A Zero Wage Increase Again: A Case Study

1. As the manager of House, Hearth & Home, Mark desires to further motivate his employees through increased wages and rewards to inspire higher productivity and engagement within the firm. Considering the business is in the retail industry, employee satisfaction is key to store success because the well-being of employees directly impacts their interactions with customers and thus the overall success of the firm. This effect is evidenced in the study by Marie and Anne’s lack of awareness of a customer needing assistance[1], showing that when staff are not engaged in their work, customer satisfaction will suffer.  Recognizing that one of the primary inputs to an organization is their labour force[2], it is important to make sure they are of the highest quality so as to ensure that the outputs produced by the company are in optimal condition. Therefore, in order to please customers, Mark is striving to find new ways to further motivate his employees to improve the overall strength of the company.

2. This question presents two solutions that would change the company’s incentive system, which is defined as how tangible, extrinsic rewards are distributed within an organization[3]. If every employee was to receive a three percent wage increase, the benefits would be evenly distributed, showing all staff that they are valued. The Equity Theory of Motivation highlights that the overall perception of what is fair in the workplace, known as organizational justice, can be a key determinant for staff in deciding whether their skill sets are receiving the compensation they deserve[4]. Therefore, overall employee satisfaction may increase. However, for strong performers such as Aaron, Simon and Wesley, they may feel underappreciated for the extra efforts they are making as they are not receiving any surplus benefits. This would have extremely negative consequences, as Mark describes them as “the lifeblood of the business”[5]. The second option would reward them for their efforts. As identified in the Study, all three men seem to possess strong intrinsic motivation, which means that they find meaning and enjoyment in their tasks[6]. These are qualities that all managers desire to strengthen within their employees, but monetary rewards are not necessarily the right solution as money is an extrinsic motivator, meaning it is a tangible reward that is not achieved solely individually but rather received from another source[7]. If corporations only focus on extrinsic rewards, intrinsic motivation may weaken because now an activity previously enjoyed by the employee is now perceived as an objective rather than a chance for personal fulfillment. Furthermore, extrinsic reward systems work best when the task is easily quantifiable, which does not correlate with consumer-oriented industries such as retail[8]. Also, other employees may take this decision as an opportunity to re-evaluate the quality of their work, as they will be wondering what they can do to receive these rewards. Thus, only awarding three workers could serve as a motivation for other staff members to work harder, further boosting overall productivity. Any form of salary increase will effect overall employee performance.

3. As a consultant to Mark, I would recommend that no wage increases be given in the current time period. Aaron explains that the store’s profit is only “a few thousand dollars”[9]. Thus, if wage increases were to occur, the company would not have a safety net to cover unexpected expenses. Although some employees may be upset by this decision, I believe that few people will leave the firm as the entire staff is facing the effects of this action, meaning the Equity Theory will be upheld. People who determine the level of work they are willing to do from the financial benefits they receive, known as Theory X[10], are in any case not the kind of staff that Mark can afford to keep nor that the store’s customers deserve. Therefore, if they were to leave, it could produce an opportunity for the firm as Mark would now be able to hire more motivated employees to replace them. Overall, any changes in staff performance will not have dramatically negative consequences on the firm. However, just because wages are frozen does not mean there cannot be any forms of rewards distributed to employees. Non-monetary rewards can actually better suit workers that are intrinsically motivated. Studies on intrinsic motivation have found that increasing employee autonomy and feedback from management can lead to an increased sense of responsibility and knowledge of the corporation, which results in higher work performance and job satisfaction[11]. Employee recognition awards such as ‘Employee of the Month’ could be established to continuously show staff that they are being appreciated. In these ways, Mark can strive to boost employee morale and productivity without compromising the financial state of the firm. Recognizing that the business environment is constantly changing, however, I believe that an analysis of the business’ expenses would help Mark gain insight into whether maximum efficiency is being gained within all areas.


Alyson Duff

Works Cited

Hackman, R.J., G. Oldman, et al. “A New Strategy for Job Enrichment”. California Management Review 17(4). 1975. Pages 57-71.

Kerr, S. On the Folly of Rewarding A While Hoping for B. Academy of Management Journal 18(4). 1975. Pages 769-782

MacMillan, Kate.  A Zero Wage Increase Again? Richard Ivey School of Business: University of Western Ontario. 2011. Pages 2-5.

Nadler, D.A. and Tushman, M.L. A Model for Diagnosing Organizational Behaviour. Organizational Dynamics, 9(2). 1980. Page 41

Robbins, S.P., T.A. Judge. Essentials of Organizational Behaviour. Pearson: New York. 2014. Chapter 7, Page 185-190


[1]  MacMillan, Kate.  A Zero Wage Increase Again? Page 2

[2] Nadler, D.A. and Tushman, M.L. A Model for Diagnosing Organizational Behaviour. Page 41

[3] Robbins, S.P., T.A. Judge. Essentials of Organizational Behaviour. Chapter 7, Page 190

[4] Ibid, Page 184

[5] MacMillan, Kate.  A Zero Wage Increase Again? Page 5

[6] Robbins, S.P., T.A. Judge. Essentials of Organizational Behaviour. Chapter 7, Page 184

[7] Kerr, S. On the Folly of Rewarding A While Hoping for B. Page 769

[8] Ibid. Page 782

[9] MacMillan, Kate.  A Zero Wage Increase Again? Page 3

[10] Robbins, S.P., T.A. Judge. Essentials of Organizational Behaviour. Chapter 7, Page 185

[11] Hackman, R.J., G. Oldman, et al. A New Strategy for Job Enrichment. Page 58