery
or motivation, the practice of linking monetary incentives with desired behavior has existed for
years. Evidence shows providing financial incentives works to change employee behavior. Can
similar financial incentives change student behavior?
That’s the question Harvard economist Roland Fryer, Jr., set out to answer using a series
of experiments in underperforming inner-city elementary schools across the country. Why inner-
city schools? According to Fryer, “the average black 17-year-old reads at the same level as the
average white 13-year-old.” Something had to be done to bridge that gap. Fryer conducted the
experiments at elementary schools in four cities: Chicago, Dallas, Washington, and New York.
He used various incentives. For example, in New York City, fourth graders could earn
a maximum of $25 for good test scores; seventh-graders, 50 dollars. Students in Chicago were
paid $50 for each A, $35 for each B, and $20 for each C with a maximum possible “salary” of
$2,000 per year. Similar pay-for-performance schemes were tested in Washington and Dallas.
Using mostly private funds, Fryer paid 18,000 kids a total of $6.3 million to boost their
performance.
As with any experiment, researchers often do not get the results they expect, and Fryer’s
was the same. The “treatment” had no effect on student performance in one of the cities where he
expected the most success. In two of the other cities, his experiment yielded mixed results. Yet in
another city, the results exceeded his expectations. Students who were paid all year performed
better on standardized tests than those who were unpaid. Fryer’s plan did not come without its
detractors. While some school officials were willing to try anything new to motivate students to
learn, others strongly believed students should learn for learning’s sake and not for cash. The fact
that Fryer’s test subjects were students in predominately minority schools hurt the case. One
think-tank scholar called the plan racist.
Questions:
1. How is using extrinsic measures to motivate students any different from using intrinsic
measures if the outcome is the same?
2. Do you believe using financial incentives to improve performance in predominantly minority

schools is a racist strategy? Why or why not?
SOURCES: A. Ripley, “Should Kids Be Bribed to Do Well in School?” Time (April 8, 2010);
N.C. Strauss, “Fryer Hopes to Institute Pay for Performance Plan,” The Harvard Crimson (June
29, 2007).

EXPERIENTIAL EXERCISE
WHAT DO YOU NEED FROM WORK?
This exercise provides an opportunity to discuss your basic needs and those of other students in
your class. Refer back to What about You, “What’s Important to Employees?”, on the SE card
for chapter 5, and look over your ranking of the ten possible job reward factors. Think about
basic needs you may have that are possibly work related and yet would not be satisfied by one or
another of these ten job reward factors.
Step 1. The class will form into groups of approximately six members each. Each group elects a
spokesperson and answers the following questions. The group should spend at least five minutes
on the first question and make sure each member of the group makes a contribution. The second
question will probably take longer for your group to answer, up to fifteen minutes. The
spokesperson should be ready to share the group’s answers.
a. What important basic needs do you have that are not addressed by one or another of these ten
job reward factors? Members should focus on the whole range of needs discussed in the
different need theories of motivation covered in Chapter 5. Develop a list of the basic needs
overlooked by these ten factors.
b. What is important to members of your group? Rank-order all job reward factors (the original
ten and any new ones your group came up with in Step 1) in terms of their importance for your
group. If group members disagree about the rankings, take time to discuss the differences among
group members. Work for consensus and also note points of disagreement.
Step 2. Each group will share the results of its answers to the questions in Step 1. Cross-team
questions and discussion follow.
Step 3. If your instructor has not already shared the normative data for 1,000 employees and
their supervisors mentioned on your SE card the instructor may do that at this time.
Step 4 (Optional). Your instructor may ask you to discuss the similarities and differences in
your group’s rankings with the employee and supervisory normative rankings. If he or she does,
spend some time addressing two questions.
Questions:
1. What underlying reasons do you think may account for the differences that exist?
2. How have the needs of employees and supervisors changed over the past twenty years? Are
they likely to change in the future?

WHAT TO DO?
According to Stacy Adams, the experience of inequity or social injustice is a motivating force for
human behavior. This exercise provides you and your group with a brief scenario of an inequity
at work. Your task is to consider feasible actions for redress of this inequity.
John and Mary are full professors in the same medical school department of a large private
university. As a private institution, neither the school nor the university makes the salaries and
benefits of its faculty a matter of public record. Mary has pursued a long-term (fourteen years)
career in the medical school, rising through the academic ranks while married to a successful
businessman with whom she has raised three children. Her research and teaching contributions
have been broad ranging and award winning. John joined the medical school within the last three
years and was recruited for his leading-edge contribution to a novel line of research on a new
procedure. Mary thought he was probably attracted with a comprehensive compensation
package, yet she had no details until an administrative assistant gave her some information about
salary and benefits a month ago. Mary learned that John’s base contract salary is 16 percent
higher than hers ($250,000 versus $215,000), that he was awarded an incentive pay component
for the commercialization of his new procedure, and that he was given an annual discretionary
travel budget of $35,000 and a membership in an exclusive private club. Mary is in a quandary
about what to do. Given pressures from the board of trustees to hold down costs associated with
public and private pressure to keep tuition increases low, Mary wonders how to begin to close
this $70,0001 inequity gap.
Step 1. Working in groups of six, discuss the equity issues in this medical school department
situation using the text material on social exchange and equity theory. Do the outcome
differences here appear to be gender based, age based, performance based, or marital status
based? Do you need more information? If so, what additional information do you need?
Step 2. Consider each of the seven strategies for the resolution of inequity as portrayed in this
situation. Which ones are feasible to pursue based on what you know? Which ones are not
feasible? Why? What are the likely consequences of each strategy or course of action? What
would you advise Mary to do?
Step 3. Once your group has identified feasible resolution strategies, choose the best strategy.
Next, develop a specific plan of action for Mary to follow in attempting to resolve the inequity so
that she can achieve the experience and reality of fair treatment at work.
Step 4 (Optional). Your group may be asked to share its preferred strategy for this situation and
your rationale for the strategy.

MOTIVATION: THREE INCIDENTS
For each of the following incidents, determine whether the individuals will be motivated to
behave as desired. Then select the appropriate managerial action from those listed.
I. Frank Edwards is head basketball coach at a small regional state university, a campus of the
state's main university system. He has just had a visit with Walter Johnson, a local high
school athlete who is clearly one of the state's blue chip basketball prospects. Frank
desperately needs a player of Walter's potential to turn his mediocre team around, but he
realizes that it won't be easy to sign him. He is confident that he made it clear to Walter that
there is a scholarship available for Walter if he wants it. He also knows that Walter needs a
scholarship to be able to go to college. However, an article in the Sunday Sports section
reports that two of the major state university coaches (larger schools upstate, with nationally
known basketball programs) intend to actively recruit Walter, also. Coach Edwards should
take which of the following actions?
A: Send Walter a written and notarized offer of the scholarship.
B: Write Walter's parents, stressing that the scholarship will cover all of his tuition, room and
board, and book expenses.
C: Write a letter to Walter stressing to him the value of a college education.
D: Talk to Walter again, stressing the likelihood that he would make the starting five in his
freshman year.
E: Do nothing. Walter will probably sign with him anyway.
II. Joyce, a recent College of Business graduate, has been working several months as a sales
person for a small manufacturer of computers and word processors. She is one of two sales
people working a large metropolitan area. Her sales manager, Eric Kurtz, is concerned about
her performance, however. He is aware that Joyce wants very much to have high sales in
order to participate in the company's generous incentive bonus plan. She has expressed her
satisfaction with the way the plan operates, and was clearly in agreement that there is a
booming demand for computers and word processors in the market area. He is puzzled,
therefore, by her poor performance. He should take which of the following actions?
A. Post sales performance figures in the office so that everyone can see how the sales
persons are doing.
B. Have a talk with Joyce, stressing the details of how she can benefit financially from
increased sales.
C. Tell Joyce that unless she begins to reach her quota within the next three months, she will
be terminated from employment.

D. Ask Joyce to accompany him on sales calls to several new customers.
E. Do nothing. Her performance should soon be improving.
III.Motumba is a small African nation with rich deposits of several rare metals. Tall, forbidding
mountains to the North and West make it impossible to ship out ore in these directions.
Kobutsu, the country bordering on their East has a modern deep-water port city, and an
extensive rail network, which make it a logical alternative route for shipping out the ore.
However, due to a long-running conflict between the heads of state of the two countries,
Kobutsu has not allowed Motumban ore to be transported to and through its port, and
Motumba has been forced to settle for sending out small quantities through the neighboring
country to the south via a long route of antiquated rail facilities. Recently, however, the
government of Kobutsu changed, with a new head of state coming to power who had a
reputation of being friendly toward the Motumbans and cognizant of the potential benefits to
Kobutsu of serving as a transportation route for their ore. As U.S. Department of State envoy
to that area, your action should be:
A. Meet with the Kobutsun head of State, stressing the potential benefits of being a
transportation link for Motumban ore.
B. Meet with the Kobutsun head of State and point out the opportunity present for a new
constructive relationship with Kobutsu.
C. Send a letter to the Kobutsun Minister of Commerce stressing the likelihood of being able
to work out a trade agreement with Motumba.
D. Invite both heads of State to the U.S., and tell both of them that the U.S. will cut off all
economic aid to them if they do not begin to cooperate.
E. Do nothing. They are likely to begin cooperating now anyway.

CASE STUDY
Controversial Retention Bonuses at AIG
American International Group (AIG), a behemoth insurance and financial services company,
became notoriously famous in early 2009 for the payment of $165 million in retention bonuses to
employees in its Financial Products unit. This was the same unit that was instrumental in
bringing AIG to its knees and necessitating the infusion of billions of dollars in U.S. government
bailout money. Although the near-collapse of AIG was significantly influenced by “soured trades
entered into by the company’s Financial Products division,” the operations of other AIG units,
such as the financial gambles of its Investments unit, helped cripple the company as well.2
Rapidly mounting financial losses had been occurring in the Financial Products unit for
some time. Consequently, AIG decided to unwind the business and shut it down. In early 2008,
employees in the unit were asked to remain with the company through the shutdown and,
essentially, to work themselves out of a job.3 To entice talented employees to stay and work, a
contractual retention bonus plan was instituted.4 According to a report in The Washington Post,
the Financial Products employees were repeatedly assured that AIG would honor these
contractual obligations.5
The bonus plan was highly favorable to AIG’s Financial Products employees, as there
was no firm connection to their job performance. The unit’s employees were paid bonuses
totaling $423 million in 2007, despite a paper loss of $11.5 billion on toxic real estate assets.6
The 2008 bonus plan, which was approved in March of that year just as the unit’s losses were
beginning to surface,7 was “designed to kick in without regard to paper losses.”8 For 2008, paper
losses on the toxic real estate assets ballooned to $28.6 billion, and total losses were more than
$40 billion.9
According to New York Attorney General Andrew Cuomo, who was threatening legal
action against AIG, seventy-three Financial Products employees received $1 million or more in
bonus payments. The top recipient, identified by The Wall Street Journal as Douglas Poling,
received more than $6.4 million, whereas the next half-dozen top bonus recipients got more than
$4 million each. In addition, another fifteen employees received $2 million or more, and fifty-
one other employees received $1 million or more.10 “Of those people collecting more than $1
million, eleven have already left the company, Mr. Cuomo’s office said.”11
2
S. Ng and L. Pleven, “An AIG Unit’s Quest to Juice Profit⎯Securities-Lending Business Made Risky Bets; They
Backfired on Insurer,” The Wall Street Journal (Eastern edition) (February 5, 2009): C1.
3
H. W. Jenkins, Jr., “The Real AIG Disgrace,” The Wall Street Journal (Eastern edition) (March 25, 2009): A11.
4
Ibid.
5
Ibid.
6
R. Smith and L. Pleven, “Some Will Pay Back AIG Bonuses,” The Wall Street Journal (Eastern edition) (March 19,
2009): A1.
7
R. Smith, J. Weisman, and L. Pleven, “Some at AIG Buck Efforts to Give Back Bonus Pay,” The Wall Street Journal
(Eastern edition) (March 26, 2009): C1.
8
Smith and Pleven, “Some Will Pay Back AIG Bonuses,” A1.
9
Ibid.
10
Ibid.
11
Ibid.

When the retention bonuses were paid in March 2009, the U.S. Congress, President
Obama’s administration, and the public were outraged. Under intense political pressure, AIG’s
CEO Edward Liddy, who was working for only $1 a year, asked the “bonus recipients to cough
up half their pay, despite fearing that resignations would follow.”12 In defense of the bonuses,
however, Gerry Pasciucco, head of the Financial Products unit, observed that the “top bonus
recipient, Douglas Poling, had successfully sold off several holdings in his area of responsibility,
infrastructure and energy investments. He’s done an excellent job at the task of unwinding his
book, of realizing value.”13
In the ensuing emotionally charged days, employees of the Financial Products unit
pondered what to do. According to one account, “employees have huddled in small groups in
conference rooms off the division’s main trading floor in Wilton, Conn., debating what to do.
Some have expressed worries about retaliation. One employee said he had instructed his wife to
call the police in the event his identity became known and a news truck appeared at his home.
Others commiserated that their children have been verbally abused in school. Employees have
passed around emails from colleagues who opposed returning the payments.”14
Some Financial Products employees decided to return their bonuses. Mr. Poling indicated
he intended to return his bonus.15 “Fifteen of the top 20 recipients of the retention bonuses have
agreed to give back a total of more than $30 million in payments.”16
Others Financial Products employees opted to keep their bonuses, perhaps the most
notable being Jake DeSantis, a Financial Products unit executive who received an after-tax bonus
of $742,006.40. On March 25, 2009, in an Op-Ed contribution to the New York Times, DeSantis
published an open letter to AIG’s CEO, Edward Liddy, wherein he resigned from his AIG
position. His letter read in part:
After 12 months of hard work dismantling the company—during which

A.I.G. reassured us many times we would be rewarded in March 2009—we
in the financial products unit have been betrayed by A.I.G. and are being
unfairly persecuted by elected officials. In response to this, I will now leave
the company.  I take this action after 11 years of dedicated, honorable
service to A.I.G. I can no longer effectively perform my duties in this
dysfunctional environment, nor am I being paid to do so. Like you, I was
asked to work for an annual salary of $1, and I agreed out of a sense of duty
to the company and to the public officials who have come to its aid. Having
now been let down by both, I can no longer justify spending 10, 12, 14 hours
a day away from my family for the benefit of those who have let me down.17
With respect to his intention to not return the retention bonus, DeSantis wrote,
12
Anonymous, “The AIG Mess Gets Worse,” Business Week (4125) (April 6, 2009): 6.
13
Smith, Weisman, and Pleven, “Some at AIG Buck Efforts to Give Back Bonus Pay,” C1.
14
Ibid.
15
Ibid.
16
Ibid.
17
J. DeSantis, “Op-Ed Contributor: Dear A.I.G., I Quit!,” NY Times.Com,
http://www.nytimes.com/2009/03/25/opinion/25desantis.html (accessed July 2, 2009).

I have decided to donate 100 percent of the effective after-tax proceeds of
my retention payment directly to organizations that are helping people who
are suffering from the global downturn. This is not a tax-deduction
gimmick; I simply believe that I at least deserve to dictate how my earnings
are spent, and do not want to see them disappear back into the obscurity of
A.I.G.’s or the federal government’s budget. Our earnings have caused such
a distraction for so many from the more pressing issues our country faces,
and I would like to see my share of it benefit those truly in need.18
DeSantis’s Op-Ed piece stimulated much discussion regarding the proper response to the
retention bonus fiasco. Did DeSantis do the right thing?
This case was written by Michael K. McCuddy, The Louis S. and Mary L. Morgal Chair of
Christian Business Ethics and Professor of Management, College of Business Administration,
Valparaiso University.
Discussion Questions

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?
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.
Quiz:
1. AIG’s bonus payments are an example of:
A: external incentives.
B: internal needs.
18
Ibid.

C: need for affiliation.
D: valence.
ANS:
A: Correct.
B: Incorrect. Review p. 74.
C: Incorrect. Review p. 74.
D: Incorrect. Review p. 74.
2. True or False? An employee’s salary can be classified as both a motivation and hygiene
factor.
ANS:
T: Correct.
F: Incorrect. Review p. 79.
3. True or False? AIG’s bonuses, which were not linked to performance, were intended to
address primarily the need for achievement.
ANS:
T: Incorrect. Review p. 77
F: Correct.
4. In exchange for its contribution of bonuses, AIG demanded which contribution from
employees?
A: better performance.
B: longer hours.
C: integrating technology.
D: staying at their jobs.
ANS:
A: Incorrect. Review p. 82.
D: Correct.
5. True or False? As illustrated in this case, the employees of AIG were motivated by two
conditions: expectancy and instrumentality.
ANS:
T: Incorrect. Review p. 84.
F: Correct.
6. Which of the following is NOT an example of an external incentive?

A: wage increases.
B: stock options.
C: affirmation from colleagues.
D: bonus payments.
ANS:
A: Incorrect. Review p. 74-75.
B: Incorrect. Review p. 74-75.
C: Correct.
D: Incorrect. Review p. 74-75.
7. Generally speaking, employees who receive rewards that are contingent on performance tend
to perform:
A: better.
B: worse.
C: about the same.
ANS:
A: Correct.
8. In spite of the fiercely negative public image, many AIG employees have chosen to remain
with the company during the recent recession for fear that they will not find other jobs. This
is an example of:
A: organizational commitment.
B: individual commitment.
C: continuance commitment.
D: normative commitment.
ANS:
A: Incorrect. Review p. 61.
C: Correct.
D: Incorrect. Review p. 61.

CASE STUDY
Compensation Controversies at AIG
American International Group (AIG), a behemoth insurance and financial services

company, became notoriously famous in early 2009 for the payment of $165 million in retention
bonuses to employees in its Financial Products unit ⎯ the business unit that was instrumental in
bringing AIG to its knees and necessitating the infusion of many billions of dollars in United
States government bailout money, beginning in September 2008. Although the near collapse of
AIG was significantly influenced by “soured trades entered into by the company’s Financial
Products division,” the operations of other AIG units, such as the financial gambles of its 2,000-
employee Investments unit, helped cripple the company as well.i
Rapidly mounting financial losses had been occurring in the Financial Products unit for
some time. Consequently, AIG decided to unwind the business and shut it down. In early 2008,
employees in the Financial Products unit were asked to remain with the company through the
unit’s shutdown and, essentially, to work themselves out of a job.ii To entice talented employees
to stay and work through the shut-down, a contractual retention bonus plan was instituted.iii
According to a report in The Washington Post newspaper, the Financial Products employees
were repeatedly assured, subsequent to the plan’s implementation decision being made in March
2008, that AIG would honor these contractual obligations.iv
The bonus plan was highly favorable to AIG’s Financial Products employees ⎯ and the
bonuses were not really linked to the employees’ performance. The unit’s employees were paid
bonuses totaling $423 million in 2007, despite a paper loss of $11.5 billion on toxic real estate
assets.v The 2008 bonus plan, which was approved in March of that year by the board of AIG’s
Financial Products unit just as the unit’s losses were beginning to surface,vi was “designed to
kick in without regard to paper losses.”vii For 2008, paper losses on the toxic real estate assets
ballooned to $28.6 billion, and total losses were more than $40 billion.viii
According to New York Attorney General Andrew Cuomo, who was threatening legal
action against AIG, 73 Financial Products employees received $1 million or more in bonus
payments. The top recipient, identified by The Wall Street Journal as Douglas Poling, received
more than $6.4 million, whereas the next half-dozen top bonus recipients got more than $4
million each. In addition, another 15 employees received $2 million or more, and 51 other
employees received $1 million or more.ix “Of those people collecting more than $1 million,
eleven  had already left the company [by March 209], Mr. Cuomo’s office said.”x
When the retention bonuses were paid in March 2009, the United States Congress,
President Barack Obama’s administration, and the public were outraged. Under intense political
pressure, AIG’s then-CEO Edward Liddy, who was working for only $1 a year, asked the “bonus
recipients to cough up half their pay, despite fearing that resignations would follow.”xi In
defense of the bonuses, however, Gerry Pasciucco, head of the Financial Products unit, observed
that the “top bonus recipient, Douglas Poling, had successfully sold off several holdings in his
area of responsibility, infrastructure and energy investments. He’s done an excellent job at the
task of unwinding his book, of realizing value.”xii
In the ensuing emotionally-charged days, employees of the Financial Products unit
pondered what to do. According to one account, “employees have huddled in small groups in
conference rooms off the division’s main trading floor in Wilton, Conn., debating what to do.
Some have expressed worries about retaliation. One employee said he had instructed his wife to

call the police in the event his identity became known and a news truck appeared at his home.
Others commiserated that their children have been verbally abused in school. Employees have
passed around emails from colleagues who opposed returning the payments.”xiii
Some Financial Products employees decided to return their bonuses. Mr. Poling
indicated he intended to return his bonus.xiv “Fifteen of the top 20 recipients of the retention
bonuses have agreed to give back a total of more than $30 million in payments.”xv
Others Financial Products employees opted to keep their bonuses, perhaps the most
notable of whom is Jake DeSantis, a Financial Products unit executive who received an after-tax
bonus of $742,006.40. On March 25, 2009, in an Op-Ed contribution to the New York Times,
DeSantis published an open letter to AIG’s then-CEO, Edward Liddy, wherein he resigned his
AIG position. DeSantis’s letter read in part:
“After 12 months of hard work dismantling the company — during which

A.I.G. reassured us many times we would be rewarded in March 2009 —
we in the financial products unit have been betrayed by A.I.G. and are
being unfairly persecuted by elected officials. In response to this, I will
now leave the company.  I take this action after 11 years of dedicated,
honorable service to A.I.G. I can no longer effectively perform my duties
in this dysfunctional environment, nor am I being paid to do so. Like you,
I was asked to work for an annual salary of $1, and I agreed out of a sense
of duty to the company and to the public officials who have come to its
aid. Having now been let down by both, I can no longer justify spending
10, 12, 14 hours a day away from my family for the benefit of those who
have let me down.”xvi
Because the United States Government bailed out AIG, along with numerous other
financial institutions, through the Troubled Asset Relief Program (TARP), significant oversight
of executive compensation was imposed on these recipient companies. Kenneth Feinberg has
played a key role in addressing the controversy over the AIG retention bonuses. As the federal
government’s overseer of executive compensation at AIG and other major TARP recipients,
Feinberg tried “to recover $45 million paid to the most highly compensated executives, but AIG
management  said reclaiming the entire amount would be difficult because many employees
who originally received retention awards have left the company.”xvii
In late October of 2009, Kenneth Feinberg, the federal government’s pay czar, rejected
much of the proposed pay package that AIG put forth for “a group of highly paid employees ⎯
including five at the financial-products unit whose problems helped nearly sink the firm ⎯ as
inconsistent with the ‘public interest’.”xviii Feinberg said base salary should not exceed $500,000
annually; however, he did not rule out bonuses for financial-products employees which were
scheduled to be paid in 2010.xix Feinberg also allowed AIG to “compensate executives with
‘stock units’ tied to the value of four of its insurance units ⎯ an outcome that executives at AIG
had pushed for in negotiations. The stock units  would be payable in three equal annual
installments, starting two years after they were granted ⎯ in effect giving executives incentive to
stay at the company and help it thrive.”xx “Feinberg rejected AIG’s proposal that five high-paid
officials at the financial-products unit get ‘significant increases in cash base salary’ and total
2009 compensation of $13.2 million. He concluded that those employees should get only the
cash salaries that were in effect at the end of 2008.” xxi

Did Kenneth Feinberg’s make appropriate decisions regarding executive compensation at
AIG?
DISCUSSION QUESTIONS

5. The amount of compensation earned by executives ⎯ as well as by professional athletes and

famous actors/actresses and musicians ⎯ often spark emotionally-charged debate. Do you
believe the $1 million plus retention bonuses received by 73 employees of AIG’s Financial
Products was excessive? Why or why not?
6. Do you think that the various decisions made by Kenneth Feinberg with respect to executive
compensation at AIG were justified? Explain the reasoning behind your answer.
SOURCE: This case was written by Michael K. McCuddy, The Louis S. and Mary L. Morgal
Chair of Christian Business Ethics and Professor of Management, College of Business
Administration, Valparaiso University.
i
S. Ng and L. Pleven, “An AIG Unit’s Quest to Juice Profit ⎯ Securities-Lending Business Made Risky Bets; They
Backfired on Insurer,” The Wall Street Journal (Eastern edition) (February 5, 2009): C1.
ii
H.W. Jenkins, Jr., “The Real AIG Disgrace,” The Wall Street Journal (Eastern edition) (March 25, 2009): A11.
iii
iv
v
R. Smith and L. Pleven, “Some Will Pay Back AIG Bonuses,” The Wall Street Journal (Eastern edition) (March
19, 2009): A1.
vi
R. Smith, J. Weisman, and L. Pleven, “Some at AIG Buck Efforts to Give Back Bonus Pay,” The Wall Street
Journal (Eastern edition) (March 26, 2009): C1.
vii
19, 2009): A1.
viii
19, 2009): A1.

ix
19, 2009): A1.
x
19, 2009): A1.
xi
Anonymous, “The AIG Mess Gets Worse,” Business Week (4125) (April 6, 2009): 6.
xii
xiii
xiv
xv
xvi
J. DeSantis, “Op-Ed Contributor: Dear A.I.G., I Quit!,” NY Times.Com,
http://www.nytimes.com/2009/03/25/opinion/25desantis.html (accessed July 2, 2009).
xvii
M.A. Hofmann and J. Greenwald, “Treasury Ignored AIG Pay, Watchdog Says,” Business Insurance 43(37)
(October 2009): 3 (2pages).
xviii
L. Pleven, “Executive-Pay Limits: AIG Compensation Plans Fail to Pass Muster ⎯ Feinberg Rejects
Chunks of Packages for Highly Paid Workers; Bonuses Still Possible for Unit That Nearly Toppled the
Firm,” The Wall Street Journal (Eastern edition) (October 23, 2009): A5.
xix
xx
xxi
D.A. Hughes, A. Saha-Bubna, and M.R. Crittenden, “Feinberg Caps Pay at Rescued Firms ⎯ But Five AIG
Executives’ Compensation Will Exceed $500,000 Cash Limit for ‘Good Cause’,” The Wall Street Journal
(Eastern edition) (March 24, 2010): C3; L. Pleven, “Executive-Pay Limits: AIG Compensation Plans Fail to
Pass Muster ⎯ Feinberg Rejects Chunks of Packages for Highly Paid Workers; Bonuses Still Possible for
Unit That Nearly Toppled the Firm,” The Wall Street Journal (Eastern edition) (October 23, 2009): A5.

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IN THIS CHAPTER, YOU’LL FIND:

Chapter 5 ♦ Motivation at Work 1

2 Explain Maslow’s hierarchy of needs and its two main modifications.

4 Describe the two-factor theory of motivation.

Chapter 5 ♦ Motivation at Work 2

5 Explain two new ideas in human motivation.

6 Describe the role of inequity in motivation.

7 Describe the expectancy theory of motivation.

8 Describe the cultural differences in motivation.

Chapter 5 ♦ Motivation at Work 3

Slide 3 – Motivation Slide 5-6 – Early Motivational Theorists

Slide 8 – Maslow’s Hierarchy of Needs Slide 12 – McGregor’s Assumptions about

Slide 15 – McClelland’s Theory Slide 18 – McClelland’s Need Theory: Need

LO4 Describe the two-factor theory of motivation.

Chapter 5 ♦ Motivation at Work 4

LO5 Explain two new ideas in human motivation.

LO6 Describe the role of inequity in motivation.

LO7 Describe the expectancy theory of motivation.

Slide 38 – Expectancy Theory Slide 41 – Expectancy Model of Motivation

LO8 Describe the cultural differences in motivation.

Slide 46 – Cultural Differences Slide 47 – Beyond the Book: Motivation in

Slide 48 – Friday Night Lights

REVIEW QUESTIONS AND ANSWERS

Chapter 5 ♦ Motivation at Work 5

4. What three manifest needs does McClelland identify?

7. How is inequity determined by a person in an organization? How can inequity be

Individuals in organizations calculate equity through a concept of social exchange. This

Chapter 5 ♦ Motivation at Work 6

8. What are the key concepts in the expectancy theory of motivation?

This theory focuses on personal perceptions of desired outcomes of behavior, in conjunction

DISCUSSION & COMMUNICATION QUESTIONS AND

Chapter 5 ♦ Motivation at Work 7

Chapter 5 ♦ Motivation at Work 8

1. Using consequential, rule-based, and character theories, evaluate Jim’s options.

2. What should Jim do? Why?

Chapter 5 ♦ Motivation at Work 9

5.2 WHAT’S IMPORTANT TO EMPLOYEES?

Chapter 5 ♦ Motivation at Work 10

ISSUES IN DIVERSITY: USING CASH TO BRIDGE THE

Chapter 5 ♦ Motivation at Work 11

2. Do you believe using financial incentives to improve performance in predominantly minority

5.2 WHAT TO DO?

5.3 MOTIVATION: THREE INCIDENTS

Chapter 5 ♦ Motivation at Work 12

A. Has nothing additional for motivation. Walter already knows this.

III.. They are likely to begin cooperating now anyway.

SOURCE: Conrad Jackson, The University of Alabama, Huntsville.

Chapter 5 ♦ Motivation at Work 13

NEED ENERGY, TAKE A NAP

SOCIAL AND ECONOMIC EXCHANGE IN TRANSITION

Chapter 5 ♦ Motivation at Work 14

Suggested Answers for Discussion Questions

Chapter 5 ♦ Motivation at Work 15

3. Using the model of the individual-organizational exchange relationship, explain the

The individual-organizational exchange relationship (or social exchange relationship) is

Chapter 5 ♦ Motivation at Work 16

Chapter 5 ♦ Motivation at Work 17

5. The amount of compensation earned by executives⎯as well as by professional athletes and

Chapter 5 ♦ Motivation at Work 18

Discussion Questions and Solutions

Chapter 5 ♦ Motivation at Work 19