Motivation Theories: Maslow’s Hierarchy Of Needs

In this chapter the relevant theories to the research question will be presented. Firstly we will present basic theories of motivation and talent retention approaches that provide an insight in our first research question which is: “How to motivate and retain Chinese employees in MNC?”

Motivation theories

Motivation is a hidden force to enable organizations to keep talent. Vaiman and Vance(2008) claim that what people view as a motivation is grounded in their individual beliefs, values and attitudes. And these hidden influence and emotion can vary among cultures and continents. Therefore, it is necessary to review the major content theories of motivation in order to provide the basis for talent management.

Maslow’ hierarchy of needs

Abraham Maslow (Goble 2004) presented his famous Hierarchy of Needs theory. According to Maslow, people were “motivated by a number of basic needs which are species-wide…” (Goble 2004: 50). They were driven by basic needs, growth needs and self actualisation needs. Basic needs were the physiological needs for survival such as food, shelter, sleep, and so on. When these were satisfied, man turned to the safety needs which referred to the need to be healthy and normal physically. In the context of business it referred to job security as well. Then came the need for belonging and love which were necessary for growth. People needed to socialise and develop trustful relationships in order to function in their circle. Furthermore, they needed esteem-building factors like self-respect, confidence, competence, mastery, appreciation and independence. And lastly, people have the desire to know and understand the environment around them, which were critical for their mental health (Goble 2004). Maslow’s Hierarchy of Needs (Goble 2004) has been a valuable contribution to the field of motivation as it helped theorists to understand the tangible and intangible nature of people’s motives. However, Maslow’s theory is an America-dominated, therefore this theory may has limitations when applied to Chinese work organizations. As Hong(2000) argued that Chinese have their own hierarchy of needs based on Eastern culture. Many Western firms underestimate many cultural messages in the Chinese market. For instance, Chinese employees put love issues ( i.e. family) on the highest positions of their life.

Alderfer’s Existence-Relatedness-Growth (ERG) theory

On the contrary, Alderfer’s Existence-Relatedness-Growth (ERG) theory argues that more than one level of needs may be activated at the same time and there is no orderly progression through level of needs. Employees can chase personal development while existence and relatedness have not been fully satisfied. It means that companies should recognize that an employee has multiple needs and able to motivate workers on multiple areas simultaneously. The ERG theory acknowledges that if a higher order need is frustrated, an employee may return to increase the satisfaction of a lower order need. (Alderfer, 1972).

McClelland’s Achievement Motivation Theory

In David McClelland’s “Acquired Needs Theory”, he identified three main arousal-based, and socially developed motives: the achievement motive, the power motive and affiliative motive. He suggests that employees can be aroused to perform certain tasks, if their personal needs conjunct (McClelland, 1987). Thus application of these three factors in talent management will allow companies to motivate employees effectively across different kinds of boundaries such as geographical and cultural.

Adam’s “Equity Theory”

Adam’s “Equity Theory” focused on employee’s feelings of how fairly they have been treated in comparison with the treatment received by others. Employees pursue to gain equity between the contribution (input) they bring to the organization and the outcome (i.e. promotion) that they receive from it and compared these treatments with others. If the input versus outcome relationship is fairly balance, the employees are more likely to be motivated. On the other hand, if the employees feel their treatment is unfair, negative behaviour as a consequence could happen. i.e. leaving the field (Adam 1965).

Theory X and Y

Douglas McGregor (1960) had established that there were two approaches to management. Theory X assumed that people disliked work, and needed to be coerced or directed towards organisational goals. People will always avoid responsibility. Alternatively, Theory Y assumed that people were interested in their work. They did not need to be directed and they took on responsibility to solve business problems voluntarily because they were genuinely interested in the organisation’s progress (McGregor 1960). A cross-cultural comparison of managerial styles shows that Theory X is more applicable in a Chinese context, whereas Theory Y in the West (Evans, Hau, & Sculli, 1989).

Chinese cultural messages

Many literatures argued that basic motivation theories have limitations when applying these theories in China. Child (1994) indicates most of existing theories are based on Western values, in order to determine the effective motivation factors for Chinese employees, it is necessary to concentrate on cultural messages and is realized in social interaction.

Chinese people have unique characteristic of Chinese culture. To achieve success, many cultural considerations must be addressed and it is important to understand the Chinese mentality.

In spite of various Chinese philosophies and religions that have shaped Chinese values, Confucianism has probably exerted the greatest influence and Chinese traditional values have been dominated by Confucian (Zheng 1997).

Confucius emphasized the individual and the community are closely related in order to achieve humanism and a social order in this world, people show seek virtue as the goal. The key messages of the Confucian morale are self-discipline, social harmony, strong family social collective, and reverence for education which had positive effects on Chinese people (Confucius 1992). However, in late 1950s, Mao ZeDong’s (former party chairman) radical socialist ideology and series of political campaigns (i.e. Cultural Revolution) had distorted the lives of Chinese people. A strong ‘psychological block’ developed in Chinese society. People began to have conservative point of view and feeling of suspicion- distrust of others (Bettignies and Tan 2007).

After generations of cultural change most of the Chinese have been influenced by a mixture of values. As a result, two elements that are considered of key importance in the Chinese context: “face” and “guanxi”.

In Chinese business culture, face defines a person’s place in his social network and the measure of his social worth. A person’s reputation and social standing rest on saving face. Therefore, “Saving face” is particularly important to Chinese. In order to save harmonic relationships, managers should avoid putting their Chinese employees in “face loss” situations. For example, managers must respect the need for face when disciplining Chinese employee and never reprimanding Chinese employee publicly. Managers need to use “soft” constructive criticism and indirect methods to get your point across their points (Graham 2003).

In addition, another important issue is the concept of “Guanxi”, it is very much like the networking in the West, “Guanxi” which literally means “relationship”. In Chinese community, people are closely connected by “Guanxi”. An important implication of Guanxi for HR is that Chinese employees seek to establish their personal connection at the workplace. They like to maintain a close and harmonic relationship with their colleagues and the employer, while westerns prefer to separate their work and personal lives (Graham 2003). By having good relationship with Chinese employee can motivate employees and offer various benefits to organization. As Tian (2007) mentioned, Chinese employees tend to think that a good relationship with their boss is more important than any benefits or rewards. Thus, harmonious work environment and Interpersonal trust is crucial in achieving business success in China which is built very much through “Guanxi” (Graham 2003).

To sum up, MNCs should pay close attention and respect to those differences in culture and society.

Talent Retention tools

Considering all those facts, this is important to know what the employer can do to motivate and retain their Chinese employees. Vaiman and Vance (2008) suggest that Motivation can be achieved by extrinsically through monetary incentives or intrinsically through non-monetary incentives.

Monetary rewards

Monetary rewards including all types of compensation and benefits (C&B) packages such as salary, performance related payment, deferred compensation plans, social and commercial benefits and etc (Tian 2007). Monetary rewards can satisfy employees’ physiological needs and it is an effective tool to retaining talent (Vaiman and Vance 2008). Refer to Maslow’s Hierarchy of Needs, who suggests the physiological needs have to be satisfied before concerning with the higher order needs. This may be the reason to explain why money is still the best reward for the majority of people.

Non-monetary Rewards

On contrast, non-monetary reward is another essential tool for retaining employees. It can be use to satisfy employees’ higher other of needs such as the needs for achievement, affiliation and power (McMlelland 1962). Non-monetary rewards include: training and career development, employer branding, ect. (Tian 2007).

Further we will consider these retention tools in Chinese environment.

Extrinsic motivation

Firstly we start from the monetary side- compensation and benefits. According to a recent survey conducted by Waston Wyatt in China, the number one reason for Chinese talents to leave their current job is to find a better-paid job (Leininger 2004). Therefore, it is extremely important for MNCs to offer a competitive compensation and benefits package, in order to retain the wanted Chinese talent.

The following components are normally included in the packages that MNCs offer to local employees, and therefore they are discussed here in detail.

The first element is Salary-salary is the fixed amount of money pay to an employee for work performed and is the largest component in a C&B package. Due to the weak social security in China, Chinese employees tend to place more value on money than Western employee (Jones 1997). Therefore, MNCs need to consider a number of factors when they design the salary level for Chinese employees. For example, the cost of living and level of economic development vary significantly from city to city, so the salary for equivalent positions may vary as well. Leininger (2004) points out that first-tier cities such as Beijing and Shanghai enjoy the highest salary level, followed by second- and third-tier cities. Moreover, the salary level has been increasing at a dramatic rate in China. Since the rapid economic growth, the annual salary growth rate has been risen up to 8% in recent years, and the trend is expected to continue in future (Tian 2007). As a result, it is necessary for MNCs to have a general idea about local compensation level and salary growth rate before designing their own competitive packages.

The second element is Performance related payment-performance related payment (i.e. bonus) is the portion of a C&B package that is related to performance. It is very popular and accepted by many MNCs in China. MNCs believed that performance related payment is an effective tool to given an incentive for compensation to meet certain goals. For example, complete a specified sales target. In addition, it is able to encourage local employees to be more creative such as propose a new idea to increase efficiency in the work place, improve the quality of the output, etc (Melvin 2001). To an extent, performance related payment help to attract local employees and keep them help in the company.

The third element is deferred compensation plans- the deferred compensation plans is also called ‘golden handcuffs’. Deferred compensation plans are popular with MNCs in China, and are offered in the form of a contract-related gratuity. For example, If the Chinese employee stay with the company for a contractually specified length of time ( i.e. 2 years), at the end of his/her contract. He or she would be given an extra year’s salary as a reward. The deferred compensation plans is useful in retaining Chinese employees because it provides a financial incentives for talented Chinese employees to remain in the company. Now-days, MNCs have begun offering a new version of ‘golden handcuffs’ to young talented Chinese employees who like would like to get a degree at a oversea university. They offer a full scholarship for these employees and in exchange, the employees have to work for the company for specified length of time after completing their degree (Tian 2007).

The fourth element is social and commercial benefits. Social benefits is made mandatory in China, it refers to contributions to government-run social insurance schemes, which cover pensions, medical care, unemployment, work injury, child birth and housing, etc. The benefits are borne by both employer and employee, while employees’ 30 and 40 percent of payroll is paid to the state, of which around 50% is paid by employers. In recent years, Chinese employees are increasingly aware of the importance of social benefits, due to rising costs of housing and medicare in China. In this case, Some MNCs are even willing to pay benefits of more than regulated ratios to retain their employees. By contrast, commercial benefits refer to the benefits offered by an employer to an employee on a commercial basis. Many MNCs in China provide a numerous commercial benefits for their employees such as offer loans at below-market interest rates, monetary assistance with single child family or even payment of wedding. Both social and commercial benefits are reported as useful to inducement to employees to remain in the company (Tian 2007).

Intrinsic motivation

However, monetary rewards are not everything employee wants. Once compensation reached a certain level, employees are likely to look for higher order of needs such as career development opportunities. Therefore, it is necessary to consider these non-monetary factors that can motivate and retain employees.

As Jones (1997) points out that it is very important to understand Chinese employees’ expectation. For most Chinese employees, especially those top performers joining a MNC not only for a high C&B package but also for the opportunity to receive advanced training and learn western business methods. Those top performers are clearly aware of the skill gap between them and their Western counterparts, so they are eager to improve their own knowledge and skills. Additionally, providing training and career opportunities to employees can improve employees’ commitment to the company. As Leininger (2003) stated that the heart of retention is long term employee commitment. He divided employees into two different groups. They are “satisfied” and “committed” employees. The satisfied” employees can easily be retained by satisfying their monetary incentives while the “committed” employees tend to stay longer with companies even without monetary incentive. A global research conducted by Waston Wyatt shows that committed employees are more productive and efficient than those whose employees showed low commitment. Leininger (2003). Therefore, it is important that MNCs recognize the importance of training and development opportunities to their Chinese employees and demonstrate a commitment to training, development and career path development for them. Besides, organizational factors can also influence talent retention such as corporate culture, communication, leadership behavior are able to suffice employees’ needs for affiliation (Chew 2004).

In the Chinese case, the leadership behavior is one of the most important motivation and retention drivers for Chinese employees. For many MNCs, the meaning of a “good leader” for Chinese people can be far more complicated than what they have seen in their home countries. Leadership in China has specific connotations. According to the research conducted by Craig Pepples, to achieve success in Chinese environment, foreign leader need a strong leadership style to build a team. Chinese employees respect those leaders who have a strong leadership style. They expect leaders to conduct themselves like emperors and always able to give them instruction to follow. Moreover, Pepples also insists that to be an effective leader, foreigners need to create a culture of teamwork, showing their personal commitment to the employees and care for each individual (Jones 1997). Therefore, Chinese employees are most likely to want to stay and work for an organization if they had a good manager or boss, who recognized individual contribution, and had great company leaderships (Howard, Liu, Wellins and Williams 2007).

These studies above are just a few examples of tools regarding talent retention in Chinese context. When these retention tools are applied to Chinese employees, MNCs have to rank all the tools in order of importance, and then focus on several areas for motivation and retention talent (Vaiman and Vance, 2008).

Talent development in Chinese context

As we have discussed earlier, the number one challenge that MNCs facing when operating in China is the shortage of “qualified employee” within the Chinese labour pool. One of the solutions for MNCs to bridge this gap can be talent development (Woodland 2007). Jones (1997) emphasize that although the supply of Chinese “qualified” employee is far from enough to meet nation’s need in China, MNCs can develop their existing employees who can help to bridge the gap between the current competencies of employee and desirable in future. He suggested that the existing employees know how the company works. Employees who is ambitious, desire to move on and get advancement have the potential to become talented worker. They are “rough diamonds” for the company. By giving them the opportunity to develop, they can become a talented work (Jones 1997).

In addition, Rothwell (2001) identifies 5 strategies that can be used for narrowing the short talent gap. They are: Coaching, Special job assignment, Action learning, Job rotation, University-based programs.

Further we will consider all these tools in Chinese environment.

Mentoring and Coaching

Mentoring can be simply defined as a relationship establish between a mentor who is experienced, and a mentee who is not. The mentors use their personal experience, knowledge and skills, and offering advice and guidance to help mentees to develop their knowledge and career progression such as making realistic plans and objectives, in order to improve the mentees’ effectiveness and develop their potential. At the same time, mentees are giving the opportunity to access to the experience mentors’ mind set, and learn from their views, knowledge and their way to get things done in both formal and informal manner (Kram 1983).Today, companies are increasingly aware of the importance of mentoring. They recognize that mentoring is not only an effective tool to retain employees, it is also a significant way to ramp up the knowledge and skills of talented employees ( Clutterbuck and Megginson 1999).

In addition, Byrne (1991) categories the different types of mentoring arrangement. He identifies two main categories, they are: Professional (informal) mentoring and Formal mentoring. The Professional mentorship allows the mentor to have freedom on selection of his own mentee. Mentor is given the right to choice mentee based on his personal choice and it is not a compulsory aspect of an organization’s operation (Byrne 1991). The formal mentorship is a compulsory and core component within an organization’s staff training programs. It is used as a systemic policy issue and a standard part of management practice (Byrne 1991).

In the Chinese environment, the researcher expects that mentoring will met in Chinese culture because Chinese junior employees are eager to receive advice from senior staff. As they believe that senior staff who has more experience are more intelligent than themselves. Thus, they are willing to received advices from mentoring. The reason behind this, is because Chinese traditional values have been dominated by Confucian and Confucius theory emphasize that people should respect for age. As a result, an age hierarchy is entrenched in Chinese social environment (Jones 1997).