Introduction to Motivation

Introduction to Motivation
At one time, employees were considered just another input into the production of goods
and services. What perhaps changed this way of thinking about employees was research,
referred to as the Hawthorne Studies, conducted by Elton Mayo from 1924 to 1932
(Dickson, 1973). This study found employees are not motivated solely by money and
employee behavior is linked to their attitudes (Dickson, 1973). The Hawthorne Studies
began the human relations approach to management, whereby the needs and motivation
of employees become the primary focus of managers (Bedeian, 1993).
Motivation Theories
Understanding what motivated employees and how they were motivated was the focus of
many researchers following the publication of the Hawthorne Study results (Terpstra,
1979). Five major approaches that have led to our understanding of motivation are
Maslow's need-hierarchy theory, Herzberg's two- factor theory, Vroom's expectancy
theory, Adams' equity theory, and Skinner's reinforcement theory.
According to Maslow, employees have five levels of needs (Maslow, 1943):
physiological, safety, social, ego, and self- actualizing. Maslow argued that lower level
needs had to be satisfied before the next higher level need would motivate employees.
Herzberg's work categorized motivation into two factors: motivators and hygienes
(Herzberg, Mausner, & Snyderman, 1959). Motivator or intrinsic factors, such as
achievement and recognition, produce job satisfaction. Hygiene or extrinsic factors, such
as pay and job security, produce job dissatisfaction.
Vroom's theory is based on the belief that employee effort will lead to performance and
performance will lead to rewards (Vroom, 1964). Rewards may be either positive or
negative. The more positive the reward the more likely the employee will be highly
motivated. Conversely, the more negative the reward the less likely the employee will be
motivated.
Adams' theory states that employees strive for equity between themselves and other
workers. Equity is achieved when the ratio of employee outcomes over inputs is equal to
other employee outcomes over inputs (Adams, 1965).
Skinner's theory simply states those employees' behaviors that lead to positive outcomes
will be repeated and behaviors that lead to negative outcomes will not be repeated

(Skinner, 1953). Managers should positively reinforce employee behaviors that lead to
positive outcomes. Managers should negatively reinforce employee behavior that leads to
negative outcomes.
Motivation Defined
Many contemporary authors have also defined the concept of motivation. Motivation has
been defined as: the psychological process that gives behavior purpose and direction


(Kreitner, 1995); a predisposition to behave in a purposive manner to achieve specific,
unmet needs (Buford, Bedeian, & Lindner, 1995); an internal drive to satisfy an
unsatisfied need (Higgins, 1994); and the will to achieve (Bedeian, 1993). For this paper,
motivation is operationally defined as the inner force that drives individuals to
accomplish personal and organizational goals.
The Role of Motivation
Why do we need motivated employees? The answer is survival (Smith, 1994). Motivated
employees are needed in our rapidly changing workplaces. Motivated employees help
organizations survive. Motivated employees are more productive. To be effective,
managers need to understand what motivates employees within the context of the roles
they perform. Of all the functions a manager performs, motivating employees is arguably
the most complex. This is due, in part, to the fact that what motivates employees changes
constantly (Bowen & Radhakrishna, 1991). For example, research suggests that as
employees' income increases, money becomes less of a motivator (Kovach, 1987). Also,
as employees get older, interesting work becomes more of a motivator.
Purpose
The purpose of this study was to describe the importance of certain factors in motivating
employees at the Piketon Research and Extension Center and Enterprise Center.
Specifically, the study sought to describe the ranked importance of the following ten
motivating factors: (a) job security, (b) sympathetic help with personal problems, (c)
personal loyalty to employees, (d) interesting work, (e) good working conditions, (f)
tactful discipline, (g) good wages, (h) promotions and growth in the organization, (i)

feeling of being in on things, and (j) full appreciation of work done. A secondary purpose
of the study was to compare the results of this study with the study results from other
populations.
Methodology
The research design for this study employed a descriptive survey method. The target
population of this study included employees at the Piketon Research and Extension
Center and Enterprise Center (centers). The sample size included all 25 employees of the
target population. Twenty-three of the 25 employees participated in the survey for a
participation rate of 92%. The centers are in Piketon, Ohio.
The mission of the Enterprise Center is to facilitate individual and community leader
awareness and provide assistance in preparing and accessing economic opportunities in
southern Ohio. The Enterprise Center has three programs: alternatives in agriculture,
small business development, and women's business development. The mission of the
Piketon Research and Extension Center is to conduct research and educational programs
designed to enhance economic development in southern Ohio. The Piketon Research and
Extension Center has five programs: aquaculture, community economic development,
horticulture, forestry, and soil and water resources.


From a review of literature, a survey questionnaire was developed to collect data for the
study (Bowen & Radhakrishna, 1991; Harpaz, 1990; Kovach, 1987). Data was collected
through use of a written questionnaire hand-delivered to participants. Questionnaires
were filled out by participants and returned to an intra-departmental mailbox. The
questionnaire asked participants to rank the importance of ten factors that motivated them
in doing their work: 1=most important . . . 10=least important. Face and content validity
for the instrument were established using two administrative and professional employees
at The Ohio State University. The instrument was pilot tested with three similarly situated
employees within the university. As a result of the pilot test, minor changes in word
selection and instructions were made to the questionnaire.
Results and Discussion

The ranked order of motivating factors were: (a) interesting work, (b) good wages, (c)
full appreciation of work done, (d) job security, (e) good working conditions, (f)
promotions and growth in the organization, (g) feeling of being in on things, (h) personal
loyalty to employees, (i) tactful discipline, and (j) sympathetic help with personal
problems.
A comparison of these results to Maslow's need-hierarchy theory provides some
interesting insight into employee motivation. The number one ranked motivator,
interesting work, is a self-actualizing factor. The number two ranked motivator, good
wages, is a physiological factor. The number three ranked motivator, full appreciation of
work done, is an esteem factor. The number four ranked motivator, job security, is a
safety factor. Therefore, according to Maslow (1943), if managers wish to address the
most important motivational factor of Centers' employees, interesting work,
physiological, safety, social, and esteem factors must first be satisfied. If managers
wished to address the second most important motivational factor of centers' employees,
good pay, increased pay would suffice. Contrary to what Maslow's theory suggests, the
range of motivational factors are mixed in this study. Maslow's conclusions that lower
level motivational factors must be met before ascending to the next level were not
confirmed by this study.
The following example compares the highest ranked motivational factor (interesting
work) to Vroom's expectancy theory. Assume that a Centers employee just attended a
staff meeting where he/she learned a major emphasis would be placed on seeking
additional external program funds. Additionally, employees who are successful in
securing funds will be given more opportunities to explore their own research and
extension interests (interesting work). Employees who do not secure additional funds will
be required to work on research and extension programs identified by the director. The
employee realizes that the more research he/she does regarding funding sources and the
more proposals he/she writes, the greater the likelihood he/she will receive external
funding.
Because the state legislature has not increased appropriations to the centers for the next
two years (funds for independent research and extension projects will be scaled back), the

employee sees a direct relationship between performance (obtaining external funds) and
rewards (independent research and Extension projects). Further, the employee went to
work for the centers, in part, because of the opportunity to conduct independent research
and extension projects. The employee will be motivated if he/she is successful in
obtaining external funds and given the opportunity to conduct independent research and
extension projects. On the other hand, motivation will be diminished if the employee is
successful in obtaining external funds and the director denies the request to conduct
independent research and Extension projects.
The following example compares the third highest ranked motivational factor (full
appreciation of work done) to Adams's equity theory. If an employee at the centers feels
that there is a lack of appreciation for work done, as being too low relative to another
employee, an inequity may exist and the employee will be dis-motivated. Further, if all
the employees at the centers feel that there is a lack of appreciation for work done,
inequity may exist. Adams (1965) stated employees will attempt to restore equity through
various means, some of which may be counter- productive to organizational goals and
objectives. For instance, employees who feel their work is not being appreciated may
work less or undervalue the work of other employees.
This final example compares the two highest motivational factors to Herzberg's twofactor theory. The highest ranked motivator, interesting work, is a motivator factor. The
second ranked motivator, good wages is a hygiene factor. Herzberg, Mausner, &
Snyderman (1959) stated that to the degree that motivators are present in a job,
motivation will occur. The absence of motivators does not lead to dissatisfaction. Further,
they stated that to the degree that hygienes are absent from a job, dissatisfaction will
occur. When present, hygienes prevent dissatisfaction, but do not lead to satisfaction. In
our example, the lack of interesting work (motivator) for the centers' employees would
not lead to dissatisfaction. Paying centers' employees lower wages (hygiene) than what
they believe to be fair may lead to job dissatisfaction. Conversely, employees will be
motivated when they are doing interesting work and but will not necessarily be motivated
by higher pay.

The discussion above, about the ranked importance of motivational factors as related to
motivational theory, is only part of the picture. The other part is how these rankings
compare with related research. A study of industrial employees, conducted by Kovach
(1987), yielded the following ranked order of motivational factors: (a) interesting work,
(b) full appreciation of work done, and (c) feeling of being in on things. Another study of
employees, conducted by Harpaz (1990), yielded the following ranked order of
motivational factors: (a) interesting work, (b) good wages, and (c) job security.
In this study and the two cited above, interesting work ranked as the most important
motivational factor. Pay was not ranked as one of the most important motivational factors
by Kovach (1987), but was ranked second in this research and by Harpaz (1990). Full
appreciation of work done was not ranked as one of the most important motivational
factors by Harpaz (1990), but was ranked second in this research and by Kovach (1987).
The discrepancies in these research findings supports the idea that what motivates


employees differs given the context in which the employee works. What is clear,
however, is that employees rank interesting work as the most important motivational
factor.
Implications for Centers and Extension
The ranked importance of motivational factors of employees at the centers provides
useful information for the centers' director and employees. Knowing how to use this
information in motivating centers' employees is complex. The strategy for motivating
centers' employees depends on which motivation theories are used as a reference point. If
Hertzberg's theory is followed, management should begin by focusing on pay and job
security (hygiene factors) before focusing on interesting work and full appreciation of
work done (motivator factors). If Adams' equity theory is followed, management should
begin by focusing on areas where there may be perceived inequities (pay and full
appreciation of work done) before focusing on interesting work and job security. If
Vroom's theory is followed, management should begin by focusing on rewarding (pay
and interesting work) employee effort in achieving organizational goals and objectives.

Regardless of which theory is followed, interesting work and employee pay appear to be
important links to higher motivation of centers' employees. Options such as job
enlargement, job enrichment, promotions, internal and external stipends, monetary, and
non-monetary compensation should be considered. Job enlargement can be used (by
managers) to make work more interesting (for employees) by increasing the number and
variety of activities performed. Job enrichment can used to make work more interesting
and increase pay by adding higher level responsibilities to a job and providing monetary
compensation (raise or stipend) to employees for accepting this responsibility. These are
just two examples of an infinite number of methods to increase motivation of employees
at the centers. The key to motivating centers' employees is to know what motivates them
and designing a motivation program based on those needs.
The results presented in this paper also have implications for the entire Cooperative
Extension Sysyem. The effectiveness of Extension is dependent upon the motivation of
its employees (Chesney, 1992; Buford, 1990; Smith, 1990). Knowing what motivates
employees and incorporating this knowledge into the reward system will help Extension
identify, recruit, employ, train, and retain a productive workforce. Motivating Extension
employees requires both managers and employees working together (Buford, 1993).
Extension employees must be willing to let managers know what motivates them, and
managers must be willing to design reward systems that motivate employees. Survey
results, like those presented here, are useful in helping Extension managers determine
what motivates employees (Bowen & Radhakrishna, 1991). If properly designed reward
systems are not implemented, however, employees will not be motivated.
References
Adams, J. S. (1965). Inequity in social exchange. In L. Berkowitz (ed.), Advances in
experimental social psychology. New York: Academic Press.


Bedeian, A. G. (1993). Management (3rd ed.). New York: Dryden Press.
Bowen, B. E., & Radhakrishna, R. B. (1991). Job satisfaction of agricultural education
faculty: A constant phenomena. Journal of Agricultural Education, 32 (2). 16-22.

Buford, J. A., Jr., Bedeian, A. G., & Lindner, J. R. (1995). Management in Extension (3rd
ed.). Columbus, Ohio: Ohio State University Extension.
Buford, J. A., Jr. (1990). Extension management in the information age. Journal of
Extension, 28 (1).
Buford, J. A., Jr. (1993). Be your own boss. Journal of Extension, 31 (1).
Chesney, C. E. (1992). Work force 2000: is Extension agriculture ready? Journal of
Extension, 30 (2).
Dickson, W. J. (1973). Hawthorne experiments. In C. Heyel (ed.), The encyclopedia of
management, 2nd ed. (pp. 298-302). New York: Van Nostrand Reinhold.
Harpaz, I. (1990). The importance of work goals: an international perspective. Journal of
International Business Studies, 21. 75-93.
Herzberg, F., Mausner, B., & Snyderman, B. B. (1959). The motivation to work. New
York: John Wiley & Sons.
Higgins, J. M. (1994). The management challenge (2nd ed.). New York: Macmillan.
Kovach, K. A. (1987). What motivates employees? Workers and supervisors give
different answers. Business Horizons, 30. 58-65.
Kreitner, R. (1995). Management (6th ed.). Boston: Houghton Mifflin Company.
Maslow, A. H. (1943). A theory of human motivation. Psychological Review, July 1943.
370-396.
Skinner, B. F. (1953). Science and Human Behavior. New York: Free Press.
Smith, G. P. (1994). Motivation. In W. Tracey (ed.), Human resources management and
development handbook (2nd ed.).
Smith, K. L. (1990). The future of leaders in Extension. Journal of Extension, 28 (1).
Terpstra, D. E. (1979). Theories of motivation: borrowing the best. Personnel Journal, 58.
376.
Vroom, V. H. (1964). Work and motivation. New York: Wiley.


ten tips for questionnaires on employee motivation
1. What is the 'primary aim' of your company?

Your employees may be more motivated if they understand the primary aim of your
business. Ask questions to establish how clear they are about your company's principles,
priorities and mission.

2. What obstacles stop employees performing to best effect?
Questionnaires on employee motivation should include questions about what employees
are tolerating in their work and home lives. The company can eliminate practices that zap
motivation.

3. What really motivates your staff?
It is often assumed that all people are motivated by the same things. Actually we are
motivated by a whole range of factors. Include questions to elicit what really motivates
employees, including learning about their values. Are they motivated by financial
rewards, status, praise and acknowledgment, competition, job security, public
recognition, fear, perfectionism, results...

4. Do employees feel empowered?
Do your employees feel they have job descriptions that give them some autonomy and
allow them to find their own solutions or are they given a list of tasks to perform and
simply told what to do?

5. Are there any recent changes in the company that might have affected
motivation?
If your company has made redundancies, imposed a recruitment freeze or lost a number
of key people this will have an effect on motivation. Collect information from employees
about their fears, thoughts and concerns relating to these events. Even if they are
unfounded, treat them with respect and honesty.

6. What are the patterns of motivation in your company?
Who is most motivated and why? What lessons can you learn from patches of high and

low motivation in your company?

7. Are employee goals and company goals aligned?
First, the company needs to establish how it wants individuals to spend their time based
on what is most valuable. Secondly this needs to be compared with how individuals


actually spend their time. You may find employees are highly motivated but about the
"wrong" priorities.

8. How do employees feel about the company?
Do they feel safe, loyal, valued and taken care of? Or do they feel taken advantage of,
dispensable and invisible? Ask them what would improve their loyalty and commitment.

9. How involved are employees in company development?
Do they feel listened to and heard? Are they consulted? And, if they are consulted, are
their opinions taken seriously? Are there regular opportunities for them to give feedback?

10. Is the company's internal image consistent with its external one?
Your company may present itself to the world as the 'caring airline', 'the forward thinking
technology company' or the 'family hotel chain'. Your employees would have been
influenced, and their expectations set, to this image when they joined your company. If
you do not mirror this image within your company in the way you treat employees you
may notice motivation problems. Find out what the disparity is between the employees
image of the company from the outside and from the inside


The success of any business depends largely on the motivation of the employees. Human
resources are essential to the prosperity, productivity and performance of any company.
Motivation is the key to creating an environment where optimal performance is possible.

So how do you ensure that individual motivation is at its peak within your workplace?
Every person has their own set of motivations and personal incentives to work hard or not
as the case may be. Some are motivated by recognition whilst others are motivated by
cash incentives. Whatever the employees motivation, the key to promoting that
motivation as an employer is understanding and incentive.
Employee incentive programs go a long way towards ensuring employees feel
appreciated and worthwhile. This alone can help with employee motivation across the
board. The great thing about these programs is they are very individualized. That is you
tailor your programs to suit the needs and wants of your employees. Incentive programs
increase motivation because they are not only encouraging productive performance but
also show employees the company cares.


Employee Motivation
1996 TEN article by Ed Zimmer, 734-663-8000, The Entrepreneur Network, Ann Arbor,
MI.
This article is in response to Edd Tury's questioning in last month's Growing Pains
column of how to motivate employees.
The classic paper on this subject is one by Frederick Herzberg, O
" ne More Time: How Do
You Motivate Employees?", published sometime in the '70s in the Harvard Business
Review. (I don't remember the issue, but if you want a copy, I'm sure a librarian can find
it for you.)
Herzberg was (and maybe still is) Professor and Chairman of the Psychology Department
at Case Western Reserve. He's the father of the "job enrichment" approach to employee
motivation, coining that term in that paper (and if still living, I'm sure quite distraught
with the gross caricature others have made of that term in the intervening years).
The essential insight that he added to the subject is that job satisfaction is NOT the
opposite of job dissatisfaction. Rather the opposite of job satisfaction is no job
satisfaction and, likewise, the opposite of job dissatisfaction is no job dissatisfaction.

And he went on to show that the factors that influence job satisfaction are different from
— and largely independent of — those that affect job dissatisfaction.
Herzberg's paper, when I discovered it in the late '70s, caused a paradigm shift in my
understanding of employee motivation. It resulted in a total reorganization of my
company and in the way I viewed (and continue to view) employees and my
responsibilities to them.
Following are some of the rules that evolved from my understanding of Herzberg.

Be decisive in hiring.
Every company has a personality — a culture. If new hires fit into that culture, they'll
adapt to what's required and learn to do the job. If they don't fit into that culture, they'll
never learn and will be a continual problem to you and your employees.
Under expanding employee-rights law, you have like 90 days to make that
determination. If they're not fitting in — or even if you have reservations about their
fitting in — let them go! Once they've passed that initial trial period, you have an
obligation — moral if not legal — to help that person become the best employee that he
or she can be.


If you do let them go, make it clear that the problem is in the fit. They may well be a
great employee for another company. Give them the chance to find out! Every person
can eventually find a "fit". When they do, both they and the company will be happy.
You'll not be doing either them or your company any favors by letting mis-fits stay.

Treat employees as adults — not children.
Work rules are important. As in society, rules are important to protect the safety, comfort
and serenity of individuals from each other. But they should be adult rules. Physical and
verbal abuse are clearly verboten — because they affect the safety and comfort of others.
But so are unplanned absences and tardiness. These cause unnecessary stress for those
who have to pick up their workload and cover for them.

Whatever the rules, they should be clear, precise — and minimum. They must be
uniformly administered — applied as equally to your star engineer as to the new-hire on
the assembly line. They should be documented in an "employee handbook" (which need
be no more than a few sheets stapled together) which should be given to each employee
and all new hires. And each rule should include not only the rule but the "why". Keep in
mind that the primary purpose of these rules is to protect the safety and comfort of your
employees — only secondarily to protect your company. Before freezing the handbook,
talk over the rules with your employees. If they have trouble with some of the "whys",
either convince them or let them convince you.

Avoid paternalism.
Almost every beginning entrepreneur falls into the paternalism trap. Your company's
growing. You're starting to build up some extra cash — and you want to share your
success with your employees. That's cool. They've contributed to that success and they
should share in it. What's not cool is then starting to believe that since you shared with
them, they "owe you".
All an employee owes you is a good day's work for a good day's pay. Nothing more.
Nothing less. You can't "buy" warm-fuzzies like loyalty and devotion — even at 20
times the going wage!
If you want to share the company's success with your employees, do so with random
bonuses when you have extra cash. And be certain that that extra cash cannot better be
spent in "growing" your business. You'll be doing your employees a much greater favor
by expanding your business — creating more challenges and opportunities for them —
than by simply doling out cash — if the business can be reasonably and safely expanded.
Avoid timed bonuses. All "Christmas" bonuses after the first will become not "bonuses"
but "expecteds". And distribute the bonuses in equal amounts or, at worst, proportionate
to pay. Any taint of favoritism will not only obviate any good-will you intended — but
drive it firmly negative.

Avoid incentive pay.
Incentive pay can be used to influence employee behavior. However, it is certain that
any benefits gained in the short-term will be more than lost in the long-term. It is
people's nature to look at what you are doing for them today. What you did for them in
the past is quickly forgotten. That may not be the way it should be — but that's the way
it really is.
You can use incentives to trigger a short-term burst of output. But be assured that the
next time such a burst is required, the reward will no longer be looked at as an
"incentive" — but as an "expected". Worse, if such a burst becomes not required in the
normal course of events, your employees will — wholly unconsciously — see that such a
burst does become required.
Pay to get out extra product at the end of an accounting period, and you'll get out extra at
the end of every accounting period. That's what you're telling them you want. Of course,
if you look at the numbers, you'll find that you're shipping a bit less during the
accounting period!
There are strong believers in incentive pay — especially in sales. I've enjoyed over the
years listening to sales managers extol their incentive systems. But listening closely, year
to year, what I really hear is what was wrong with their last system and why their new
system will be the greatest thing since sliced bread. Sure it will!

Avoid long-term employees.
Conventional wisdom admires companies who have retained employees for many years.
That wisdom is wrong! A good employee is a good employee only so long as he is
stimulated, challenged — and learning.
Trying to retain employees after they've stopped learning is bad for the employee and bad
for the company. Bad for the employee because they've stopped "growing" — stopped
improving their unique value in the job market. Bad for the company because it stifles
the flow of new ideas, new insights, new views of the changing business environment.
Why is it done? Because it's easier on the manager — do I want to hold onto this guy or
go through the hassle of trying to hire and train someone new? And it's easier on the

employee — there's equal hassle in looking for and starting a new job. Both parties are
inherently oriented toward choosing the "easy" way — to the very real detriment of both.
Your star employee, once a dynamo, once willing, able and eager to tackle any task, no
longer shows that drive. The problem may be outside personal problems — whereupon
you have the obligation to help him through that period. However, it's more likely that
he's simply no longer learning at the rate he was. He's no longer stimulated and
challenged — he's bored.


It's time for him to move on — and instead of trying to hold him with pay and benefits —
you should try to help him find a new job where he can continue to grow.

Cross-train.
People enjoy best doing what they do best. A born salesman will not be happy doing
account audits — despite the fact he may have spent many years getting an accounting
education. Everyone is good at some things — and lousy at others. But most people
don't get the chance to find out what it is they're good at. Give them that chance!
Say you hire someone in to do assembly. In time, they're doing that job competently —
maybe very well — but they've stopped learning. They may or may not become a
problem — but they're certainly not stimulated, motivated. You can raise their pay and
benefits, but as we've said before, that's a short-term fix — with long-term consequences.
Instead, try moving them on — into, say, incoming inspection. And once they're doing
that competently, let them run your machinery... or work in the paint room ... or in final
test, or final inspection, or shipping.
Forget any notion that there are men jobs and women jobs. And question any notions you
may hold about skilled jobs. Yes you may need a skilled machinist to produce custom
parts — but not routine parts. You may need a skilled technician to do generalized
testing — but not routine testing. If your needs are routine, hire a moonlighting
machinist or technician to come in to show your employees how to make those parts or
how to run those tests.

When an employee has all the jobs involved in building the product down pat, let them
plan, schedule and manage the whole production operation for awhile.
When they're doing that competently, move them into purchasing and let them do some
buying. And then into sales... and service, letting them handle some sales and service
calls for awhile. And then into accounting, letting them maintain the books, file the
required government reports, etc.
Even payroll. There are no secrets in a small company. Everyone knows how the
company's doing, what everyone else is making. And that "knowledge" is always better
based on real data than hearsay — simply because, regardless of the situation, the real
data is always better than the hearsay.
Where I've used "let" in the past few paragraphs — replace that with "expect". Set the
expectation that your employees will be moving among the jobs in your company. A few
employees will look forward to the prospect. Many employees will feel threatened by it.
Some will bide their time and learn to enjoy it. Others will feel overly threatened — and
leave. Let them! Those are the one's that are so fearful of change that they will become
unyielding obstacles when change you must.


Not all employees will like all jobs — or become competent in them. From my
experience, they'll realize it about the same time you realize it. Don't leave them there.
Move them on. Just chalk it up as one job they can't do. But don't look at it — or let
them look at it — as "failure".
There's nothing written in the heavens that says everyone should like and be good at
everything. What you're trying to do is to let people find out what they like and what
they're good at — and you're trying to find that out too.
So who's going to do all this "training"? Why the employees themselves of course. Who
knows the job better than the person who's been doing it? Another expectation — that
the employees doing a job are responsible for writing up and maintaining a written
description of that job!
You'll be amazed at how good these descriptions become as each employee "improves"

the writeup they've been given. And you'll find that not only the writeups improve — but
the manner of doing the job itself. The writeups give the employee a direct way to
improve the way the job is done.
Now all this cross-training does good things for your employees. You can take great
pride when one of your assemblers discovers he's very good at purchasing, loves dealing
with vendors — and finds a job with a bigger company at significantly better pay. Or
better yet, if he's a superstar, spins out on his own and, with your help, convinces a group
of companies — maybe including your own — to let him do the buying for the whole
group.
But it's also done good things for your company. You no longer have employees so
"key" that their absence — or their leaving — causes major disruptions in your
operations. And you've gained a climate of change so necessary in today's business
world. Every employee is continuously looking at how to improve the job they're doing
— not because of dictum, but because it's built into the job itself. You haven't
"empowered" your employees — you simply haven't taken away the power they came
with!
You've also gained a basis for a fair and objective pay system. For example, weight the
jobs by their "worth" to the company. A job that only a couple of employees can do
competently, and none "very well", would get a top weighting. One that most everyone
can do and is quick to learn would get a weighting near the bottom. Then weight each
employee according to their ability to do each job (e.g., from "can't do" to does "very
well"). The product-sum of those weightings gives you a pretty good measure of each
employee's "worth" to the company — and one that can be explained and justified to
them — and their pay should obviously bear some relationship to that "worth".
What about the superstar — the super salesman... or super purchasing agent... or
superstar engineer. If he's really a superstar and you're really concerned that you'll go


under if you lose him, make him an equal partner. (After all, you've just defined that you
don't have a business without him.)

If you decide that he's just not quite that much of a superstar, then do what we alluded to
earlier. Face up to the fact that you're not going to be able to keep him. Money will, at
best, keep him only a short time. Unless you can keep him stimulated and challenged —
which is unlikely unless you have a very fast growing company — it's just a matter of
time until you lose him.
So help him make it as an entrepreneur. Encourage him and help him to spin out on his
own, doing what he's doing so well for you, for a group of companies — hopefully still
including yours. That way you're likely to retain access to his talent. Otherwise, he's
gone — possibly to both your and his detriment.
One caution in all of this: This system encourages employees to make their own
decisions. But you can't ask people to make their own decisions — and then come down
hard on them when they make a bad decision. They're going to make mistakes. In a
sense, you want them to make mistakes — people learn from their mistakes, not from
their successes. But you're going to have to live with and clean up after their mistakes.
But the alternative is you making all the decisions — and you don't have time for that
(and there's the legitimate question whether all your decisions really would be "better").
In any event, your "job" is figuring out what the company should be doing in the future
— both internally and externally — not in handling all the day-to-day details. It's
awfully hard to see the forest when you're in the middle of it.

Conclusion
Maintaining employee motivation is just not that difficult if 1) you recognize that you
can't "buy" it, and 2) you think about your employee's needs at least as much as your
own. Would that more companies recognized these simple truths!


In a recent article, The Provisional Application, we outlined a cost-effective strategy to
get a product to market via Licensing. The downsides to Licensing are 1) the initial costs
(which the provisional application can minimize), and 2) a limited prospect set. (There
are only a limited number of product-line manufacturers selling into any given market —

many, many, many fewer than there are potential customers in that market. Obviously,
the fewer the customers you have to sell to, the lower your probability of making a sale.)
Since the alternative to Licensing is Venturing, the obvious next question is "Is there a
cost-effective strategy for getting a product to market via Venturing?" The answer is
definitely "yes" — for those willing and able to get out and hustle.
Venturing has its downsides too, the primary ones being 1) capital (which this article will
suggest means for minimizing), and 2) the time, energy and ability to get out and sell.
Most entrepreneurs consider the former to be their main problem, whereas it's almost
always the latter. Even if you have the capital, you're not going to be able to hire
someone to do your selling for you. You can't hire someone to sell something you've
never sold before simply because you don't know what to expect. If the product sells less
than expected (which is likely), you'll have no idea whether you have a product or pricing
problem — or an incompetent salesman. (Keep in mind that the one thing every
salesman sells best is himself.)

Venturing vs. Licensing
So which is better — Licensing or Venturing? It depends. Licensing is always an
option. Venturing may not be. If the product's complicated and expensive or if its
market is dominated by a few big companies — a new automobile, airplane, washing
machine, disposable diaper, etc. — successful Venturing isn't very likely, even with a
world-beater product and the best of credentials. Licensing is easy to test. Following the
strategy outlined in The Provisional Application article, you can know within a few
months whether Licensing's a viable path. With Venturing, it's likely to take several
years to know whether you have a viable business.
For suitable products, it's likely you'll make more money Venturing than Licensing —
provided you make no serious mistakes. With Licensing, you're passing 2/3 to 3/4 of the
potential profits from the product to the licensee in return for their investing their
knowledge, effort and money — and taking the risks — to bring that product to market.
If you can successfully bring the product to market yourself, you'll not only capture all of
those earnings — but you may well be able to turn around and sell your company to that

same licensee for a substantial multiple of those earnings — but don't underestimate the
risks in doing so — or the time, work — and luck — required.

Venturing Decisions
If you choose the Venturing route, the first decision you'll have to make is whether or not
to seek equity investment. Unless you're an experienced entrepreneur — and understand
very clearly what you're getting into when you accept other people's money — my


recommendation is that you not. Anything you can accomplish with money, you can
accomplish in other ways — with time, imagination, and chutzpah. If you do decide to
seek an investor, look for one with an established record of entrepreneurial success —
and be prepared to turn control of the company over to them (or their assignees) if/when
they think it's necessary. (If you falter, it's going to happen anyway — better you accept
it on the front end and plan for it.)
If you choose to bootstrap (i.e., proceed without investors), the next decision you'll have
to make is whether or not to seek patent protection. Unless you're sitting on some basic
(i.e., clearly licensable) technology, my recommendation is that you not — on the basis
that most small businesses simply cannot afford to defend their patents. Any product that
sells very well is going to get copied whether it's patented or not. All a patent is is a
license to sue. And a typical patent infringement suit starts at like $250,000. And the
better the product is selling, the more infringers you'll have to sue. If you find this
decision difficult, try to find a patent attorney who'll give you a written guarantee that
he'll defend his work against all infringers — on spec (i.e., without fees, but with a major
portion of any proceeds resulting from such suits). If you can find a patent attorney
who's willing to take that bet on your technology, it's likely worth betting on. If you
can't, it's likely not — and the decision is made for you.
So... for purposes of this article, we've decided no investors, no patents. What we're
going to do is try to get the product into the market as inexpensively as possible, try to
make some money — and worry about competition if and when it comes.

Contract Manufacturing
The essence of this strategy is to use contract manufacturers to make the product. You
don't want to spend money to duplicate facility and equipment they already have. And
even if you did, where your time really needs to be spent is out on the road selling. Every
moment you're not in front of a potential customer incrementally increases your odds of
failing. And recall that, early on, you can't hire someone to do this selling for you.
To find contract manufacturers, start with a good Industrial Directory. Thomas Register
is the bible, listing all manufacturers in the U.S. in 20-plus volumes. However, you'd like
one specializing in your State, and there are several publishers of such directories (e.g.,
Harris Publishing, in Twinsburg, OH, 800-888-5900).
If you know (or can find access to) someone who works in a Purchasing Dept., you can
probably get them to loan you one (or even give you one that's a duplicate, last year's,
etc.) And if you can get them to mentor you, so much the better. Recognize that what
you're doing in this phase is what purchasing agents do for a living. A good purchasing
mentor can save you many hours, many mistakes, and much frustration.
The state directories are typically organized by city, listing all manufacturers in that city
with address, phone number, names of people, data on company size (sales, employees,
sq-ft, etc.) — and typically a short description of the kind of work they do. Look first at


the manufacturers in your own city. If there's someone listed there who looks like they
might do the kind of work you want done, call them. If they do that kind of work, make
an appointment to go in to meet with them. If they don't, ask if they know of anyone in
the area who does. Bouncing back and forth between referrals and the directory — and
spiraling outward from your city — you can find as many as you wish.
Always approach contract manufacturers "looking for a quote" on tooling and piece-price
at various quantity levels, e.g., 100, 1,000, 10,000 pcs. You can, and should, approach
them as early as possible — even if all you have is a rough sketch.
Recognize that every contract manufacturer was started (and most are still run) by a

skilled tradesperson who had enough on the ball to start his own business. These people
know their particular manufacturing process(es) better than most engineers. When you
meet with them, be prepared to "pick their brain": Is there a better approach (or process,
or material) for making this? What are possible manufacturing problems? What tradeoffs between piece-price and tooling costs are available? Etc.
Pin them down on what data (drawings and/or specs) they need to give you a good quote.
If there are parts of generating that data that you don't feel competent to do, ask if they
know of anyone who can do those parts. Every contract manufacturer has a network of
outside tradespeople and professionals that they can call on when they need related work
that they don't do in-house.
If you're inexperienced with juggling the trade-offs between design and manufacturing
processes — or working with contract manufacturers — you should try to get at least a
dozen quotes. You'll learn something new from each one. And be prepared to cycle
through them several times as you pin down your design and specs.
But be sensitive to their time. They're busy trying to make a living and can't afford to
spend hours with you in rambling discussions. Prepare for your meetings — with written
materials you can leave them, with questions you want to ask —— and try to conduct
those meetings as efficiently (and professionally) as you can.
If you're worried about disclosing proprietary data to them, most contract manufacturers
will sign a non-disclosure agreement. Such an agreement basically says, "In return for
my showing this to you, you promise to treat it as confidential material, not disclose it to
others, not to use it yourself". With such an agreement, you are as protected under
contract law (at least with that party) as you are with a patent under intellectual property
law. Suitable forms can be found in most inventor books. If you're going to ask that
such an agreement be signed, be sure to verify that they will before setting up a meeting.
My own personal opinion is that such agreements are generally an unnecessary hassle
and impediment to doing business with contract manufacturers. Of all the risks facing a
new venture, having a product copied by a contract manufacturer — especially a product
whose sales have yet to be proven — has to rank way down near the bottom. Contract

manufacturers sell manufacturing services. They're comfortable selling those services —
and are very aware that selling products is a whole different bag.
Once you have your quotes — if you have the money to pay for the tooling and initial
inventory — do so. Then take that inventory out, sell it, and use your proceeds to go
back and buy more.
However, if you don't have the money to pay for the tooling and initial inventory, then
cycle back through the contract manufacturers who quoted — and try to work a deal. I've
seen inventors talk contract manufacturers into doing their tooling and initial inventory
on nothing more than a promise to buy from them for a couple of years. I've seen others
go into 50-50 partnerships with them — "you do the manufacturing and I'll do the
selling". And everywhere in between.
Recognize that contract manufacturing is a service business. Like all service businesses,
they have minimal control over their workload — everybody wants everything at once
and then nobody wants anything. But they're a very high-overhead service business —
during a downswing, they still have to pay rent on their facility, still have to make lease
payments on their machines, still have to pay their utilities, still have to keep their key
people employed. During a downswing, it literally costs them nothing more than raw
materials to do your tooling and initial inventory. Otherwise their machines would be
sitting idle and their people would be sweeping floors and cleaning shelves.
However, recognize that you have to sell them on doing this for you. They've all been
burned by "deals" in the past — or know someone who has. And selling at marginal
costs sets a bad precedent for their other business. But a part of them really wants to be
sold. A stable product-line can be a godsend to their service business — during
downswings they can simply build product into inventory to smooth out and buffer their
workload. Bottom line — you have to convince them that — if they invest in making
you your first batch — it's 100% that you'll sell them — and quickly. And if you have
trouble convincing them, that just means you're not ready to get out and sell that product.
You still have some serious homework (or soul-searching) to do.

Selling

That was the easy part. Now comes the hard part. First decision in selling is pricing —
because that determines the distribution channels that are available to you. The product's
retail price (i.e., price to end-user) obviously has to be greater than your manufacturing
costs. If your product must retail at or below 2x your manufacturing costs, you're stuck
selling directly to the end-user — in which case your product better be a high-ticket item
(several thousand dollar price) to cover the costs of individual one-on-one selling, or a
product for a very narrow niche market in which you can reach those end-users very
cheaply (e.g., with a small classified in a trade magazine).
If your product can retail at 4x your manufacturing costs, you can sell through retail
stores and some catalogs. You'll sell to the stores at 2x your cost and they'll sell to the


end-user at 2x their cost. If your product can retail at 6x your manufacturing costs, you
can sell through wholesale and all catalogs. There's enough margin there to fairly cover
all intermediaries in most distribution channels.
These numbers are rules-of-thumb. They can vary considerably in different markets. To
refine them, get out and talk with a few of the people you expect to sell to and find out
what markups they operate on. For your own markup, project your expected operating
costs (selling costs, engineering costs, general & administrative costs) and desired pre-tax
profit. And be conservative — these costs are almost always underestimated by the
inexperienced.
With price established, now get out and sell. Most entrepreneurs initially target the major
accounts in their market, e.g., the mass merchandisers (Wal-Mart, K-Mart, etc.) for a
consumer product. That's generally a mistake. First, it's very unlikely they'll buy. Their
business strategy is to sell the 5-10 best-selling lines in each of their product categories.
They have many proven lines available to them — it's unlikely they'll choose yours
before it's "proven". Second, even if they have interest, they'll prove to be impossible to
negotiate with. They'll look at what they could make that product at in one of the
developing nations, add a couple of percent, and tell you to take it or leave it. Third, by
initially targeting those who could be high-volume users, you're collapsing your

"proving" phase. It is almost certain there are bugs in your product, in your packaging, in
your promotion materials, in your business systems. The greater your volume, the greater
the probability those bugs will prove fatal.
If you want to follow this strategy (i.e., bootstrapping), you might as well face up to the
fact that you're going to start at the bottom and work your way up. With a consumer
product, the place to start is with a few local (i.e., within driving distance) owneroperated stores. Sell your product into those stores if you can. Put it in on consignment
if you have to. Then help those stores sell your product off the shelf. By doing time in
the store if they'll let you. By getting the local paper to do a PR piece on you (with
mention of where your product's available). By placing an ad in the local paper, radio
station, cable TV, etc. Getting your product into the store is only 10% of the problem.
Getting it out (at a profit) is 90%.
Once you have several local stores making money on your product, they'll point you to
the sales rep or distributor who sells them that type of product. You can now likely get
their attention. In sales, what sells is success. Until you've "proven" that stores can make
money on your product, the people selling to those stores won't have much interest in
your product. Like the mass merchandisers, they want the 5-10 best-selling lines in the
market they're servicing. They have plenty of proven lines available to them. And
they're going to spend 90% of their time selling the 10% of the lines that are making them
90% of their income.
Once you have their attention, then you'll work with that rep or distributor helping them
sell more stores. Once you have them making money on your product, they'll point you