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Hira Group comprises of two state of the art textile units by the name of 'Hira Textile Mills limited' and 'Hira Terry Mills Limited' located adjacent to each other at 8km from Manga Raiwand Road, Lahore. Hira Textile produces cotton yarn with the facility of an in house dying unit and Hira Terry manufactures towels.Â The units, apart from producing and exporting their respective products all across the world, are also a fine example of vertical integration where at times the product yarn is obtained from Hira Textile and optimally weaved to make towels in Hira Terry. Hira Textile Mills has three offices, Corporate HQ in Lahore and one office in US and Canada, respectively. (Hira Textile Mills company website)
A dynamic profitable and professionally managed successful business organization. (Hira Textile Mills Annual Report, 2011)
Hira Textile Mills Ltd is committed to the highest standards of integrity, honesty, openness and professionalism in all of its activities whenever they are undertaken. We, the Management Team of HTML are striving to improve the quality of yarn by continuously improving its manufacturing facilities. We are committed to positioning the Company at the apex of the industry by satisfying our valued customers, archiving superior returns for shareholders, by providing congenial work environment where the employees feel part of the organization and be a good corporate citizen by fulfilling our social responsibilities. (Hira Textile Mills Annual Report, 2011)
Although the performance of the company is quite satisfactory during the year but the future market situation is changing to adversely due to decrease in the yarn prices, and increase in wages, markup rates and other input costs. The management is taking the view of consolidation for the moment and taking advantage of new textile policy 2009 by reasonably enhancing its direct and indirect exports by improving productivity and quality. Aggressive marketing strategy has been the major factor in HTM consistent profitability over the last years. In the light of the Company's overall objectives the Board of Directors regularly review the Company's strategy business plans and set performance targets accordingly. (Hira Textile Mills Annual Report, 2011)
Businesses and Products
Hira Terry Mills is a state of the art terry products manufacturing plant setup in Lahore, Pakistan. The plant was set up in late 2006-early 2007 with new machinery comprising of mainly European machinery from Germany (Dornier Air Jet Looms, Theis Dyeing, Schumale continuous Double-Needle Side Hemming, Spain (Anglada Continuous Finishing line), Switzerland (Benninger Weaving preparation) and Japan (Kindai Continuous Side Hemming, Barudan Cross Hemming and Infinity Continuous Slitting). The Plant is a vertically integrated terry manufacturer, which has the production capability of manufacturing, all in house, yarns to towels.
Â The plant has a large variety of cottons in its spinning operations and is a certified producer of Supima, Egyptian and Organic Cotton yarns. In addition, it carries a variety of other cottons such as Australian, Brazilian, California (US) and Turkish Cottons in medium staple and Pima and Egyptian in long staple fibers. This gives it a unique position in the market to service better-best quality towels.
The range of products extends to:
Cotton Towels made from Supima, Pima, Giza and Pakistani cottons with possibility in Combed, Zero Twist, Soft Twist yarns.
Products range to Bathrobes, Bath towels, Hand towels and Face towels.
Density in towel ranges from 400GSM to 1100GSM.
Hira Textile Mills is equipped with the most modern machinery in spinning, doubling and yarn dyeing.
The spinning units comprises of 40,000 spindles.
The product range varies from coarse counts to fine counts ranging from 4/1cd to 80/1cm, producing Ring Spun as well as Compact spun yarns, Slub and Lycra yarns.
Draw frames with auto levelers and conditioning machine from Xorella have also been installed for further improvements in the quality of yarn in the ever increasing international standards of the world market.
Organic (Skal Certified)
Pima (Supima Certified)
Source: Hira Textile Mills company website (http://www.hiramills.com.pk/)
Purpose of the Study
At the start of this thesis study an exploratory meeting was held with Hira Textile Mills' (HTM) CEO, Mr. Nadeem Butt in order to explore how the human resources department can be improved and whether there were any ongoing HR related issues that the firm was facing. It was brought to attention that one of the most important assets of the company was its employees and had it not been for them the company would not have been successful in the past, especially after the new terry unit was installed. In order to ensure its continuous growth HTM wants to safeguard its most important asset, its people. Mr. Nadeem Butt brought into light the issue of employee morale not being what it once you used to be, one indication he had was an increasing employee turnover rate. As the company grew and more people were inducted, it became harder and harder to maintain the same level of fervor, motivation and loyalty which was once shared across all management levels, in the starting days of the company. Larger groups of companies like Nishat, Crescent, Sapphire, Nakhshbandi etc. have become more organized and commercial and hence attract good employees. But if HTM is to survive among the giants, it is essential to train and retain a pool of efficient human resources. With the senior management nearing retirement, it has become ever more important to focus on retaining and strengthening its well trained middle management for succession planning. I was asked to investigate (i) Whether low employee morale even exists or is it just the directors perception and (ii) IF it does exist, what is causing it and (iii) how to deal with high employee turnover.
Therefore my research question is:
"Is the employee morale low, IF so, what are the reasons behind low employee morale and high employee turnover rates at Hira Textile Mills?"
What are the current financial and non-financial techniques being used by HTM.
Determine the respective importance assigned by employees to these financial and non-financial incentives.
Determine how satisfied employees are with their respective financial and non-financial remunerations.
What is the current level of employee motivation and loyalty.
How attractive an employer HTM is in its employee's eyes.
Determine the effect of financial incentives versus non-financial incentives on employee loyalty and motivation.
Importance of financial incentives versus non-financial incentives at different organizational levels (lower management, middle management and upper management).
This study was conducted using a pragmatic approach, that is, mixed methods were used. The start of this research study was exploratory research, in which the problem was discovered, defined and agreed upon through informal meetings with the CEO and the HR department; the descriptive part of the study consisted of gathering data to basically determine what is currently happening, the status quo that is; and the explanatory part of this study was the inferences derived based on the analysis of the gathered data.
A combination of qualitative and quantitative research was undertaken to collect first-hand data for this study. Only first hand data will be collected for the purpose of this research project because no secondary data sources exist as this is a firm specific issue, but a thorough literature review was conducted to refine and enrich the research methodology and to enhance the researcher's understanding of the research topic.
For qualitative research the following technique was used:
The main reason for choosing in-depth interviews was the consideration that since the participants belong to the same company, they will not share their open and honest views with the group, had the focus group discussion technique been used. Also, in-depth interviews provide a chance to the researcher to probe deeper in to apparent on the surface issues in order to reveal the core problems. However, the most important limitation of this technique is that the point of view received is of just an individual. It is best to use in-depth interviews to explore the general problem area or to go deeper into a problem, e.g. defining which variables to include in the quantitative stage of the study and which ones to omit.
The tool used to conduct quantitative research was:
This survey questionnaire was administered via email. This was done because (a) This method was more convenient, (b) respondents were all educated enough to understand questions in the written form and (c) since only a selected number of employees were to be questioned, on the spot in-person questionnaire filling would have made the respondents cautious and brought bias in their opinions. Other reasons for choosing questionnaires as the data collection instrument are (Khan, 2007):
The use of questionnaire for collection of data is relatively cheaper compared to other methods.
Questionnaire can easily be coded and analyzed. They were more amenable to statistical analysis.
They can be quick to administer, enabling feedback on many things to be gathered in a few minutes.
They can be used anonymously, allowing learners the chance at least of giving negative feedback without the embarrassment of giving it publicly.
The chance of bias would be minimal because the respondent would free of any pressure of being observed through these tools.
However, questionnaire technique of data gathering also has some disadvantages (Khan, 2007):
The Ticky Box syndrome: People become conditioned to make instant responses to questions. Getting through the questionnaire quickly becomes a virtue. Responses are made on a surface level of thinking rather than as a result of reflection and critical thinking.
The Performing Dogs syndrome: Many people filling in questionnaires tend to please the researcher. They can usually tell which responses will please the people giving them the questionnaire and the people whose work is involved in the issues covered by the questionnaire. If they like the people, they are likely to comment favorably on things.
Lost Learning opportunities syndrome: Questionnaires are often used after the event rather than during it. This tends to minimize any real learning outcomes of the process of completing questionnaires.
The 'wysiwyg' syndrome: 'What you see is what you get'. Questionnaires produce feedback on the particular issues covered but often not on other important issues. There is a tendency to design questionnaires which will give positive feedback.
Blue, Rosy and Purple, questionnaire: A major limitation of most questionnaires is that responses are colored by how people feel at the moment of filling them in. If the same questionnaire were used a few days later, some responses may be completely different. Yet the results are often statistically analyzed as though they reflected permanent reactions to questions and issues rather than fleeting, transient reactions.
This study was executed in three parts:
Part I: Qualitative Research - In-depth interviews conducted with employees at various levels of HTM and from different departments.
Part II: Quantitative Research - Using the qualitative research findings a questionnaire was developed to test these findings. Once the field work completed and data was tabulated in excel format, ready for manipulation and extraction, it was analyzed to answer the research question and achieve the stated research objectives.
Part III: Report Writing, Formatting and Referencing - This is the final stage of the research study. In this stage all the tabulated data, its research results and analysis are articulated into a standardized report format with proper referencing to avoid plagiarism.
The relevance of this thesis topic can be derived from the starting lines of Rihova's article (2009) which argues that
"The cornerstone of a company's success is aÂ well-defined and implemented corporate strategy which the whole company lives"
In order for a company to successfully reach its strategic goals, its employees need to "feel closely connected to the (corporate) strategy's values and direction and motivated to fulfil the company's designated goals". Two important things have been mentioned here by the author, firstly, having a well defined corporate strategy is pivotal to any company's success and secondly, unless there is a strong connection between the employees and these goals, employees are not likely to be motivated. In other words, the employer needs to make corporate goals as unambiguous (this will help in giving "direction") and relevant for the employees as possible, so that a strong connection can be made, therefore, giving way to motivation for employees. However, this alone does not instigate motivation but rather it is the necessary condition which needs to be fulfilled for other motivation techniques and tools to work effectively. Therefore, making the thesis' research question, 'Which compensation technique reaps the highest level of motivation and loyalty towards the organization?' a fundamental topic to be looked into.
Ivana Rihova further states that:
"To determine the expectations, the company's strategic goals are broken down in detail to the level of ordinary employees.
Employees then seek motivation to meet the designated goals in which the company is able to help them by setting attainable conditions and measures. Hence, the performance of employees corresponds to how the work and rewards (both financial and non-financial) meet the employee's needs."
"Conditions and measures" here refer to the infrastructure, rules & regulations and the standard operating procedures that define how work is done in a company and also serve to enable the employees to carry out their jobs effectively. This is synonymous to the 7-S framework's "hardware and software". The point that the author intends to highlight here is that rewards should be based on employees needs; otherwise it will not be able to motivate them.
At this juncture the author challenges the conventional belief that 'the higher the financial rewards, the higher the motivation of an employee' by stating that many surveys and experiments have been conducted over the years which yield a different result. Although financial rewards are a hygiene factor and do contribute towards motivation, it does not mean that they are the most optimal motivation catalyst. Financial rewards can only motivate employees up to a certain point, after which non-financial rewards are more useful in creating motivation. This conclusion is also validated by economics; the labor curve of a single employee is a downward 'U' shape curve with number of labor hours on the X-axis and the corresponding pay on the Y-axis. This downward 'U' shape of the curve depicts that up to a certain point an employee is willing to work more hours for more pay, but beyond the peak of the downward 'U' curve the employee actually prefers to work less hours for each increment in salary. It is especially at this point that non-financial motivation comes in handy. Hence, there is a need to design a balanced compensation system which includes financial aswell as non-financial rewards.
"Indeed, the HR function can be expected to set rules, have knowledge and provide support, yet non-financial motivation is the responsibility of management, namely senior management and line management. Management is genuinely wrong to think that except for direct assignment of tasks to employees, which is ensured by the management, the HR function can take care of and be responsible for all other reactions of employees at work and associated with work."
The author here talks about the wide-spread misconception among organizations today where managers assume that all types of rewards, may it be financial or non-financial, are the responsibility of the human resource department. In the author's opinion it is only the financial rewards which are the sole responsibility of the human resource department but the burden of non-financial rewards should fall primarily on management's shoulders more often than not.
HR Trends of Employee Motivation around the World
Generally, in America the growth of Employee Stock Ownership Plans over the past 25 years have played a pivotal role in the compensation arrangements of employees, linking employees pay structure with companies overall performance, including broad based stock options, gain sharing, profit sharing etc. Over the years, research has shown that on average, employee ownership firms are in a position to either match or to exceed the performance of similar firms; however with considerable dispersion of results. An example can be of United Airlines where employee ownership failed to deliver its promise in certain circumstances while the outstanding success of companies such as SAIC highlights that ownership helps to achieve long term growth specially in highly competitive industries.
In order to reduce principle agent problem, it is very important to tie employee pay with the firm performance and involve employees in decision-making process. In this way not only the employee ownership arrangements will reduce any problems accruing, but also it would increase the performance of the company. One of the most common objections to employee ownership incentive plans is the free rider problem. It arises due to the weak connection between an individual's performance and financial rewards, as the work team gets larger. As there seems no possible solution to the free rider problem, many researchers agree with Weitzman and Kruse;
"something more may be needed-something akin to developing a corporate culture that emphasizes company spirit, promotes group cooperation, encourages social enforcement mechanisms, and so forth" (1990: 100).
The key improving factors through employee ownership programs are the incentives, participation and work place environment. The incentives given to employees must be sufficient to motivate them, participation must be meaningful for employees to make critical decisions and environment provided should look closely at the free rider problem. Consistent with this, researches that have compared workers attitude under employee ownership give a mixed picture. Few of the research done have found out higher commitment, motivation and satisfaction among employee-owners, while according to other researches, there no significant difference before and after an employee buyout. Some researchers suggest that organization identification and commitment are higher under employee ownership. However, results vary significantly from favorable to neutral on job motivation, satisfaction, employee absenteeism, turnover, grievances, injuries and tardiness.
A successful organization is the one that is able to cope with the changing needs of its employees and make them feel an important part of the organization. It is the responsibility of the top management to have strong trust relationship with the lower level employees so that the employee works at their maximum capabilities. Organizations expect the workers to follow the rules and regulations of the firm and work accordingly. They need to keep in mind the standards set for them; the employee expects respect, good pay structure, safe working environment, fair treatment and secure career along with involvement in decision making process. The expectations of the employees and organizational heads vary from one firm to another. For the firms to address such expectations, it is very important to have a thorough understanding of employee motivation.
According to a research done at Piketin Ressearch and Extension Center and Enterprise Center, there are certain factors affecting the motivation level of any employee. These factors include interesting work, good pay structure, appreciation of work done, job security, decent working conditions, promotions and growth opportunities, tactful discipline, being an important part of the organization, personal loyalties to workers, and sympathetic help with personal problems.
The article further relates these factors with Maslow's need-hierarchy. The top most ranked motivator is interesting work, which is also a self -actualizing factor. Second motivator is a good pay structure that is a physiological factor. Third is the appreciation factor that can also been seen as self-esteem. Fourth motivator is the job security that is the safety factor. Thus according to Maslow, out of all, the most important factors that must be satisfied first are interesting work, physiological, safety, social and esteem factors.
According to another study conducted by Kovach (1987), the order of motivational factors for the industrial employees was interesting work, appreciation of the work done and feeling an important part of the organization. On the other hand, another study conducted by Harpaz (1990) ranked the motivational factors as interesting work on number one, decent pay structure as number two and job security as the third important factor to motivate the employees of the organisation. Pay structure was not ranked as an important motivational factor by Kovach, however, it was ranked second by Harpaz. Similarly appreciation of work done was not ranked as an important motivational factor by Harpaz, however, it was tanked second by Kovach. This proves that the motivation of employees differ amongst various types of work done in numerous organizations. However, interesting work is considered as the most important factor for employee motivation in almost any kind of work place.
According to Butkus and Green (1999), motivation is derived from the word 'motivate,' which means to persuade for satisfying a need. According to Baron;
"Motivation is a set of process concerned with a kid of force that energizes behavior and directs it towards achieving some specific goals."
Many writers have suggested motivation as the goal directed behaviour. According to Kreitner and Kinicki (2001),
"Those psychological processes that cause the stimulation, persistence of voluntary actions that are goal directed".
In other words, a motivated individual has the awareness of achieving a specific goal in some specific way and so he puts his effort in order to achieve such goal. Therefore, the role of the managers is to guide the lower level employees about organizational agendas of how to achieve its objectives.
It is very important to differentiate between movement and motivation. Movement does the work for compensation and remuneration whereas motivation is the total involvement of an individual in the work given out to him. Movement can make an employee compel to do the work whereas motivation is self realized jubilant of carrying out different task. The researcher emphasized on motivation and not movement as motivation is the prerequisite for success because the person is happy and satisfied with the work irrespective of the compensation. He carries out the task voluntarily without any greed. Motivation is the reason for the accomplishment of individual in any aspect of work. Once the managers understand and agree that employees are naturally motivated, they need to provide a decent environment for the employees to enhance their motivation.
Importance of Motivation
People motivate themselves to satisfy their own personal goals, and therefore they invest and give their best in achieving the organizational objectives in order to meet with their personal goals also. It would mean that organizational goals are linked to personal goals as well.
The manager's job is to get work done from the employees under him but it is only possible if the workers are self motivated rather than directed. The manager's involvement is not that important in the motivation of employees, in fact the workers should motivate themselves to work hard.
Irrespective of being skilled, unskilled or professional workforce, the major problem organizations face is the lack of motivation by the employees. It is also one of the major issues faced by commercial banks. In this competitive world, it is a challenge for the administration to keep the employees motivated so that they offer efficient services to the customers. The employee's enthusiastic, energetic behavior and their motivation towards their task play a pivotal role in successes of any organization.
One of the functions of human resource manager is to ensure employee's workplace motivation. They should assist the manager in keeping the workers satisfied with their jobs. The service manager should be able to develop motivated workers and encourage their work morale. If the employees are unsatisfied and unhappy about their workplace, their performance is usually poor.
Levels of Employee Motivation
Generally, there are three levels of employee's motivations.
Direction of an employees' behavior; it is the behavior that a person choose to perform.
Level of effort; it relates to how much effort can be put by the person to behave in a certain way
Level of persistence; it related to person's willingness to behave despite obstacles faced.
Every employee has a different background in terms of education, experiences and family class, however the primary interest of all is to satisfy their personal need and desires. They want to satisfy their basic necessities of life, linked to survival and security along with a desire to generate positive feelings about oneself and to be self fulfilled. Most employees want
fair company policies in matters affecting them;
favorable job status
management they can be trusted
good working relationships with senior managers and co-workers;
decent salaries and good working environment;
adequate job security
The article measures the effect of Human Resource Strategies on job satisfaction, specifically in Pakistan. It is mentioned in the article salary, promotion and training has positive effect on job satisfaction, however in case of Pakistan, the employees give more importance to pay and promotion rather than training. Significant differences were found between men and women job satisfaction level. The service based industry is going through numerous changes for the last couple of years. Due to these changes, the transactions are increasing along with the range of services provided. As a result, different sectors such as educational institutes, telecommunication firms, banks are experiencing high turnover.
According to Maslow hierarchy of needs, people are motivated by unsatisfied needs. The lower level needs need to be fulfilled before moving on to higher level needs. In general, there are six types of needs; physiological, survival, safety, love, esteem and self-actualization. People can act unselfishly only if the first five needs are fulfilled. Maslow called theses needs as deficiency needs. As long as people are motivated to satisfy their desire for needs, they will be moving higher towards self-actualization. Satisfying our needs is a healthy behavior whereas preventing gratification makes us act devilish. According to different researches, people have problems in knowing that exactly they want from a job. This is the reason why the supervisors ignore what the employee wants from the job, and in fact impose on employee what they themselves want from the job. As the person grows through any organization, his employer provides opportunities for him to move higher up the Maslow's pyramid.
Frederick (1959) modified Maslow's need Hierarchy theory and came up with the two factor theory; Hygiene Theory. According to Frederick, there are some satisfiers and dissatisfies for employee in any workplace. These are the intrinsic and extrinsic factors. Intrinsic factors are associated with job satisfaction whereas extrinsic factors are related to job dissatisfaction. Frederick wanted to know what do people want from their jobs. He asked people to describe situations where they felt exceptionally good or bad. From the results he concluded that the opposite of satisfaction is not dissatisfaction. This means that removing the dissatisfying characteristics from any job experience doesn't make the job satisfying. Existent of certain factor in a firm is natural and presence of the same doesn't lead to motivation. Nonetheless, their non existence maybe leads to de-motivation. Similarly there are few factors, the absence of which doesn't cause dissatisfaction, but their existence has a motivational impact on the employees of the organization.
According to Skinner (1953), employees can be motivated by properly designing the environment. Instead of taking into consideration the internal factors like feelings, attitudes, impressions etc, and people are directed by what happens in their external environment. This is also known as the reinforcement theory. The work place environment should be suitable and decent enough to motivate the employees of the organization.
Victor Vroom (1964) presented expectancy theory which is widely accepted. The theory says that an employee can be motivated enough to perform better when they believe that the better performance gets them a good performance appraisal and that in turn leads to realization of personal goal in shape of some reward. Therefore an employee is:
Motivation = Valence x Expectancy
The focus of this theory is on three key variables:
Efforts and performance relationship;
Performance and reward relationship;
Rewards and personal goal relationship.
The Adams' Equity (1965) Theory model incorporates not only individual self but also the influence and comparison of other people's situations in forming a comparative view and awareness of equity. When employees feel that they are treated fairly, they are more likely to be motivated. When employees are treated unfairly, they are highly prone to demotivation. The way people measure this sense of fairness is the heart of Equity Theory. Thus, equity is not dependent upon by how much the rewards exceed the effort, it is dependent entirely on the fairness of the game. It is the comparison that one makes between his reward and investment ratio with the ratio enjoyed or suffered by other employees.
According to the article, the eight top most motivational factors include safe work place, fair salary, promotion and growth opportunities in the organization, challenging work, decent working condition, sympathetic help by people, appreciation of work done and personal loyalty to workers.
Comparing these motivational factors to Maslow need hierarchy it can be seen that the top most motivational factor, safe work place, is one of the safety needs whereas fair salary is related to physiological factors. Moving on promotion and growth opportunities are esteem factors and challenging work is associated with self-actualization.
If we compare Vrooms expectancy model with highest ranked motivator living in a safe area, it is believed that the level of effort a person puts in changes with the value they attach to the outcomes they get from the process and their idea of the strength of the relation between effort and outcome. Thus, this theory is not entirely about self-interest in rewards but the links people make between expected outcomes and the input they feel they can give towards those outcomes.
While comparing the third highest motivational factor, promotion and growth opportunities, to Adam's equity theory, it is clear that managers want to motivate employees by providing growth opportunities in equity bases. Being unjust leads to dissatisfied employees and the performance will decrease.
Increasing Motivation via Rewards
Financial and Non Financial Rewards
Ivana Rihova tackles the issue of how a well managed and effective financial rewards package should be designed which will be fair and reflective of employee performance and competence. The underlying idea which the author tries to promote is linking performance to financial rewards. So firstly the author shows how the total income of an employee should be broken down; total income should comprise of a 'base salary', or minimum fixed salary that the employee receives at the end of each month irrespective of how he/she performs; then comes the 'variable pay' or 'bonus', this is the part of the salary which is dependent on how well the employee is able to achieve the set goals and targets; and lastly, 'employee benefits'. The level of 'basic salary' depends on 'external competitiveness', that is, the going market wage rate which other similar companies are offering and on 'internal equity' which is the level of wages the company can afford to offer to its employees. However, a provision should be kept within the basic salary scale for employees with a higher competency level which will translate into higher productivity. Such employees' salaries lie at the higher end of the basic salary spectrum. Whereas, the influencing factors for the amount of 'variable pay' or 'bonus' are not just the employee's individual performance, but also the team/department and overall corporate performance of the company. And lastly, the employee benefits can be seen as a 'competitive advantage' for the company over its competitors.
Susan M. Heathfield gives an insight into how different companies should maneuver financial rewards in different times:
"A growing, entrepreneurial company, with variable sales and income, may be better off controlling the levels of base salaries. When times are good, the company can tie bonus dollars to goals achieved. In lean times, when money is limited, the company is not obligated to high base salaries. A longer-term company, with fairly stable sales and earnings, may put more money in base salary." (Heathfield)
So far the author has concentrated on the design of a financial reward package; next comes implementation or disbursement of that package. Here the author introduces two very important concepts; the 'knock-out criteria' and 'reward cap':
"Rewards can often be paid only when aÂ certain value in fulfilling goals is reached, i.e., when knock out criteria are met...Once the company achieves its main, usually financial goals, only then can the rewards of individual employees be considered. Under step 2, the knock-out criteria are applied to the individual performance of employees. Under an interim step, the knock out criteria can be established for the performance of individual organizational departments or teams .Once the fulfillment of goals reaches aÂ certain level, the higher value of goal fulfillment is no longer translated into aÂ higher reward, i.e. aÂ reward cap. The reward cap should protect the company against excessive fulfillment of goals which might not be covered by aÂ proportionally higher amount of financial funds, for example, in the case of qualitative goals."
The core idea behind these concepts is protecting the firm while maintaining the integrity of the link between rewards and performance. The knock-out criteria pushes the employees to do more than just the bare minimum to receive a bonus and the reward cap protects the firm against poorly set goals which may result into excessive rewards. Employees surpassing their goals by tens of percent are an indication that the goals have not been set appropriately.
The author then turns her attention towards the non-financial rewards. Ivana states that "non-financial motivation is defined by corporate culture and corporate values". An analysis of just this statement reveals how diverse and intangible non-financial rewards can be, hence making it very difficult, if not impossible, for competitors to replicate them. According to Ivana, the first step towards creating a favorable environment for non-financial motivation is,
"â€¦direct and open communication and atmosphere across the company and continues with providing constructive feed back to employees and adopting aÂ personalized approach where possible. Non-financial motivation includes basic company values such as ethical approach, loyalty, empathy, courage, leadership and team spiritâ€¦Other non-financial motivation drivers of employees which the company and management can use include: power - decision-making opportunities - responsibility; self-fulfillment opportunities; strong and clear vision of the company; relationships in the group; certainty; recognition - praise; feed-back; and respect - relationship to authority"
Basically, non-financial motivation has much to do with how an employee feels at the job and how he/she is treated by superiors and co-workers. All the non-financial motivation drivers mentioned by the author are qualitative in nature and based on the employee's perception. Therefore, an inclusive and active approach by senior management and line managers is pivotal in recognizing as to which of these drivers apply to which employees. This is the personalized approach that managers must have in order to effectively motivate employees in today's era. In author's opinion, the new generation of employees entering the market, the generation-Y, is keen on learning and self development. This means that on the job mentorship programs can be an effective non-financial motivation driver for new employees.
The author recommends that companies should implement an "integrated performance management system". This system will benefit the human resource management via regular "employee evaluation and monitoring", linking employee compensation with "employee competencies" in short-run and long-run and therefore enable the management to identify "above-average talent and developing the talent management program".
Profit Sharing and Employee Motivation
Barf Kuvaas (2003) mentions in his article that there is a rising interest of employee ownership and profit sharing among practitioners and researchers. In industrialized countries and some emerging economies have shown very high level of interest in the connection between financial share, employee attitudes and firm performance. Financial reward systems have received much criticism in the past but this new trend of involving the employees in the profit of the company and handing them a share of the profit in form of bonuses has its advantages. Firstly, this kind of a plan includes no extra control of employee's work behavior. If a profit is gained by the company it would be shared by the employees at the end of the year. This reduces the chances of demotivating an employee due to his perceived level of competence of himself hence undermining their intrinsic motivation (Deci, Ryan, & Koestner, 1999; Kohn, 1993a). Secondly, since this system links the organizational achievements to individual achievements, it ensures that the agency problem is kept at a minimal level. Employees do not seek to gain individual goals as the reward is on how well the organization does as a whole. This encourages cooperation rather than internal competition (Kendrick, 1987; Kohn, 1993b).Thirdly, this kind of an arrangement heightens employee commitment to the organization and ensures that the long term goals of the company are well in sync with the goals of the employees. The system gives a sense of ownership, partnership and psychological attachment to the owners of the organization and the workers. Not does it only have a positive impact on the morale of the teams within the organization; it also enhances organizational performance (Pendleton et al., 1998)
Pay and Employee Motivation
Linking employee motivation to the payment of the employees, Sara L. Rynes (2004) states that human resource professional usually give a very high degree of importance to the link between the pay structure of an employee and his motivation to perform on job, this belief is far from true as pay is a general motivator of an employee and not the main reason behind his/ her motivation. The paper identifies the situations in which pay is more or less important for an employee and also reasons why managers might pay less importance to it. The table below contains findings of some major studies that have been conducted to determine the importance of pay to employees compared to other potential motivators. The first column shows the results of people being asked to rank the importance of pay compared to other motivators, the right hand side shows results of real studies in ongoing organizations that examine the work output resulting in the introduction of different motivators like work redesign, increases in employee participation, change in pay structures etc. first column concludes that when people are asked directly to rank pay as a motivator, they tend to place it at a fifth level (range second to eighth) in lists of potential motivators. In comparison, the actual behaviors in response to the motivators, almost always show pay as the most influential motivator of all.
Defining Job Satisfaction
Job satisfaction is a term used widely and commonly, yet there isn't any general agreement as to what it really entails. Satisfaction covers a lot of different facets and can mean different to different people. Different authors have used different approaches to define job satisfaction, many of which will be covered in this literature review.
Hoppock (1935) explains job satisfaction as
"Any combination of psychological, physiological and environmental circumstances that cause a person truthfully to say I am satisfied with my job"
This definition adheres to the fact that although job satisfaction has alot of external factors affecting it, it is still an internal affair that defines the feelings of the employee. This means job satisfaction is a result of a number of factors that create satisfaction.
Vroom's (1964) definition of job satisfaction involves the role an employee plays in his workplace. He defines job satisfaction as an
"Affective orientations on the part of individuals toward work roles which they are presently occupying"
According to Spector (1997), job satisfaction has to do with how people feel about their job and its other aspects. The level to which they like or dislike the job that creates job satisfaction or dissatisfaction in a work situation.
Positivity and negativity of an employee towards his work, are both are a part of job satisfaction. When an employee joins an organization, he comes with preconceived notions about the kind of job he is getting into. He harbours certain needs and expectations about his work and his satisfaction depends on the extent to which his expectations are met, whether or not the real awards match the ones in his belief. An individual's workplace behaviour is very closely linked to his satisfaction towards his job (Davis et al.,1985).
According to kaliski (2007) an employee's sense of achievement and his success on his job is a part of job satisfaction. This is thought to be directly linked to productivity and personal well being. It also implies doing the job one enjoys and is appropriately rewarded for. Job satisfaction is not only the key to recognition, promotion, and income and feeling of fulfilment, it is also enthusiasm and happiness with one's work.
Statt (2004) defines job satisfaction as the level of contentment of an employee with the rewards he gets for his work especially in terms of intrinsic motivation. Armstrong (2006) relates the positive and favorable attitudes towards the job as job satisfaction and the negative and unfavorable feelings to job dissatisfaction.
Goerge et al (2008) describe job satisfaction as;
"Job satisfaction is the collection of feeling and beliefs that people have about their current job. People's levels of degrees of job satisfaction can range from extreme satisfaction to extreme dissatisfaction. In addition to having attitudes about their jobs as a whole, people also can have attitudes about various aspects of their jobs such as the kind of work they do, their co-workers, supervisors or subordinates and their pay"
Whereas Mullins (2005) is of the view that;
"Job satisfaction is a complex and multifaceted concept which can mean different things to different people. Job satisfaction is usually linked with motivation, but the nature of this relationship is not clear. Satisfaction is not the same as motivation. Job satisfaction is more of an attitude, an internal state. It could, for example, be associated with a personal feeling of achievement, either quantitative or qualitative"
The efficiency and effectiveness of a business organization is often related to job satisfaction of its employees. The new managerial paradigm believes that employees should be treated as human beings that they are and their individual needs, expectations, personal desires be kept under consideration as these ensure job satisfaction. The logic behind analyzing job satisfaction is that a satisfied employee is a happy employee and a happy employee is a successful/efficient/effective employee. The importance of job satisfaction is heightened when the drawbacks of an unsatisfied employee are seen, that is disloyalty, high absenteeism and higher number of accidents etc. Spector(1997) states three key features of job satisfaction as
Human values should be kept as the guidelines for organizational policies. Organizations following this are more likely to treat their employees with respect and fairness. Assessment of the employee job satisfaction in such cases is a good way of knowing employee effectiveness. High job satisfaction means the employees have a good emotional and mental state.
The functioning and activities of an organization are largely affected by the behaviour of its workers and their level of satisfaction. This implies that a positive behaviour results from satisfaction whereas the negative behaviour of employees is a result of their dissatisfaction.
Job satisfaction can be an indicator of organizational activities. Job satisfaction evaluations present variations in satisfaction levels of different units within a company. This, in turn, serves as an indication as to which organizational unit change can boost performance.
The following figure given by Christen, Iyer and Soberman (2006) provides a model of job satisfaction and its elements:
Job related factors
Figure 1 - Christen, Iyer and Soberman "Model of Job Satisfaction" (2006)
Figure 2 shows Lawler and Porter's (1967) model of job satisfaction which unlike Christen's model puts high emphasis on rewards affecting job satisfaction. This model represents intrinsic and extrinsic rewards as indirect factors affecting job satisfaction and the perception of the kind of pay the employee deserves as the main factor.
Figure 2- Lawler and Porter's "Model of Job Satisfaction" (1967)
Locke and Latham (1990) provide a completely different idea of job satisfaction in their theory . Their theory is that tasks set at higher level or in other words, the tasks that are not easily attainable and provide a challenge to the employees and set high expectations for success create high satisfaction levels. Figure 3 shows their model of job satisfaction
Figure 3 - Locke and Latham 'Model of Job Satisfaction '(1990)
The importance of the textiles sector for Pakistan's economy can be exhibited by just reviewing a few facts:
The textile sector of Pakistan employs approximately 40% of the total labor force (Source: Pakistan Board of Investment).
For the year 2011, textile sector's contribution towards Pakistan's GDP was 8.5%. (Source: APTMA Chairman Review Report 2011)
The share of textile exports out of total Pakistan's export is approximately 52.8% currently. (Source: State Bank of Pakistan, Economic Data)
These figures are more than enough to establish what an important sector textile is for Pakistan's economy. Now let us review what is currently happening in this sector. Below is the break-up of the current number of textile units in the country, courtesy Ministry of Textile Industry:
NO OF UNITS
a) 10.906 M. Spindles
b) 202356 Rotors
Independent Weaving Units
27500 Shuttle less Looms
Small and Medium Sector
NO OF UNITS
Independent Weaving Units
295442 Looms (Conventional)
10000 Looms 700 shuttle less
However, Pakistan's textile sector has been, and for the most part still is, going through a period of turmoil.
"The textile ministry has acknowledged closure of 90 big units in 2008 alone. Each company employed a minimum of 1,000 workers. "Hundreds of thousands have lost jobs," Federal Adviser on Textile Dr Mirza Ikhtiar Baig, told The News."
"Baig said that the higher mark-up rates, energy crises, law and order situation and the global recession were the major reasons behind job cuts from textile sector. A company cannot sustain itself if the production units are shut 15 days a month due to power outage, he said.
The import of readymade garments from China has also affected the local manufacturer. "It started from shoes, pencils and ballpoint pens and now happening with the garments," Baig said.
The record of Pakistan Hosiery Manufacturers Association (PHMA) shows closure of 245 companies from the hosiery and knitwear sub-sector alone in last five years. Of which 99 units were closed in 2008 alone. These units employed 100 to more than a few thousand workers each."
[Source: The World Trade Review, 2009]
All in all around 350 units were closed with many more just barely surviving. The major problems being faced by Pakistan's textile sector are:
Energy Crisis - shortage of gas and electricity may have reduced for households, but industry still suffers from an acute deficit of supply.
Law, Order & Terrorism - textiles sector has suffered greatly because of abysmal law and order situation in the country. Rampant and frequent terrorist attacks in the past have left foreign buyers scared of even entering Pakistan, let alone visit factories in remote industrial areas.
Poor Country Image Perception - due to terrorism reports on and in Pakistan, foreign buyers and consumers have developed a negative image of Pakistan in minds, therefore making its products seem inferior in quality.
Market Access - with Bangladesh receiving the GSP+ status from EU in 2010, Pakistan's access to market is further reduced. A GSP+ status means that Bangladesh's products would face a lower tariff rate in EU, making them cheaper for the buyers.
Increased Competition - While Pakistan's textile sector is stuck fighting at several fronts, India, Bangladesh, China and even Sri Lanka's markets are eating up our market share and forging new bonds with foreign buyers.
High Interest Rate Regime - According to APTMA Chairman Mr. Gohar Ejaz "Regional competitors, from 2005 onwards induced investment to develop sizable capacity and as a result the textile exports of our principal competitor increased from $ 12 billion to $ 30 billion. The instrument used was the Technology Up-gradation Fund Scheme (TUFS) that provided for a remission of interest rate up to 50% for investment. Similar schemes visualised here did not materialise because of the characteristic gap between policy and implementation." [Source: APTMA Chairman Review Report 2011]
As a result, smaller companies who have limited economies of scale are facing the brunt of competition in Pakistan. Larger companies who can afford to make huge infrastructure investments are adapting to these problems by building their own independent source of power supply, while some other have even started to contemplate shifting their units to Bangladesh or Turkey in order to enjoy the same benefits as their global competitors are enjoying.
Hira Textile Mills (HTM) is a medium sized unit. The company started off as a spinning unit which later on in 2007 added its terry manufacturing operations which included weaving, dyeing and confection. Terry is the technical used for manufacturing of towels and bathrobes. This expansion was a vertical expansion for HTM, which was a positive step forward as it led to economies of scale and synergy.
Since the topic at hand is HR related, it makes sense to only review the key highlights of HTM's financials and not go into the nitty-gritty details of the financial statements which is required while dealing with operational topics.
Cost of Sales
Other Operating income
Profit before Interest & Taxation
Other Operating Expenses
Financial & Other Charges
Share of profit Hira Terry Mills Ltd.
Profit before Taxation
Provision for Taxation
Profit after Taxation (Net Profit)
Operating Fixed Assets
Net Capital Employed
Long Term Debts
Share Holder's Equity
Surplus on Revaluation on Fixed Assets
Break â€up Value Per Share (Rupees)
Number of shares
Total Debt to Total Assets
Acid â€Test Ratio
Debt Coverage Ratio
Interest Coverage Ratio
Fixed Assets Turnover
Total Assets Turnover
Per Share Results & Returns
Earning per Share
Return on Capital employedâ€ net
Gross Profit to Sales
Operating Profit To Sales
Net Income to Sale (Profit margin)
Return on Assets (ROA)
For the purpose of this study, the research findings have been analyzed by segmenting the respondents in 3 groups:
The Upper Management - which comprise of senior members of the organization who have more than 10 years experience in the textiles sector and occupy senior management positions in the company, e.g. GMs, COO, CFO and other Directors.
The Middle Management - members in this group have 4 to 9 years of experience in the textile industry and currently occupy the middle management posts in the company, e.g. Deputy Managers, Manager Exports and other divisional managers.
Lower Management - consists of employees who are new to the textile sector with upto 3 years of experience and currently occupy junior management posts, e.g. Assistant Managers and MTO's.
Graph 1 - Sample Split
A total of 30 employees were interviewed. The sample was split between 5 upper management executives, 10 middle management level employees and 15 lower management level employees. The split was designed to reflect the number of employees at each management level. Also, the focus of this study is more towards the lower management level employees because of higher turnover rates found among this management level.
Graph 2 - Education Level
This graph depicts the education level of the 3 groups of respondents interviewed. As can be seen, 60% employees in upper management and middle management have a Master's degree whereas 80% of employees in lower management group have a Master's degree. There has been a shift in the hiring policy for new employees; preference is now given to MBA graduates, whereas in the past when MBA programs had lesser proliferation and the textiles sector was less conscientious about the academic background of its human resources, a higher percentage of Bachelor degree holders were hired.
Graph 3 - Pay Scales
This graph shows the different pay levels each category is receiving, a representation of how the pay is actually structured in the company. All upper management executives receive pays above Rs. 126,000/-. The pay range for middle management employees varies from Rs. 66,000/- up to Rs. 125,000/-; whereas lower management staff's salaries range starts from Rs. 25,000/- and goes up to Rs. 65,000/-. The ranges are wider for middle management and lower management employees. This wide range within middle and lower management employees can be explained by three factors:
Educational background - Those employees which belong to an upper tier university receive a higher wage and those employees which have an MBA degree receive a higher wage than employees with just a Bachelor's degree
Experience - As a general rule, employees with more experience receive a higher compensation, it is also due to accumulating impact of increments received over the years. Also, those employees which have past work experiences at industry giants, like Nishat, Sapphire and Crescent, get more salaries because of the belief that these employees have had a good quality experience; and
Past Performance - Employees with a proven track record, either with previous employers or at HTM, are in a stronger position to bargain for higher salaries.
Types of Compensation Schemes Being Offered Currently
Company Car / Motorcycle
Table 1 - Types of Compensation Schemes Being Offered Currently
This table shows the different kinds of financial compensation techniques being used by HTM HR department to reward its employees.
Only 40% of the lower management