Organizational Environments and Motivational Incentives – Part 1

Their seems to be a common public perception that government employees are sincere ordinary people who spend their careers serving the public interest and – as a recent columnist in The Tulsa World wrote recently “that public service is essentially noble”. But with the coming of the sequester Charles Krauthammer started a column by reporting that a leading Washington anti-budget-cut lobbyist told a reporter for the Washington Post that “The worst case scenario for us is the sequester hits and nothing bad really happens.”  The sequester hit and the FAA furloughed enough air traffic controllers to ensure that people would notice and see something bad happening.  The sequester cut government spending 2.3%.  I have been part of more than one organization that cut spending as much as 4 times that without anything bad really happening.  After a short period and some congressional action, the FAA furloughs ended (apparently without raising the FAA budget – but reporting on that part was extremely sparse).  More recently, however, it was reported that because of TSA cut backs the passengers at the Atlanta airport had 70 minute waiting time to get through security.  Earlier this year it was reported that a Nobel Prize winning economist, James Buchanan had died.  It seem Mr. Buchanan won the prize for work that concluded that government employees often act in their own self-interest  instead of the public’s interest.  So wat’s going on here?  Are government employees motivated by self-interest or not?

In 1960, Douglas McGregor published a book entitled The Human side of Enterprise.  In it he described two different management assumption which he titled Theory X and Theory Y.  Theory X management assumption were basically that employees were not innately motivated to work, that unless closely watched and supervised they would goof-off.  So they were not really to be trusted to do a full days work unless prodded and threatened with punishment.  And if something did not go well the main thrust of human nature was to find something or someone else to blame so as not to have to take responsibility for ones actions.  This was likely the predominate theory in the early part of the 20th Century which led to the growth of labor unions in an effort to reduce punitive management practices.  Beginning probably in the 1930s with the growth of the human relations school of management supported by studies such as the Hawthorne studies, those assumptions were beginning to change.  By the time McGregor published his book in 1960, the business climate had likely all ready started to change.  His Theory Y assumptions were that people were innately motivated to work, wanted to be innovative and successful, and under the right type of supervision, were willing to be responsible.  While they needed the pay check, they also wanted recognition for jobs well done.

McGregor’s book was a best seller and in the last half of the 20th century in my experience, Theory Y became the dominate management mind-set.  (That also may perhaps be one of the reasons for the decline of union membership in those decades.)  I am a believer in the Theory Y assumptions, but I also believe that motivational factors, and incentives in the work environment are extremely important.  The vast majority of people (there are always a few exceptions) are innately motivated to work and want to a part of a successful organization.  But we are all motivated by self-interest.  If this were not so, the species would have died out long ago. So the motivational factors and the incentives in the organizational culture and environment are extremely important.  And some cultures and environments are easier situations in which to evoke positive behavior than others.

In the broad context, in our society we have several different types of organizations – government organizations, private for-profit free market organizations, and private not-for-profit organizations.  Recent “too big to fail” theories not withstanding, only one of these groups is not allowed to fail – government.  We have to have a government to do things required to keep us an organized functioning society.  We can change the nature of some – but not all – of the government responsibilities, but we can’t do away with it completely.  To provide government with revenue to keep it going, “we the people have to pay taxes” whether we like the services we’re getting or not.  With a private for-profit company in a free market system we -the customers – have alternatives.  If we don’t like the product, the price or customer service from company A we can go to company B.  (There will be a company B because one the rules that only the government can enforce are the rules about monopolies.)  So if a private company is to survive, it needs to keep it’s customers’ satisfied.  It also must keep revenues higher than expenses.  If it is having difficulty doing that, there are only two options, increase revenues or decrease expenses.  In a competitive market, in a recession like we have just been through, the only real option is to reduce expenses.  But if in reducing expenses, bad things happen for the customers, the customers will go elsewhere and revenues will fall which will only make matters worse for the company and put survival more in doubt.  In the recent recession, a lot of companies have reduced expenses and probably in most cases, the customers have not been noticeably impacted because these organizations have found ways to reduce expenses and become more efficient without causing pain to it customers.  Much management literature in the last few decades has stressed the need to put the customer first if companies want to survive and prosper.  So management at every level of the companies that survive will first try to find expenses to cut that will not effect the  customers and result in a further decrease in revenue.

Not necessarily so with the government, particularly the Federal Government.  The assumption seems to be that if the customers feel pain, they will be more inclined to pay more in taxes to reduce the pain since they really have no other alternative.  Government employees could look for a way to become more efficient and cut things that their customers wouldn’t really notice, but that would be more difficult and perhaps painful for them so the first option is not going to be necessarily that.  Survival is not a primary fear.  In a previous post I wrote that company middle management faced with the possibility of a budget reduction will frequently cite dire consequences in services that they know are critical to the company or the customers.  In reality in private companies these things hardly ever happen because most employees will first worry about the survival of the organization.  In a government organization this may not necessarily be the case.  If the citizenry customers feel enough pain, they may force the undoing of any austerity program.  In any event, organizational survival is not seen to be a danger.

And so, even though I believe that most individuals innately want to do good, different organizational environments will create different incentives and when faced with unwanted changes, most of us will end up looking out first for our own self-interest.  In the private sector, that usually ends up more to the public good than it does in government positions.  As Adam Smith said a few centuries ago, in a free market, competitive economy, everyone even working for their own self-interest will create good for all.  But that isn’t necessarily true for government.


About tjc13

BE - Chem Engineering, Vanderbilt Univ, MBA, University of Tulsa - Worked for an energy and chemical company for many years and then started a management consulting business working for both for-profit and not-for-profit organizations.
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One Response to Organizational Environments and Motivational Incentives – Part 1

  1. Bob says:

    Good to have you posting again. I agree with the government not being efficient as you say it.
    I think you left out the word “do” in first line of last paragraph.
    See I do read it all!


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