Using the five critical-thinking steps, evaluate Kamal and Katie’s performance as managers of the Waterfront Grill.

Chapter 5: Motivation: Concepts and Theoretical Perspectives

Introducing the Case of Katie O’Donnell: Motivating Staff at the Waterfront Grill

The Waterfront Grill is a restaurant owned by manager Kamal Williams and located in Ithaca, in upstate New York. The restaurant is among the first in the state to cater to the craze for bubble tea (a Taiwanese milk- or fruit-based tea with tapioca) that has swept the country. Boasting a dedicated bubble tea bar staffed with bubble tea experts, the Waterfront Grill is a unique restaurant in town.
Katie O’Donnell has been a server at the restaurant for the past two years, working three evening shifts during the week and full days on weekends. Server turnover has been high at the Waterfront Grill. Katie, one of the most experienced servers, has just accepted the job of assistant manager. She sees her promotion as an opportunity to identify and solve a number of problems she has experienced at the restaurant during the past two years.

Katie is frustrated by the lack of motivation and the conflicts among the staff in the restaurant, many of whom are students like herself. There are major divisions among the hostesses, servers, food runners, bar staff, and cooks regarding monetary rewards. She hopes her new position as assistant manager will give her the authority to address some of the issues.

Katie is only two weeks in to her role as assistant manager when she faces her first major challenge. One of the servers, Diego, takes her aside after a late shift and tells her he is thinking about quitting. Katie is frustrated. Turnover is a huge problem at the Waterfront Grill, and she knows that staff is expensive to replace because of advertising and training costs. Diego is a hard-working server and has been at the restaurant full time for almost a year. Katie hopes she can find some way to persuade him to stay. Because it’s near closing time and the restaurant is almost empty, Katie sits down with Diego in a corner booth to discuss the situation.
“Diego, you’re one of the best servers on staff; we don’t want to lose you,” Katie begins.
“Look Katie, I’m just not getting enough tips anymore,” Diego says. “It’s not worth working this hard for so little compensation.”
Katie is puzzled. The servers’ base pay is the lowest in the restaurant, but the tips servers earn usually ensure them high overall compensation. She asks Diego why he is unhappy with his tips.

“A couple of the servers, Kim and Lucia, have agreed to share their tips with the hostesses if they give them the best tables and keep their sections filled before anyone else’s. They boast about how much they make, and it’s just not fair. My section isn’t being seated as quickly, and my tables aren’t turning over as quickly as Kim and Lucia’s, so I’m collecting fewer tips.”
“Is that the reason you want to quit?”

“Partly, but that’s not all of it. The Waterfront Grill is not a fun place to work—most of the staff has a bad attitude. One of the runners, Evan, approached me the other day and asked me if I’d share my tips with him. I asked him, ‘Why would I do that? It’s not my fault runners don’t get tips.’ Since then he’s been bussing my tables in my section slowly and not very well, because he knows if my tables aren’t ready, the hostesses will seat customers in another section instead.”

Katie can relate to everything Diego is saying, and she agrees that many of the employees have an indifferent attitude that could certainly have a negative impact on the customers. In addition, she is aware of the rift among the servers, the runners, and the hostesses. It’s clear that the hostesses and food runners are envious of the servers’ tips.

Although she wasn’t aware of it when she was a server, she isn’t surprised that some of the other servers have struck an arrangement with the hostesses. Katie believes the compensation structure in the restaurant is partly to blame for the conflict and jealousy between the staff. After listening to Diego’s complaints, Katie is ready to empathize with him but quickly realizes Diego isn’t finished yet.
“And don’t get me started on the kitchen staff. They get upset when the restaurant is full because they have to work harder for no extra pay, and then they take it out on us because we make more tips on a busy night. When they screw up a food order, which happens a lot, or they take too long getting the food ready, the customers complain, and guess whose tip is affected yet again? That’s right—mine!” Diego crosses his arms angrily.
“You’ve told me about what’s going on with the other servers, the hostesses, the kitchen staff. . . . What about the bubble tea bar staff?” Katie asks.
Diego leans forward. “The bubble tea bar staff has always been a pretty decent group, but they’re miserable these days because the bar has become quieter over the last few months—they aren’t getting good tips either. In fact, the other day, one of the bar staff, Yuan, was telling me he’s looking for a new job.”

Katie knew many of the staff were dissatisfied but had hoped her new position would give her a chance to change things before people started quitting. Yuan is the most efficient in the group, yet she can’t blame him for looking for a new job. Despite the initial craze for bubble tea, bar bills have fallen by 20 percent over the past six months. Because bubble tea sells for $7 a serving, this decline has affected not just the bar staff’s tips but the overall profitability of the business.

Diego interrupts her train of thought and says, “Look, Katie, the bottom line is I don’t like the way things are being run around here. Management should be paying us fairly and making sure there are no unfair practices going on between the staff members.”
Katie nods and replies, “Diego, have you spoken to Kamal about these issues? I think that as manager and owner of the Waterfront Grill, he would really like to know what’s going on.”

Diego shakes his head, “I liked Kamal when he hired me, but he has barely looked my way since I started. I decided to talk to you since I know you, and Kamal has promoted you. You’re getting a business degree so you must have some thoughts about how to fix this mess.”

Katie promises to make an appointment with Kamal to discuss the challenges facing the restaurant. But first she needs to persuade Diego not to leave the restaurant. After more discussion, he agrees to stay on for another six weeks on the provision that Katie will initiate changes that improve the working conditions in the restaurant.

As soon as Diego leaves, Katie writes down notes about their conversation in preparation for her meeting with Kamal. She needs to work out some solutions to the problems Diego outlined before the rest of the workforce threatens to quit.
In this narrative, one of the main reasons Diego wants to quit his job is that he doesn’t feel he is being treated fairly. The concept of equity theory, introduced by psychologist J. Stacey Adams, holds that motivation is based on our perception of how fairly we are being treated in comparison with others.[i] According to this theory, our perception of what is fair depends on the ratio O/I where O equals outcomes like the recognition, pay, and status we enjoy and I equals inputs like our effort, experience, and ability.
Diego believes he is underrewarded because the restaurant hostesses are giving two other servers preferential treatment, and he is making less tips as a result. People adopt several behaviors in the face of such perceived inequity. Let’s explore how Diego and the restaurant staff have responded to the perceived inequity at the Waterfront Grill:

Change inputs

People may increase or decrease their inputs depending on the situation. For example, because Diego perceives that others are getting more tips than he is through unfair means, he has decided it isn’t worth continuing to work hard and he feels unmotivated and is considering quitting to find a different job.

Attempt to change outcomes

Employees might try to change the outcomes to restore O/I balance. For example, Katie decides to approach her manager to work out a solution to the problems highlighted by Diego.

Carry out cognitive reevaluation

Workers may change their perspective on the other person. If Diego spoke with the servers who were sharing tips with hostesses and discovered that their tips had not increased despite their arrangement, he would likely be less dissatisfied (at least initially) with his own tips.

Attempt to get to change inputs or outcomes

Employees might try and convince others to reduce or give up other outcomes. For example, one of the runners asks Diego for a cut of Diego’s tips, which will reduce Diego’s outcomes but increase his own. Alternatively, the kitchen staff might try to similarly force servers to provide them with a cut of their tips in order to provide timely, accurate food orders.
Pick another “Other”

Employees might compare themselves to different coworkers to perceive a more equitable situation. For example, if Diego stopped comparing himself to the other servers in the restaurant and instead compared his tips to the bubble tea bar staff, he might become more satisfied with the tips he was earning as a result.
Leave the field

When employees feel strongly enough about the inequity, they will quit their jobs. As Katie recognizes, organizational turnover can cost a company significant amounts of money. Diego is on the verge of quitting because he feels a high level of inequity at the Waterfront Grill.
Equity theory includes the concept of organizational justice, which focuses on what people perceive as fairness in workplace practices.[ii] There are two main kinds of organizational justice: distributive and procedural.

Distributive justice is the degree to which people perceive outcomes to be fairly allocated. For example, employees doing the same job as others expect to be compensated equally. When equal work does not produce equal outcomes, or when one employee is paid more or less than another for doing the same job, then there is a lack of distributive justice.
In the Waterfront Grill scenario, Diego is unhappy that two servers have worked out an unofficial arrangement with the hostesses that reduces his income and is upset that his refusal to share tips with Evan, a runner, is further reducing his income since Evan is purposefully working less hard to bus Diego’s tables. Diego perceives a lack of distributive justice and believes the restaurant’s management should provide a solution to these issues.

Procedural justice is the degree to which people perceive the implementation of company policies and procedures to be fair. For example, most restaurants have a strict policy regarding tardiness and absenteeism. Those who are repeatedly late for work or who miss work without covering their shift will eventually lose their jobs. If such a policy applies to all staff at every level, then employees will be more likely to accept it as fair. If some workers are exempt, then employees are unlikely to believe they are being treated equally.[iii]
In our narrative, Diego is upset by the ways that employees are undermining the compensation plan distributed by the Waterfront Grill, as well as the lack of managerial oversight by the owner and manager, Kamal.
In the following section of the narrative, we continue to follow Katie’s experiences as assistant manager as she attempts to develop solutions to the problems at the Waterfront Grill.

The more Katie thinks about the difficulties at the Waterfront Grill, the more she believes the staff should be given goals to achieve. She thinks this will increase motivation and encourage employees to work as a team. That evening, she spends a couple of hours thinking about what realistic goals for the staff would look like.

Katie believes the employees at the Waterfront Grill might be more satisfied and encouraged to work as a team if they were given a pay increase, but revenue is down because of declining bubble tea sales, and the restaurant can’t afford to pay higher wages right now. Katie concludes she needs to find a way for the staff to earn more tips and to generate additional income for the restaurant at the same time. If the servers and bubble tea staff are all trained to promote and sell additional items at the Waterfront Grill, she reasons, everyone will benefit, and if servers receive a percentage of all restaurant checks that include bubble tea, they’ll be motivated to sell more. She also believes that if she sets goals for the servers and bar staff to sell a certain amount of drinks per shift, they will become more motivated and energized. To effectively set goals for the restaurant staff, Katie considers several characteristics of goals.
Katie devises specific goals for the servers to sell 50 cups of bubble tea per shift.
Katie realizes the servers may feel apprehensive about trying to sell such a large number of bubble tea orders in the space of a shift, but she believes the challenge will motivate them into achieving the goal.
As soon as Katie gets the go-ahead from Kamal, she is going to have a chat with the servers to ensure their acceptance and commitment to the goal.

Katie plans to develop a spreadsheet to record the amount of bubble tea sales per individual server per shift so she can monitor the progress of each member of the staff and provide feedback after every shift.
Finally, Katie reviews the concept that goals are often arranged in hierarchies in order to assess which ones take priority.[iv]
From her experience as a server, Katie knows that setting goals too far into the future can be demotivating for employees. Katie is satisfied that the behavioral goals she has set will motivate the servers to increase their income and help reach the long-term goals of achieving overall profit for the restaurant.

Katie spends the rest of the evening drafting an e-mail about her proposal to change the tipping structure at the restaurant.
When Katie knocks on Kamal’s office door the following morning, she is nervous but enthusiastic. This is her first initiative as assistant manager, and she hopes Kamal agrees to give her ideas a try.
Kamal greets Katie and invites her to sit down. She shares her discussion with Diego and what she has learned about the different problems among staff that exist in the restaurant. She finishes by proposing that the servers be trained to increase bubble tea sales and receive a percentage of the additional sales. Kamal listens carefully and then sits back in his chair.
“Katie, part of the reason I appointed you as assistant manager is that I need someone on the floor the staff can relate to. They don’t always come to me with their problems, and I’m not always available to hear them, so I’m glad Diego feels he can confide in you.”
Katie smiles. “This is a good start,” she thinks.

Kamal continues, “I think your goal-setting strategy to increase bubble tea revenue sales makes sense. I’m going to give it a trial run. Let’s set a goal to increase bubble tea sales by 15 percent using the methods you have proposed to me. I’m giving you six weeks to achieve that goal.”

Katie is delighted. Kamal has given her an opportunity to try out her goal-setting technique with the servers, and she can’t wait to get started. But then she realizes she has been focusing only on the servers.
“What about the rest of the staff?” she asks. “From what I have been told, it’s not just the servers who are unhappy with their pay. The kitchen staff, the runners, the hostesses, the bubble tea bar staff . . . everyone is disappointed with their pay.”
“If revenue increases, then I’m happy to address the pay issues experienced by the rest of the staff. But at the moment, profits are down, and I can’t afford to increase everyone’s base pay right now,” Kamal replies.
Katie understands—she needs to make her plan work if things are going to change.

That afternoon she gathers the four servers—Kim, Theo, Diego, and Lucia—in the staff room to present the new goals. Kim and Lucia, college students who have been working at the Waterfront Grill part time for the past six months, are efficient workers but aren’t connecting with their customers. They are the servers who struck a deal with the hostesses to share their tips provided the hostesses gave them preferential treatment. Katie believes that setting a team goal the servers must achieve will discourage this practice since having the hostesses treat any one server preferentially is likely to cut down on the number of tables seated during a shift. Theo, also a college student, is Katie’s replacement; he has been at the restaurant for only two weeks and is still learning the ropes.
In preparation for the meeting, Katie spent some time researching Vroom’s Expectancy theory, which holds that people will choose certain behaviors over others with the expectation of a certain outcome.[v] The theory describes motivation as a function of an individual’s beliefs concerning effort-to-performance relationships (expectancy), work–outcome relationships (instrumentality), and the desirability of various work outcomes (valence).

Expectancy is the probability that the amount of work effort invested by an individual will result in a high level of performance. In other words, it could be phrased as “What’s the probability that, if I work very hard, I’ll be able to do a good job?” It is measured in a range from zero to +1. If someone believes strong effort will not result in a higher performance level, his or her expectancy is zero; however, if the person believes a good effort will lead to high performance, expectancy is +1. For example, for Katie’s plan to succeed, the servers need to expect that their hard work will result in an increase in bubble tea sales.

Instrumentality is the probability that good performance will lead to various work outcomes. Another way of saying this is “What’s the probability that, if I do a good job, that there will be some kind of outcome in it for me?” It can range from −1 to +1. An instrumentality of +1 would apply to people who believe that their performance would make an outcome likely, whereas people who think their performance will not result in outcomes would have an instrumentality of −1. For example, Katie needs to reassure the servers that meeting their bubble tea sales targets will result in their receiving a percentage of sales for each ticket.

Valence is the value individuals place on work outcomes. Phrased a different way, “Is the outcome I get of any value to me?” Valences range from −1 to +1 and are positive or negative depending on the nature of the outcome. For example, Katie hopes the servers will value the opportunity to make more money and see the advantages of working closely as a team.
During the meeting, Katie does her best to convince the servers that their increased efforts will lead to higher performance and outcomes that will eventually result in rewards. She also makes the point that this initiative is not just about making more money but also about everyone pulling together to make the restaurant a success. When she is finished, Diego is the first to speak.
“I think trying to sell 50 bubble teas per shift is going to be difficult, but I think it can be done,” he says. The other servers murmur in agreement.

“What if we don’t meet the target?” Theo asks. “I’m new here, and I’m not too sure if I’ll be able to increase my sales when I’m just learning the menu and how to do the job.”
“Theo, you’ve picked up things really quickly,” Katie says, “and I have no doubt you’ll meet the goals. If you feel you’re struggling in any way, you can talk to me any time. In fact, I’ll be providing each of you with feedback after every shift for the next six weeks, so you’ll have an opportunity to discuss any concerns you have. I’ll be there for you every step of the way.”
Theo thanks her and tells her he will do his best. Then Kim speaks up.

“Say we reach our sales targets and meet our quotas, which I do think is achievable. We make more money for the restaurant, and we each receive an additional percentage of those sales on top of the tips we already earn.” Katie nods and gestures for her to continue. “The bubble tea bar staff take 30 percent of our tips for tables that purchase bubble tea. So where is the incentive for us to sell more bubble tea when most of the tip goes to the bubble tea bar?”

Lucia joins in. “Kim’s right. There’s no point in us working like crazy when we won’t see much of a reward!”
Katie feels the color drain from her face. She is at a loss for words. In her zeal to apply goal setting for the servers she has completely forgotten about the 30 percent tip-out to the bubble tea bar staff. Of course the servers have no incentive to strive for this goal because they don’t think they will get the rewards. In expectancy theory terms, the link between effort and performance is strong—the servers believe if they put the effort in they can reach the bubble tea goal—but the link between performance and reward is weak. The servers don’t believe they will get the rewards; in fact, adding two bubble tea drinks to a ticket will actually reduce the servers’ total tip because of the 30 percent tip-out to the bartenders. Katie is mortified at her oversight—it’s even more embarrassing because she has spent two years as a server herself—she should know how the tips are distributed!

She gathers herself and addresses the group. “Team, I’ve made a mistake. Kim and Lucia, you’re both absolutely right. I’m going to have to revise my plan. Before I do this, would any of you like to contribute your own ideas regarding a new, more achievable goal?”
The servers are silent, and Katie promises them a solution by the end of the week.

In this chapter, we have explored the different concepts and theories associated with motivation. Motivating employees can be complex and depends on a number of factors such as knowing what drives employees to achieve goals. In the next chapter, we further analyze the application of these motivational theories and how they affect employees.

Group Task: Thinking Critically About the Case of Katie O’Donnell
Equity and Employee Motivation at Waterfront Grill

Put yourself in Katie O’Donnell’s position as the new assistant manager at Waterfront Grill, and consider the five critical-thinking steps in relation to workplace equity and motivation.

OBSERVE

What inequities does each group of workers (servers, hostesses, runners, kitchen staff, bubble tea bar staff) perceive at Waterfront Grill? To what extent are the perceptions of each group accurate or inaccurate in your opinion? Does the accuracy of each group’s perception matter from a managerial standpoint? Why, or why not?

INTERPRET

Based on the inequities perceived by each group, what sorts of conflicts do you expect to see at the restaurant? Are these conflicts likely to increase or decrease over time? What are the likely long-term costs to the restaurant’s profitability if management does not address the perceived inequities?

ANALYZE

Katie decides to set a quota on bubble tea sales to address staff problems. Assuming her initial proposal was workable, what problems among what group or groups of staff would her proposal solve? What problems among what group or groups of staff would her proposal fail to solve?

EVALUATE

Evaluate the effectiveness of Katie’s decision to solve the problems at her restaurant by setting staff goals. Assuming that Katie can change her goal-setting proposal to account for the tip percentage that goes to the bubble tea bar staff, how successful do you believe her effort will be in reducing perceived inequities among all groups of staff?

EXPLAIN

If you were Katie, what steps would you take to solve the perceptions of inequity and dissatisfaction at Waterfront Grill?

Chapter 6: Motivation: Practices and Applications
Back to the Case of Katie O’Donnell

We were also introduced to newly appointed assistant manager Katie O’Donnell, who wants to motivate the staff at the Waterfront Grill, a struggling restaurant in Ithaca, New York. Katie created a goal-setting plan for the servers to increase bubble tea sales, hoping it would generate more income for the restaurant and increase financial rewards for the staff. However, she overlooked the fact that the bar staff takes 30 percent of server tips for bubble tea sales, so there is very little financial incentive for the servers to strive for these goals. In this chapter, we continue to chart Katie’s progress as she puts different types of motivational concepts into practice in collaboration with Kamal, the manager and owner of the Waterfront Grill.

Despite her oversight regarding the tipping structure, Katie is determined to come up with an alternate solution to low employee motivation at the Waterfront Grill. But why is Katie so concerned about the restaurant? After all, she is only working there part-time while she studies for an MBA. She could just go through the motions of her role as assistant manager and then walk away as soon as she completes her degree. Why does Katie care so much about what happens at a college town restaurant where she is only working temporarily? From an OB perspective, Katie is inspired by intrinsic motivation. She performs tasks for her own innate satisfaction. Katie finds the business interesting and wants both the restaurant and herself to succeed. Her reward comes from finding solutions to different problems she encounters at the restaurant. Intrinsic motivation consists of two main mechanisms: need for competence, and need for self-determination.[vi] In carrying out her duties as assistant manager, Katie is satisfying both her need for competence, which is the motivation we derive from stretching and exercising our capabilities, and her need for self-determination, or the feeling of motivation and control we get from making efforts that do not rely on any external influences. In other words, monetary rewards are secondary to Katie, whose primary motivation is to resolve the problems at the Waterfront Grill.

What about the restaurant staff at the Waterfront Grill? They don’t appear to be intrinsically motivated. In fact, the problem seems to be that they are unhappy with the current pay structure. Katie realizes that unless she devises a fair payment structure, there will be very little opportunity for the staff to feel intrinsically motivated.

By addressing the problem of pay, Katie is focusing first on extrinsic rewards, which are external awards to employees such as salary, bonuses, and paid vacations. Extrinsic rewards can either increase intrinsic motivation, if the rewards are high, or decrease it if they are low. On the one hand, extrinsic rewards act as a source of competency information. That is, financial rewards directly and concretely show the employee he or she is valued and thus increase employee feelings of competence and self-determination and increase intrinsic motivation. On the other hand, when people feel they are being underrewarded, their feelings of self-determination decrease, as does their intrinsic motivation.[vii] The current pay structure at the Waterfront Grill is a prime example of how poor extrinsic rewards can serve as a demotivator. Katie’s theory is that better extrinsic rewards will increase performance and job satisfaction, leading to increased intrinsic motivation.

Katie is also aware, however, that improved compensation will not address the divisions and poor relationships between the staff members. She needs to resolve the other concerns raised by the staff in order to increase levels of performance and satisfaction. However, because the pay issue seems to be the most pressing, Katie decides to focus first on extrinsic rewards and how to apply them to create a better payment structure.
After some thought, Katie dismisses seniority-based pay increases. Even though they might encourage longevity and help reduce turnover, the fact is that turnover will always be reality at the Waterfront Grill because it is based in a college town, and most of the employees are students.
The pay system at the Waterfront Grill is job content–based, but since the staff is having so many problems with the compensation structure, Katie feels that this type of extrinsic reward is not working effectively.
Katie knows some of the larger restaurants in the area give servers skills tests and award them for each new skill they acquire. However, because the Waterfront Grill is an independently owned enterprise, with a small staff and a lower overall skill level than larger restaurants, Katie doesn’t feel that this approach is realistic. Next, she considers the fourth type of extrinsic reward, performance-based pay.
Katie spends a long time trying to figure out how to apply one of the individual-level performance-based pay plans to the restaurant staff without any success. The next morning she sits down with Kamal, the restaurant’s owner and manager, and describes the past 24 hours, starting with her conversation with the servers and the flaw they pointed out in the tipping structure.
“Don’t the servers realize they’re still keeping 70 percent of the tips they collect on bubble tea sales? Don’t they think 70 percent of something is better than 100 percent of nothing?” Kamal says, throwing his hands in the air in frustration.
“Actually, I did the figures and the servers are correct. Under the current tip-out policy, increasing bubble tea sales could actually reduce server tips,” Katie replies.
Katie spends the next few minutes bringing Kamal through her calculations, and in the end, he agrees that the current tip-out structure needs to be reviewed. He brings up an Excel spread sheet and starts typing. After a short while, he stops and turns back to Katie.
“I think I’ve worked out a new tipping policy that could work,” Kamal says thoughtfully. “How about if we reduce the bubble tea bar staff’s tip from 30 percent of all checks with bubble tea to 9 percent of all checks?”
“So that means the bubble tea bar staff will get 9 percent of all checks, rather than just 30 percent of the ones with bubble tea?” Katie says, slowly, trying to absorb Kamal’s new plan.
Kamal shows Katie the calculations he has made on the spread sheet, and she agrees they make sense.
With a tip-out on all checks, both bartenders and servers make the same average tips, but now there is incentive for the servers to sell more bubble tea and, in turn, make more money.
Katie is excited about the new policy, but she has a few questions.
“I think the new policy needs to be explained carefully to the bar staff, otherwise they might feel they’re losing tips. They need to see the value of receiving a percentage of all checks, not just those that include bubble tea,” Katie says.
“I agree we need to communicate the message properly, so I’ll have a talk with them later on today and answer any concerns they may have,” Kamal replies.

“What about the rest of the staff?” Katie asks. “The runners, hosts, and kitchen staff don’t get any tips.”
She walks Kamal through the different types of individual performance-based pay structures. Kamal dismisses merit pay because he feels that reaching the sales targets instead is not only indicative of the servers’ performance but also allows them to earn generous tips at the same time. He also discards the idea of piece-rate pay as more appropriate to manufacturing and farming industries than to the restaurant business. But he does consider the idea of bonuses.
“Maybe if the restaurant’s performance improves,” he says, “I can afford to give each member of the staff a small bonus at the end of the year to reward good performance.”

Katie thinks bonuses based on performance are a great idea and believes they will help increase loyalty. She suggests introducing a “Waterfront Grill Employee of the Year Award,” which Kamal promises to consider. But Katie still has a question.
“While I think bonuses are a good idea,” Katie says, “I’m not sure a small annual bonus is enough of an incentive for those who don’t receive tips on a regular basis.”

“Let me talk to the kitchen staff,” Kamal replies. “They don’t usually earn tips, but if the restaurant starts to turn over more profit, then I would consider giving them a wage increase. As for the runners, perhaps we could give them 2 percent of the servers’ tips.”
“I’m not sure the servers will be happy giving away an additional 2 percent of their tips,” Katie says, thinking about her conversation with Diego about the runner who wanted to share his tips.

“It’s in their best interests,” Kamal points out. “If the runners share in the tips they’ll be more motivated to bus tables quickly and efficiently. The tables will be turned around faster, and that will benefit the servers.”
Katie isn’t convinced. “I’m not sure 2 percent of tips will motivate the runners to that degree,” she says.
“I think it’s better than nothing!” Kamal says, frustrated.

Katie doesn’t want to appear negative, so she decides to change the subject.
“That just leaves the hosts . . .” Katie says. She fills Kamal in about the side deals Kim and Lucia have with the hosts and how they boast about their tips in front of the rest of the staff.

Kamal agrees the arrangement needs to come to an end because he believes the hosts already receive a fair base rate. “The hosts won’t be pleased that I’m putting an end to their arrangement, but they shouldn’t be cutting deals in the first place. Their behavior is unethical and demotivating for the other staff.”
Katie agrees to relay this message to the hosts and servers involved and asks Kamal’s opinion about the second level of performance-based pay for teams and organizations, which includes gain sharing, profit sharing, and employee stock ownership plans.

Gain Sharing

When Katie discusses this pay plan with Kamal, he says he has noticed the servers often provide customers with far more packets of ketchup, mustard, and mayonnaise and servings of complimentary bread than they really need. Kamal agrees to look into the possibility of sharing 50 percent of any food cost savings with servers on a quarterly basis if they play their part in helping to reduce costs.
Profit Sharing

Kamal agrees to consider introducing a profit-sharing plan for all staff when the restaurant becomes profitable once more so employees can receive a portion of the profit they helped create. The hope is that such a plan will encourage employees to stay longer.
Employee Stock Ownership Plans (ESOPs)

Since Kamal is a small-business owner, he finds the idea of ESOPs interesting. He thinks they are a good way to motivate employees and give them a sense of ownership and says he will give the idea further thought.
Although she is pleased that the staff can look forward to promising financial incentives, Katie knows this will not be enough to motivate them to work together as a team. She suggests some job design strategies to increase motivation.

Though Katie is all for improving efficiency, she also wants the Waterfront Grill to be a fun place to work, not just an assembly line of repetitive boring tasks. Kamal agrees, and with this in mind, they take a look at job enlargement, a method of job design that increases the range of tasks and duties associated with a job in order to make it more challenging and varied.[viii] Katie hopes the servers will feel more challenged and motivated by the extra tasks they are taking on to increase sales. But what about the rest of the staff?
Kamal suggests the runners could help out in the kitchen during quiet periods, washing dishes or chopping vegetables. Similarly, the hosts could leave their stations when it’s not busy to collect glasses from tables for the bar staff, and perhaps the kitchen staff could swap duties now and then, or, following some training, take turns working as sous chef for the night. Katie agrees, believing the expanding roles will lead to more positive interaction among the staff and contribute to effective relationship building, strengthening the team.

Next, Katie and Kamal focus on job rotation, which is a process of periodically moving employees from one job to another.[ix] Because the server and bubble bar tender positions are the most lucrative, Katie reasons, what about giving hosts and runners the opportunity to work shifts as servers and bartenders to cover absent staff or to fill in on a busy night? If they prove successful, they’ll have the first option of moving into these roles as they become available. She also suggests that new hires should come in at the base level and work as runners and hosts until a server or bartender vacancy arises. They will also be given the opportunity to rotate roles. This means everyone will have a chance to work their way into more lucrative positions if they are interested.

Kamal is excited about this plan. He and Katie discuss rotation in more depth before moving on to the concept of job enrichment, or increasing the scope of a job to make it more complex, stimulating, and satisfying for employees.[x] Kamal believes he can implement job enrichment by creating a “lead server” position. On any given night, the most experienced server would be the lead server, a sort of quasimanager who has additional responsibilities and authority. He or she would be empowered to make decisions and resolve problems for customers and fellow employees, especially if Kamal or Katie were not available.

Finally, in order to ensure that their plan will have a positive outcome, Katie and Kamal apply what they have discussed to the Hackman and Oldham job characteristics model (see Figure 6.3), which identifies five core dimensions of jobs: skill variety, task identity, task significance, autonomy, and feedback.[xi] Hackman and Oldham created a scoring system based on these five characteristics. The higher the score for each of the characteristics, the more positive are employees’ psychological states and outcomes.
As business at the Waterfront Grill improves, the staff will be able to see the impact their extra effort has made.
Katie works with Kamal to create a more flexible scheduling process whereby employees can, within limits, set their own hours, including longer work days on nonclass days for employees who are students.

Katie has already agreed to provide feedback to the servers after every shift to discuss bubble tea sales targets. Kamal commits to providing monthly constructive feedback in the form of a personal meeting with each member of staff in an effort to motivate and build relationships between management and staff.

Katie and Kamal are satisfied that once the plan they have agreed upon is enacted, jobs will score more highly on the job characteristics model, resulting in a happier staff. Katie is delighted that in one meeting, albeit a very long one, she and Kamal have managed to create a new payment structure, worked through some job design concepts, and applied the five job characteristics to the major issues and challenges at the restaurant. Katie believes that the new ideas have the power to intrinsically motivate and empower the staff at the Waterfront Grill. Now all she has to do is put the new plan into action.

Katie hopes that the new plan will provide increased psychological empowerment for the staff. She schedules a meeting to talk to the servers, hosts, and runners in individual groups to advise them of the changes she and Kamal are making.
At the meeting, the servers seem pleased with the new tipping policy. Kim and Lucia shift uncomfortably when she tells them to cut out the side deals with the hosts, but both eventually agree it’s best for the team and the restaurant. Katie also reminds the servers not to boast about their tips in front of the hosts and kitchen staff.

Theo is pleased with the new compensation structure but tells Katie he is nervous about meeting his sales targets. Katie observes that Theo is lacking in competence, which is a ability to perform work tasks successfully.[xii] She reassures him by telling him she believes in him and will provide frequent feedback on his performance, give him more sales training if necessary, and discuss any other concerns on an ongoing basis. Theo thanks her and tells her he will make as much effort as he can to meet his targets. Katie hopes she has said enough to help Theo feel more empowered about reaching his goals.

Next Katie tells the servers the runners will receive 2 percent of the servers’ tips. There is a short silence, then Diego says the runners “deserve something because they work so hard.” The other servers agree. “Now that we have the opportunity to make more money, it’s only fair that we give the runners a portion of it,” Lucia says. “Besides, it’s not going to make a huge difference to our earnings.”
Katie thanks the servers for their level-headedness and moves on to the newly created lead server position, telling Diego he is management’s choice to take on the role that very night. Diego enthusiastically agrees, and Katie asks him to stay behind after the meeting so she can talk him through his new responsibilities. She also reassures Kim, Lucia, and Theo that they will each be given a chance to be lead servers in the future. After a few minutes of discussion, the servers agree to the changes, and Katie brings the meeting to a close. As she watches Theo, Kim, and Lucia file out, Katie hopes that all the changes related to extrinsic rewards and job design will motivate the staff to be more productive and satisfied with their roles at the Waterfront Grill.

After the meeting, Diego thanks Katie for putting a stop to the unfair side deals and for working out a new tipping structure that he thinks is fair and will help to increase tips. Diego tells Katie he understands what is involved in the lead server role, but he would like to clarify one point: “Do I have the ability to train the other servers in the art of customer service?”
Katie hasn’t thought about this angle, but she thinks Diego has a good point.

Diego says, “Although Theo is new and lacks confidence, he is polite to customers and probably doesn’t need too much training. But as I mentioned before, I don’t think Kim and Lucia treat customers the way they should be treated. They barely give them a smile or even look them in the eye. I know this new tipping structure should motivate them to be more enthusiastic and ambitious about increasing their tips, but my concern is that they will simply put on a fake smile, which customers can spot a mile away! I think I have the skills to teach the staff how the customers should be treated.”

Katie is delighted by Diego’s self-determination, which is the understanding of skills, knowledge, and strengths that enable a person to make choices and initiate work tasks.[xiii] She is also impressed that Diego is aware of his own abilities and their application in improving the customer service skills of the two servers. Clearly Diego feels empowered enough to see that his actions can make a real impact.[xiv]

Katie is relieved that Diego has reacted positively to the new plan, and she hopes he will stay on at the restaurant long term.
When Katie has finished talking to the runners and the hosts, she heads off to find Kamal to tell him the outcome. When she walks into his office, instead of his usual welcome, he greets her with a terse nod.
“Yuan quit,” Kamal reports, sighing heavily.

Yuan is the best bubble tea bartender they have at the Waterfront Grill, and he will be costly to replace.

“I tried to persuade him to stay,” Kamal continues. “I told him how the bubble tea bar staff would be receiving a 9 percent tip from all the servers’ tickets including bubble tea and food sales, but he didn’t seem to understand what that meant for him or the restaurant. Yuan just said he was bored working here and had received a better opportunity at a larger restaurant.”
Katie perceives that Yuan lacked a sense of meaningfulness, which is the value of work tasks in line with a person’s own self-concepts and ideals.[xv] Though Katie is disappointed that Kamal has not been successful in convincing Yuan to stay on at the restaurant, she also knows that as a long-term employee, Yuan may have “mentally checked out” from his job a while ago. Once employees are ready to move to new jobs, it can be difficult, if not impossible, to persuade them to change their minds.

Over the next six months, profits at the Waterfront Grill begin to improve, but it is not all smooth sailing at the restaurant. Katie is dismayed when both hosts quit their jobs at the restaurant at the same time and with very little notice. The rest of the staff have been pulling together and covering their shifts and responsibilities temporarily until the positions are filled. Though Katie is impressed by the way the staff has come together, it has been difficult to find new hosts, and she has received little support from Kamal during the process.

Because of the success of the servers promoting items and increasing sales, and the restaurant becoming more profitable, Kamal is busier than ever. High volumes of paperwork and calls means he has neglected his promise to connect with the staff on a regular basis. His office door is kept firmly shut to avoid any disturbance, which has frustrated some of the employees who believe they have some good ideas to share with him. Even Katie is finding it impossible to get some time with him, which she finds irritating. After repeated requests to meet in the wake of the hosts’ departures, Kamal tells Katie that he does not have the time for personal meetings and that she and the other employees should e-mail him with any concerns instead of trying to speak with him in person. Katie follows orders, thinking there are no other options for communicating with Kamal, but her e-mails remain unanswered.

Katie begins to feel disheartened and starts questioning her loyalty to the Waterfront Grill. Her level of intrinsic motivation decreases markedly.

Though she is pleased with the positive impact her ideas have had at the restaurant, Katie realizes this is only the beginning of the changes that are needed and that there is much more work to be done. She has many other ideas to improve things, but she cannot act on them without Kamal’s support. Katie begins to seriously consider quitting her job as assistant manager at the Waterfront Grill. Kamal’s lack of support and her inability to move forward with new initiatives reduces her sense of psychological empowerment to the point where she believes she would be better off focusing on her studies and finding a less demanding part-time job.

Group Task: Thinking Critically About the Case of Katie O’Donnell
Staff Management and Motivation at the Waterfront Grill

Using the five critical-thinking steps, evaluate Kamal and Katie’s performance as managers of the Waterfront Grill.

OBSERVE

What qualities does Kamal exhibit as a manager when he first meets with Katie about changes to pay and tipping at his restaurant? How does Katie respond to Kamal as a result of his approach? How does Kamal’s response to Yuan’s decision to leave the restaurant suggest he handles stress and disappointment?

INTERPRET

How do you explain Kamal’s initial willingness to meet with Katie and agree to regular one-on-one feedback meetings with individual staff in comparison to his subsequent decision to only communicate with staff via e-mail? Are you sympathetic to Kamal’s decision? Why, or why not?

ANALYZE

Assume that Katie O’Donnell decides to quit her job as assistant manager and gives Kamal two weeks’ notice. What steps could Kamal take to convince Katie to remain at Waterfront Grill? If you were Kamal, would you try to keep her on staff? Explain your reasoning.

EVALUATE

List what you perceive to be Kamal’s strengths and weaknesses as a manager. List what you perceive to be Katie’s strengths and weaknesses as a manager. How might Kamal and Katie work together to offset each other’s weaknesses as managers and more effectively run the restaurant?

EXPLAIN

What steps would you as Katie have taken to secure a face-to-face meeting with Kamal after the hosts resigned? What steps as Kamal would you have taken to ensure that employees stayed positive, collaborative, and on track?

[i] J. Stacy Adams, “Towards an Understanding of Inequity,” Journal of Abnormal and Social Psychology 67, no. 5 (November 1963): 422–436; Denise M. Polk, “Evaluating Fairness: Critical Assessment of Equity Theory,” in Theories in Social Psychology (Chichester, West Sussex, UK: Wiley-Blackwell, 2011), 163–190.

[ii] Jason A. Colquitt, Donald E. Conlon, Michael J. Wesson, Christopher O. L. H. Porter, and K. Yee Ng, “Justice at the Millennium: A Meta-analytic Review of 25 Years of Organizational Justice Research,” Journal of Applied Psychology 86, no. 3 (June 2001): 425–445; Jerald Greenberg, and Jason A. Colquitt, Handbook of Organizational Justice (Mahwah, NJ: Erlbaum, 2005); Hai-jiang Wang, Chang-qin Lu, and Oi-ling Siu, “Job Insecurity and Job Performance: The Moderating Role of Organizational Justice and the Mediating Role of Work Engagement,” Journal of Applied Psychology 100, no. 4 (July 2015): 1249–1258.

[iii] Jacquelyn Smith, “How to Deal with Favoritism in the Office,” Forbes (October 26): 2012, 1–2.

[iv] Gary P. Latham and Gerard H. Seijts, “The Effects of Proximal and Distal Goals on Performance on a Moderately Complex Task,” Journal of Organizational Behavior 20, no. 4 (July 1999): 421–429; Gary P. Latham and Edwin A. Locke, “New Developments In and Directions For Goal-Setting Research,” European Psychologist 12, no. 4 (2007): 290–300.

[v] Victor H. Vroom, Work and Motivation (New York: Wiley, 1964); Tamao Matsui and Toshitake Terai, “A Cross-Cultural Study of the Validity of the Expectancy Theory of Work Motivation,” Journal of Applied Psychology 60, no. 2 (April 1975): 263–265.

[vi] Edward L. Deci, Intrinsic Motivation (New York, NY: Plenum, 1975); Martin S. Hagger, Severine Koch, and Nikos L. D. Chatzisarantis, “The Effect of Causality Orientations and Positive Competence-Enhancing Feedback on Intrinsic Motivation: A Test of Additive and Interactive Effects,” Personality and Individual Differences 72 (January 2015): 107–111.

[vii] Deci, Intrinsic Motivation; Edward L. Deci, “The Effects of Contingent and Noncontingent Rewards and Controls on Intrinsic Motivation,” Organizational Behavior and Human Performance 8, no. 2 (October 1972): 217–229; Edward L. Deci and Richard Koestner, “The Undermining Effect Is a Reality After All,” Psychological Bulletin 125, no. 6 (November 1999): 692; Robert D. Pritchard, Kathleen M. Campbell, and Donald J. Campbell, “Effects of Extrinsic Financial Rewards on Intrinsic Motivation,” Journal of Applied Psychology 62, no. 1 (February 1977): 9–15; Anja H. Olafsen, Hallgeir Halvari, Jacques Forest, and Edward L. Deci, “Show Them the Money? The Role of Pay, Managerial Need Support, and Justice in a Self-Determination Theory Model of Intrinsic Work Motivation,” Scandinavian Journal of Psychology (March 24, 2015): PsycINFO, EBSCOhost.

[viii] Kae H. Chung, and Monica F. Ross, “Differences in Motivational Properties between Job Enlargement and Job Enrichment,” Academy of Management Review 2, no. 1 (January 1977): 113–122; Ronald C. Bishop and James W. Hill, “Effects of Job Enlargement and Job Change on Contiguous but Nonmanipulated Jobs as a Function of Workers’ Status,” Journal of Applied Psychology 55, no. 3 (June 1971): 175–181; Richard D. Scott, “Job Enlargement: The Key to increasing Job Satisfaction?” Personnel Journal 52, no. 4 (April 1973): 313–317; Michael A. Campion, Troy V. Mumford, Frederick P. Morgeson, and Jennifer D. Nahrgang, “Work Redesign: Eight Obstacles and Opportunities,” Human Resource Management 44, no. 4 (Winter 2005): 367–390.

[ix] Michael A. Campion, Lisa Cheraskin, and Michael J. Stevens, “Career–Related Antecedents and Outcomes of Job Rotation,” Academy of Management Journal 37, no. 6 (December 1994): 1518–1542; Martin J. Gannon and Uri Brainin, “Job Rotation and Employee Tenure among Temporary Workers,” Academy of Management Journal (March 1971), 142–144.

[x] Kae H. Chung and Monica F. Ross, “Differences in Motivational Properties between Job Enlargement and Job Enrichment.” Academy of Management Review 2, no. 1 (January 1977): 113–122; Michael B. Testerman, “Job Enrichment: Concepts and Consequences,” Industrial Management 22, no. 3 (May 1980): 9; Richard C. Grote, “Implementing Job Enrichment,” California Management Review 15, no. 1 (1972): 16–21.

[xi] J. Richard Hackman and Greg R. Oldham, Work Redesign (Reading, MA: Addison–Wesley, 1980); J. Richard Hackman and Greg R. Oldham, “Motivation through the Design of Work: Test of a Theory,” Organizational Behavior and Human Performance 16, no. 2 (August 1976): 250–279.

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