Theories of Motivation and Job Design, Stock Options versus Profit Sharing

 During week four of the BUS 4402, job design and motivation are two major tops of what surprised me. In the past, many business owners in Taiwan focused on hiring good people and punishing them when they are lazy. However, we can not treat our employees this way like they are animals anymore. These theories of motivation and job design are aimed to increase performance by designing and creating a proper culture and environment. However, it is not as easy as we think. Sometimes identifying the problem is the hardest part, even much more difficult than solving it. For example, when an employee quits a job, identifying why he/she quit the job is harder than fixing the issue that makes he/she quit. If we know exactly where the bug is in the motivation system, we may have the opportunity to fix it. Unknow is a huge barrier that causes many problems within a company and skipping the chance to solve them.

Another useful topic of this week's study is that the effectiveness of methods such as job design, goal setting, performance appraisals, and the use of incentives is culturally determined which means if a business is very successful in one country does not mean it will also be so successful in another country when adopting the same strategy. We can live on earth does not mean we can also live on other planets. It is always a good idea to understand a new environment before you visit. Moreover, a big challenge will occur when designing a motivating work environment, ethics. Oftentimes, we design a reward or award system is intended to get higher performance in the future and maintain the exertion. However, it evolves into bad habits within a company and causes a company to go bankrupt. For instance, energy giant Enron went bankrupt due to its reckless use of derivatives and special purpose entities. By hedging its risks with special purpose entities which it owned, Enron retained the risks associated with the transactions. This arrangement had Enron implementing hedges with itself.

Stock Options versus Profit Sharing

I think many people feel confused about the differences between stock options programs and profit-sharing programs. They are not the same, even though they both involve sharing the profit in some way. Profit sharing programs involve sharing a percentage of company profits with all employees. A stock option program, on the other hand, gives an employee the right, but not the obligation, to purchase company stocks at a predetermined price. Both of the two programs have their inherent pros and cons. For example, profit sharing programs may not be very effective since employees will have their own limited roles in influencing the overall company profitability. Similarly, the purpose of stock options is to align company and employee interests by making employees owners. However, options are not very useful for this purpose, because employees tend to sell the stock instead of holding onto it, even though they may receive dividends each year.

Reference

Segal, T. (2022, February 8). Enron scandal: The fall of a wall street darling. Investopedia. Retrieved February 14, 2022, from https://www.investopedia.com/updates/enron-scandal-summary/