Question

HR REASONING AND DECISION-MAKING EXERCISES Exercise 11.1: Applying Expectancy Theory to Understand Pay for Performance Three years ago, a large clothing retailer called La Ropa de Moda developed and implemented a new pay-for- performance program targeted at sales associates. The relatively new program is a sales performance incentive fund (SPIF) that provides a bonus for selling certain items of clothing. La Ropa de Moda learned that one of its competitors used SPIFs to sell old inventory to great effect. Because La Ropa de Moda has been having issues selling clothes from prior seasons, the company decided to implement a similar program. Unfortunately, La Ropa de Moda has found that even when a SPIF is attached to certain items of clothing, much of the old inventory sits on sales floors across the company's many locations, and to date, the SPIF program has been largely ineffective when it comes to motivating employees to sell old inventory. Sales associates' base hourly wage ranges from $14 to $19, and differences in hourly wage are attributable to years of experience in retail, seniority, and merit-based pay increases. SPIFs are attached to specific clothing items from prior seasons and range in value from $1 to $5. In addition to the SPIF program, sales associates receive a 7% commission on each article of clothing they sell. For example, if a sales associate sells a $100 pair of jeans, then the associate will earn a commission of S7 The average cost of an article of clothing in the store is $50, and on a typical 8-hour day, the average salesperson will sell $600 worth of clothing. The average salesperson works 33 hours per week. On one hand, the base wage and commissions earned by sales associates each pay period are distributed in a biweekly paycheck. On the other hand, the annual SPIFs earned by a single sales associate are paid out in one year-end lump-sum bonus, so SPIFs are not included in the paycheck corresponding to the pay period in which they were earned Apply the principles of expectancy theory to understand why the pay-for-performance program at La Ropa de Moda is failing to motivate sales associates to sell old inventory. Questions 1. Based on the information provided, do you think that low perceived expectancy among sales associates explains the lack of motivation to sell old items with SPIFs attached? Why? 2. Do you think that sales associates' perceptions of instrumentality explain the lack of motivation to sell items with SPIFs? Why? 3. Do you think that sales associates' perceptions of valence explain the lack of motivation to sell items with SPIF? Why?

Answer 1

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(1)

Yes, I think the low perceived expectancy is the reason why sales associates demotivated to sell old items despite SPIFs being attached. They believe that the effort they would put on selling old items is not the performance as revealed through ineffective of the program. Indeed, I think they believe that old items would not attract more customers as new items would and hence they put less effort that lead to low performance.

(2)

As mentioned above, instrumentality occurs when individuals connect performance with reward. In this case, I believe the sales associates’ perceptions of instrumentality is not the cause of lack of motivation. Based on the article, La Ropa de Moda has several rewards that would, in a normal circumstance motivate employees to put more efforts hence increase their productivity. However, the sales of old items remain low despite the company providing better and intriguing incentives.

(3)

I believe valence is not the cause of lack of motivation to sell old items with SPIFs. As stated earlier, valence connects a reward with its important or attractiveness. I think based on the information provided by the company regarding the incentives provided the sales associates would, indeed, become more motivated.