The Value of Equity Theory Essay
The Value of Equity Theory
Cadbury Nigeria PLC is an associate company of the Cadbury Schweppes Group. Established in Nigeria in 1965, its core business is the manufacture and sales of fast moving consumer goods in the foods, food drinks & confectionery groupings.
There are 2000 employees in Cadbury Nigeria at various management and non-management staff cadres. Its major competitor is the Nestle Group PLC. Other manufacturing firms in the brewery, foods & telecommunication industries also compete with Cnplc in the area of manpower poaching; staff turnover amongst these companies is common. This write up seeks to analyse how Cadbury Nigeria PLC (“Cnplc”, the organisation or “the company”) motivates its workforce as well as how the equity theory can assist in ensuring an equitable and fair organizational structure.
I am of the opinion that a motivated workforce will contribute to better performance and higher profit margins.
Motivational Methods & Techniques in use in Cadbury Nigeria PLC
Cadbury Nigeria Plc is one of the foremost multinational firms in Nigeria, whose aim is to become the employer of choice. This it hopes to achieve through a people-focused Human Resources Strategy. A central theme of this strategy is to attract, develop, retain and optimise talent to meet both current and future business needs. (Source: Cnplc employee handbook). This it hopes to achieve by “becoming” the employer of choice. The understanding of the implications of the equity theory in my view should be one of the primary responsibilities of the HR function of any company. This is why I have begun this analysis with a brief examination of what the HR strategy of Cnplc consists of. To a large extent, it is possible to deduce how seriously a company takes the subject of inequity, by examining its HR policies and strategies.
The study was undertaken mainly by questioning a few employees. Information was also obtained from the HR strategy manager and other company sources, all sources are duly acknowledged. I happen to be an employee of Cnplc for the past 7 years; hence, this provides with me sufficient grounds to assess the trends over the years.
Source: Cadbury Nigeria plc, HR strategy dialogue 2004.
How Cadbury Nigeria PLC motivates its Workforce
This will be discussed under four areas:
1. Annual Salary Reviews
2. Upfront Allowances
3. Staff Capabilities Investment
4. Welfare Packages.
Annual Salary Reviews
This is tied to the performance appraisal review, which occurs once a year. Each employee is graded by his/her line manager, based on the year’s performance. These scores are tied to salary increments, according to the employee’s cadre. The primary aim of this is to ensure that no person earns the same salary for more than 1 year. The major advantage is that it motivates employees to remain with the company, as the staff turnover over the years has been at an all time low.
However, the challenge of this technique has an implication for developing countries, such as Nigeria, in that the personal style of organization (Hickson & Pugh, chapter 9,page 249) bears its ugly head. This translates to performance reviews that are biased (Nigerians value personal relationships with their bosses, and there is a conscious effort by most employees to want to remain in the good books of their bosses, so as to win favours.) The tribal diversity of the country (over 200 ethnic groups) also means that bosses may over rate the performance of subordinates from the same tribe with them. Indeed, this remains a challenge in developing countries like mine. One thing I know for sure is that my colleagues look forward to this salary review and I would say that it is an effective motivational technique.
This involves taking a certain amount of employees’ basic salaries and paying them at the beginning of the year in a lump sum. In Cadbury Nigeria, this allowance is 40% of the basic salary and is referred to as the annual housing allowance. Since in Nigeria, rent is paid annually, it is common practice for big firms to advance salary payments to enable their employees pay rent. However a major drawback of this is the fact that an employee could resign at any time during the year, leading to losses incurred by the company. Some companies have stopped the payment of upfront allowances. However, Cadbury Nigeria hasn’t. In addition, the leave allowance of 10% of the annual basic salary is paid upfront as well. The application of equity theory here is glaring, as the Nestle group in Nigeria pays its workers 50% of annual basic salary as upfront housing allowance.
Staff Capabilities Investment
Investing in staff development takes different forms in the organization. The three techniques in use are:
* Training Programs: usually held in-house, within the country and sometimes outside the country, if specific training courses are not available in Nigeria. The HR policy of the company states that employees are entitled to 2 courses annually, but this is not adhered to in most cases. In part II of this write-up, I will look out how this has caused dissatisfaction amongst employees.
* Young Talents: involving the posting of high potential employees to any Cadbury Schweppes company in the world (for a minimum of 2 years), this program is an instant motivator for staff who have been privileged to experience it. The major objective of this is to increase exposure as well as equip staff with new ways of working. Usually, individuals are promoted on return to their home countries. However, there are issues of inequity here as well, which we will explore in the 2nd part of this analysis.
Welfare Packages: Subsidies of various forms. These are;
Medical Scheme: This covers a comprehensive medical coverage (treatment, surgery etc) for each employee and his/her spouse and 4 children. The scheme excludes dental care and eyeglass prescriptions.
Meal Subsidy: There is a 75% subsidy on lunch for management staff, while meals are provided free to non-management staff.
Car loans: Provision of car loans commensurate with basic salary earnings (each employee is entitled to 100% of his/her annual basic salary as car loan.) In addition, 50 % of interest repayments of the loan are borne by the company.
Insurance cover: Apart from a comprehensive life assurance scheme undertaken for all employees, the company also provides a 50% subsidy on vehicle insurances for all employees private cars that have been registered with the company’s Insurance pool. It is not mandatory for all employees though.
Analyzing the application of the Equity Theory to Cadbury Nigeria
The average Nigerian worker is motivated, (albeit in low levels) mostly by money. This is similar to Hickson & Pughs (management worldwide) analysis on the peculiar characteristics of organizations in developing countries.
How the understanding of the Equity Theory can lead to a better-motivated workforce in Cadbury Nigeria.
Reading through this course, it occurred to me that if most managements were aware of the Equity Theory, it would enable them to better understand what motivates their workforces. This will assist not only in curtailing employee turnover, but will result in a happier workforce and better performance.
The question the management of Cadbury must ask itself is how to reduce inequity in all staff cadres. This has to be a 2-way approach;
1. Interviewing employees; Employees at all levels should be interviewed on what motivates and demotivates them. Organizations with a high power distance have a long way to go in this regard. Management Worldwide (page 22) lists West Africa (Nigeria is one of the West African countries) as having a power distance of 77. Definitely, reducing the power distance will not be an easy task, since it involves cultural change. An example of this is in Cadbury Nigeria, where most subordinates (about 95%, including myself) do not call their bosses by their first names, and the manager’s decision is final in most cases even though this may not be in the best interest of the organization. If this is the case such subordinates will rather keep mum about what bothers them rather than risk losing a job.
2. Having clear-cut guidelines and policies: A transparent management will definitely run a more equitable organization. The reasons why rewards are given should be clearly stated. In addition, procedures such as training courses and promotion requirements should be clearly documented. An example of this in my organization is the issue of training courses. Employees feel that the process of selection of staff for training courses abroad (and sometimes in the country) is a highly inequitable process.
In many instances, the same sets of people go for the same courses from year to year. This has led to dissatisfied employees who have concluded that they have to “belong” to the right click in order to be trained. While this is not entirely true, I personally experienced a situation in which a course came up that was relevant to my job description, and my boss insisted on going for the course. The HR manager in charge of training told me there was nothing she could do about it, because my boss had the final say about who should go for a particular course. Had my organization been more sensitive to inequity, they would have seen from my job description, that the course was more suited to my role.
Limitations of the Equity Theory to the Nigerian Context
The organizational culture in Nigeria tends to be very similar to that of the Indians. As outlined in Chapter 9, page 264 of management worldwide, India is not Africa, but India is very similar to Africa. Indeed reading through the chapter on developing countries was like the typical Nigerian organizational style.
In developing countries like Nigeria, belonging to the same tribe as your boss or a senior influential employee could earn you a promotion. So also can “boot-licking” (in this context being extremely non-resisting with your boss and even subtly praising him) which is common with the Yoruba tribe of Nigeria.
Hence I would infer that the Anglo context of the equity theory may not be fully applicable to the certain developing countries such as Nigeria. The tendency is high, for individuals in developing countries to rationalize inequity. This, I believe is due to the unfavourable economic climate, poverty levels and high unemployment levels, which makes people cherish their jobs. Also, tribal diversity (in the case of Nigeria’s 250 ethnic groups) has led to the display of power, infringement on fundamental human rights and injustices of different sorts being perpetuated in the workplace. It is common practice to get short listed for a job interview in Nigeria solely because you know a person connected with the organization.
The above considerations have contributed to the “toleration” of inequity by a good number of Nigerians. In any case, it is difficult for any developing country employee to adopt any of the strategies outlined in the text book for this course(organizational behaviour by Buchanan and Huczynski). This is as a result of the generally lackadaisical attitude of Nigerians as well as the element of fear; which results in increased inequity in some cases.
Insights gained by this analysis
Despite the limitations of the application of the equity theory to the company as outlined above, there is much to be gained from it. In particular, this can be applied to the HR strategy of the organization. A thorough appreciation of inequity will translate to higher motivational levels and by inference to higher performance, and profit margins. A demotivated workforce is a dangerous workforce. My suggestions as to the practical application of this to the organizational structure of Cadbury Nigeria is as follows:
1. The current situation of the workforce is one of a fair proportion of inequity. There is a need for the organization’s management to draw up a clear-cut plan as to how rewards are earned. Incorporating clear guidelines of the company’s policies in the employee handbook is one method by which this can be achieved. This should also be backed up by seminars aimed at given detailed explanations of these policies. In developing countries, communication is key.
2. The need for to understand how inequity translates to high staff turnover lower performance and consequently, reduced profits from disgruntled employees. In some cases, management plays the part of the cruel employer. As a result of the relatively cheaper labour available in developing countries, it is easy to recruit new staff should disgruntled employees resign.
3. An attempt to reduce inequity amongst employees by discouraging rumuors and hearsay talk. This can be done by operating a corporate communications system whereby staffs are encouraged to contribute ideas on how to achieve harmony within the work force. On its part, management should be seen to operate in a transparent fashion. In Cadbury Nigeria, e directors organize monthly town hall meetings, where staff are encouraged to voice their complaints. However, there is a noticeable reluctance on the part of the employees to talk about their grudges. In a few cases, certain ‘bold” employees who have been very vocal at these meetings, ended up being t by their bosses to desist from such openness. Clearly, negative cultural traits could be a hindrance to the value added from the application of equity theory in some modern organizations.
4. Conducting periodic surveys to monitor the impact of company decisions that affect employee welfare and human resource issues. In the Nigerian context, these surveys should be done anonymously and past attempts in Cadbury Nigeria, reveal that people are usually too scared to open up in a corporate environment. Again, this is clearly an organizational culture issue peculiar to developing countries.
This assignment has afforded me the opportunity to gain knowledge about what motivates individuals and how employers can encourage put in their best in for the benefit of the organizations in which they work.
Perhaps, someday I will have the opportunity to apply the knowledge gained from this module to the organization where I am employed.
It has also exposed me to the fact that, management is often ignorant about vital issues that motivate or demotivate work forces.
However, until corporate organizations understand the implications of what leads to personal job satisfaction, they may be saddled with the high cost of replacing dissatisfied staff. In addition, I think that it is a bit of out of sync applying the theories and social techniques of the developed world to the developing world.
Developing countries on their part, should invest in studies and researches with at view to arriving at their own conclusive analysis and observations.. Until this can be done, I think that managers will continue to experience inequity in their work environments.