Herzberg’s Two Factor Theory

1. Using Herzberg’s two factor theory, what outcomes did Dan seem to want to achieve by the raise? (2 points)

Dan Price’s decision to raise his employee’s salary to $70,000 has been scrutinized by the media and has been questioned of having socialist influences. However, his decision was the result of more altruistic motives of trying to help reduce income disparity. Mr. Price’s decision can be analyzed under Herzberg’s two factor theory that suggests that there are two entirely separate dimensions that contribute to an employee’s behaviour at work. By raising salaries to $70,000, Mr. Price firstly removed any job dissatisfaction that employees may have harboured. This comes under the ‘Hygiene Factors’ of Herzberg’s theory, the lack of/presence of these factors can cause dissatisfaction among the workers. An increase in salary led to a more income-secure workforce that did not have to deal with issues with making everyday ends meet.

2. Using Adam’s equity theory, explain what tensions and reactions the raise created among employees. Feel free to refer to/quote specific employees. (4 points)

Dan Price’s decision to raise the salary floor to $70,000 has certainly led to some internal tensions that have been affecting the company itself. This organizational strain among the employees can be explained using Adam’s equity theory, under which an individual’s perception of how fairly they are treated compared with others can affect their performance. A rather unjustified increase in salary of most employees resulted in a state of ‘inequity’ that put many of the employees under pressure and caused negative reactions and some employees such as Maisy McMaster to quit her job. The first source of complain was from the people higher up in the organizational chart, with great experience and expertise who were dissatisfied with the fact that there was no difference in pay between them and the employees that were less qualified. This sort of inequity results in lack of motivation and desires to work harder. Maisy McMaster expressed this concern to Mr. Price but was ignored which increased tensions and led her to quit her job. The Gravity Payments case also demonstrates perceived inequity in the other direction. A lack of balance between the input to output ratio also resulted in a reaction from less qualified

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