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CHAPTER 8: MOTIVATION AND EMPOWERMENT 251

Exhibit 8.8 Semco’s 11 Ways to Pay

Semco, a South American company involved in manufacturing, services, and e-business,
lets employees choose how they are paid based on 11 compensation options:

1. Fixed salary
2. Bonuses
3. Profit sharing
4. Commission
5. Royalties on sales
6. Royalties on profits
7. Commission on gross margin
8. Stock or stock options
9. IPO/sale warrants that an executive cashes in when a business unit goes public
or is sold
10. Self-determined annual review compensation in which an executive is paid for
meeting self-set goals
11. Commission on difference between actual and three-year value of the company

Source: Ricardo Semler, “How We Went Digital Without a Strategy,” Harvard Business Review,
(September–October 2000), pp. 51–58.
see how their work affects the quality and productivity of employees in other de-
partments. Ralcorp invests heavily in training to be sure employees have the needed
operational skills as well as the ability to make decisions, solve problems, manage
quality, and contribute to continuous improvement. Enriched jobs have improved
employee motivation and satisfaction, and the company has benefited from higher

long-term productivity, reduced costs, and happier employees. 83

Summary and Interpretation

This chapter introduced a number of important ideas about motivating people
in organizations. Individuals are motivated to act to satisfy a range of needs. The
leadership approach to motivation tends to focus on the higher needs of employ-
ees. The role of the leader is to create a situation in which followers’ higher needs
and the needs of the organization can be met simultaneously.
Needs-based theories focus on the underlying needs that motivate how people be-
have. Maslow’s hierarchy of needs proposes that individuals satisfy lower needs before
they move on to higher needs. Herzberg’s two-factor theory holds that dissatisfi ers must
be removed and motivators then added to satisfy employees. McClelland asserted that
people are motivated differently depending on which needs they have acquired. Other
motivation theories, including the reinforcement perspective, expectancy theory, and
equity theory, focus primarily on extrinsic rewards and punishments, sometimes called
carrot-and-stick methods of motivation. The reinforcement perspective proposes that
behavior can be modifi ed by the use of rewards and punishments. Expectancy theory
is based on the idea that a person’s motivation is contingent upon his or her expecta-
tions that a given behavior will result in desired rewards. Equity theory proposes that
individuals’ motivation is affected not only by the rewards they receive, but also by
their perceptions of how fairly they are treated in relation to others. People are moti-
vated to seek social equity in the rewards they expect for performance.
Although carrot-and-stick methods of motivation are pervasive in North Ameri-
can organizations, many critics argue that extrinsic rewards undermine intrinsic