The company has identified that due to the fact that people are living longer; the population as a whole has become older . People are living longer, retiring younger, have more disposable income and an increased awareness of health and fitness. The latest figures from the research organisation MORI indicate that over twenty per cent of the population is over sixty and control eighty per cent of the country s wealth. The over fifties have a gross income of 457 per week as against the national average of 397. They are becoming more health conscious and enjoy more free time to devote to social and leisure activities. This trend is set to continue and Rostel has invested in research into healthcare products designed for the older (over fifty) consumer. In the short term it has repackaged some products that had reached their market peak and re-marketed them specifically for the older customer. Rostel also intends to apply this to the proposed Health and Leisure Centre in having facilities, attendants and leisure services for the old and the retired.
At present Rostel has determined that there is a general air of optimism and a feel good factor that will continue for several years. The effect is that people have more income and they are prepared to spend this on luxuries, such as fragrances and cosmetics. The increasing cultural awareness of the environment and use of cruelty free products, is not only the way that Rostel should research and manufacture its products, but that this should become a major marketing feature; informing customers about the natural and environmentally friendly products the company produces.
Rostel has been observing the trends in other markets and has noted the increased sales for fast-dry nail polish. Currently, fast-dry nail polish is estimated to have grown to a significant 25 percent of the entire nail polish market. This important innovation has been responsible for a pronounced rebound in the US nail care industry. The market, a combination of nail varnish and nail polish remover, grew from a value of $498 million in 1994 to a value of $633 million 1998 at an annual growth rate of 6.2 percent. At present the UK fast-dry nail polish market is small and there is a possibility of Rostel moving into this area. However, Rostel will be moving from its currently successful policy of operating in niche markets into the larger general market. This would mean competing directly with the major cosmetic producers and, even though the present economic factors such as interest rates and inflation are favourable, this would be too big a step to take. If this move were taken it would divert resources from the Health and Leisure Centre, which Rostel considers a safer though potentially less profitable venture.
Rostel has made full use of the latest improvements and innovations in research and laboratory equipment when it set up its research department. The company has reduced waste disposal costs, while at the same time furthering its aim of being environmentally friendly by installing a waste recycling plant. It has managed to reduce production costs by purchasing the latest bottle-labelling machine. The company s two second-hand vans have been replaced with new vehicles fitted with catalytic converters.
The role of stakeholders
Any individual, group or organisation with an interest in and potential to influence a company can be termed a stakeholder. These stakeholders are affected by and can in return affect a company. Ignoring these stakeholder groups can have a negative impact on an organisation.
Stakeholders can be broken down into two groups, direct stakeholders and indirect stakeholders.
Direct stakeholders (i.e. those that deal directly with a company) include groups such as:
Customers
Shareholders (of companies) or taxpayers (for public companies)
Suppliers
Creditors (such as banks and finance companies)
Employees (who can be considered dependent stakeholders)
Indirect stakeholders (i.e. those not directly involved with but are affected or can affect a company) can include such groups as:
Community groups/public opinion (at the local, regional, national and international level)
Competitors (the actions and policies of competitors can have a significant affect on a company)
Stock markets (London Stock exchange as well as foreign stock markets)
The media (a negative public image can be devastating to a company s success)
Other organisations (such as the various professional bodies, trade bodies and trade unions)
The government can have both a direct and indirect affect on a company. Use of legislation can directly affect a company, whereas the economic policies adopted by the government can have an indirect affect.
The major stakeholders and their possible influence on Rostel Fragrances Ltd are:
The employees from the directors down to the shop floor workers all have a vested interest in the success of the company to secure their job and present standard of living. Employees have a direct influence on the company as their work performance can greatly affect the production and effectiveness of the company.
Caithness and Sutherland Enterprise, is a government organisation which promotes and provides finance for businesses in the north. They have an interest in Rostel as the company provides employment and creates wealth in the county. CASE has provided support, both in expertise and finance to Rostel in the past especially when it came to the company s location in the Caithness Enterprise Park in Thurso where it receives much reduced rent and rates charges.
The Local Banks have not only a direct interest in Rostel, providing loans and other bank services, but also an indirect interest in that all of Rostel s employees have accounts with them. So the growth and prosperity of Rostel and its employees means business for the Banks.
The Suppliers both local and national have an interest in Rostel as the company provides a market for their product and services. This not only includes suppliers of raw materials such the makers of plastic bottles and containers, but local services such as window cleaners, gardeners, electricians and many other local businesses, all of whom are very dependent on Rostel for their business.
The Local Community has an interest in Rostel as the company employs over a hundred employees, all of whom spend a great deal of money in the local shops and services. This stimulates the local economy providing much needed wealth locally and creates even more jobs.
Strategies designed to motivate employees
It is important for a company that aims for high levels of performance that it has a properly motivated work force. A company has to first identify what motivates an employee and then develop a strategy that utilises that motivation for the benefit of the company. As individuals have different motivations the strategies adopted must be tailored to suit the individuals needs and wants.
Theories of motivation
To achieve a high level of performance from an employee they must be properly motivated. This means that the job and its rewards are appropriate to the employee s needs and wants. Failure to do so will result in a demotivated workforce and as a consequence poor working performance. Identifying what motivates an employee and providing that motivation is very important to the company for productivity and an employee s job satisfaction.
There are many theories about motivation and its applications in the workplace. There is Taylor s Instrumentality theory, which states that people work basically for money. To increase an employee s motivation increase their pay. The problem with this theory is that this is a short-term answer and to sustain or increase motivation further, more money must be paid. The inherent flaw in Taylor s theory is that people work for other reasons as well as money.
This fact is recognised in the needs theory as proposed by Maslow, Alderfer and McClelland. Maslow laid out a hierarchy of needs that an individual would progress through to satisfy his needs. The first need is physiological food, water and sex. When a person has secured this need he will move to the next, which is safety protection and security. Once these two have been satisfied the social needs are met love and companionship, then ones esteem self-respect and the respect of others, before the final stage of self-fulfilment growth and development is reached. Maslow states that a person will secure his needs on one level before moving to the next. This theory has been very influential in the past but it is now generally accepted that people have different priorities and therefore, do not in reality operate within such a rigid hierarchy.
Alderfer simplified this theory into three categories: Existence needs, which are concerned with survival; Relatedness needs which stress the importance of interpersonal and social relationships; and Growth needs which are concerned with the individual s intrinsic desire for personal development.
McClelland adapted a similar theory for the motivation of managers which identified three main needs: achievement in the form of competitive success and excellence; affiliation, which is the need for human relationships and finally power, which is the need to control and influence others.
Herzberg two-factor model divides the wants of employees into two groups; the first group revolves around employees need to grow and develop in their job and the second, which is pivotal to the first group, establishes the employees need to be treated fairly in regards to working conditions, supervision, compensation and administrative practices. Herzberg establishes that the first group provides the motivation while the second only prevents job dissatisfaction. This theory has recently come under heavy criticism due to its over simplicity and limitations.
The Process theory or cognitive theory conjectures that it is people s perception of their working environment and the ways in which they interpret and understand it, that determines their motivation. This theory has gained in popularity as it is deemed to be more realistic and practical. It states that there are four processes that motivate a person. They are:
Expectations (expectancy theory), which state that a particular action will be followed by a particular outcome and the certainty in this, will motivate an individual. Change and uncertainty will demotivate a person.
Goal achievement (goal theory), when specific goals are set performance is higher
Behavioural choice (reactance theory), which proposes that people can choose their behaviour to satisfy their needs. If this freedom of choice is threatened they will be demotivated.
Equal treatment (equity theory), which basically states that people will be more highly motivated if they are treated fairly than if not.
Motivational Strategies
A motivation strategy is designed to improve an employee s performance. To be effective it must be relevant to the employee s needs, wants and drives as established by the motivational theories described above.
The main motivational strategies used by organisations are:
Rewards. Put quite simply, by paying an employee more money this will increase performance. This is the basis for Taylor s Instrumentality theory and while it will work in the short term eventually an employee s performance will drop and another reward may be necessary. Not only will this result in increasing labour costs but there is an inherent weakness in this theory in that people are not solely motivated by money. Rewards does not just include wages, but also various benefits such as pensions, company car, sick pay, insurance cover etc. These must be relevant to an employee s needs and wants to be effective.
Rostel, in the Christmas build-up offered its employees a handsome shift allowance to work around the clock in unsociable hours. This was effective at first, but after several weeks the employees became dissatisfied with the long unsociable hours and many returned to normal hours. To motivate employees to work the night shift Rostel increased the allowance. However, this had little effect as employees have satisfied their need for extra money at this time of the year. This demonstrated where Taylor s theory breaks down and that other theories, such as Alderfer s which established that once a persons existence needs are met, further increases in money will not in itself motivate an employee.
Financial incentive schemes such as a commission based or performance related strategy motivates an employee by the fact that the better their performance the more they will earn. This would imply that under Taylor s theory, the employee would be self motivated and work as hard as possible to earn as much as possible. This is not the case however. Applying Maslow s hierarchy of needs theory, an employee will first of all satisfy his basic physiological and safety needs. Financial incentives will provide the motivation to do this. However once the physiological needs are met financial incentives will no longer motivate an employee, instead they will be motivated by other factors such as social needs, esteem and self-fulfilment.
In the past Rostel motivated its Sales Department simply by commission, reasoning that the more the salesman sold the more he earned for himself. At the start this was effective, with high sales figures. However, very soon the growth of sales started to fall as the Salesmen were now earning enough to meet their basic needs. The salesmen were now making a comfortable living and there was little incentive to work harder to increase sales. Increasing the rate of commission was not the answer, as this would simply mean more money for the same effort. What Rostel did was to look at Maslow s hierarchy of needs and realise that money would have little effect on motivation and that they would have to look at the other levels of needs such as social needs, esteem and self-fulfilment. With this in mind Rostel embarked on a program of involving the salesmen more in the company. The aim was to make them feel part of the team (fulfilling the social aspect); providing recognition for their efforts (esteem) and finally to provide them with the training and advancement necessary to fulfil their need for self development.
Teamworking strategies can motivate employees by the fact that as man is a social animal people work better as part of a team. Maslow in his hierarchy of needs states that there is a need for acceptance as part of a group. Being part of a team satisfies this need for social interaction. The benefits are that people perform better when sharing a common task; the other team members providing comfort and reassurance and also that a team can achieve more than its constituent parts. The disadvantages are that group dynamics may cause rifts that make the team ineffective and not only does it take time for a team to develop but when a member is removed or missing the team may suffer as a whole.
In the Production Department of Rostel the three production lines each operate as a self contained team. They know each other and their respective roles. Each has a knowledge and expectation that what they and their team-mates do will have an expected result. There is comfort in this that motivates the individual and the team (the expectancy theory). The team can produce more as a unit than as separate individuals. However if one of the team is sick and another employee joins, there is uncertainty and a general demotivation of the team as a whole until the new member is accepted.
Job enrichment strategies are those that recognise that it is not only extrinsic factors (pay, praise, promotion etc,) which motivate people but also intrinsic factors such as responsibility, freedom to act, empowerment to make decisions, interest in the work, being challenged and having the opportunity to develop. By designing job roles to provide these factors the motivation of the employee will be increased. While this can lead to a greater sense of job satisfaction and higher commitment from the employees it can create problems with control and in monitoring employees performance. Too much delegation to employees can cause the company to lose unity and the employees can be working at odds with one another.
In Rostel s Sales and Marketing Department there was an attempt to motivate the staff by empowerment. The employees were given greater authority to make decisions, increased responsibilities and the freedom to act. This did result in greater performance; sales figures were up and, in the case of the Retail Outlets, customer service figures were at a high. However, this led to the employees and their respective departments to stop working together and to start operating as individuals with their own objectives and standards. Coupled with the lack of communications and other structural problems this led to the recent chaos in the Sales and Marketing Department and subsequent negative public image of Rostel.
Goal Setting strategies operate on the principle that motivation and consequently performance are higher when an employee has a set goal or target to achieve. Two things are vital for this concept to work. This is that the goals and targets should be agreed between the management and employees and that there is constant feedback to maintain the level of motivation. The strength of this strategy is that the management and employees have agreed on realistic goals and targets in which the employee has the resources and motivation to achieve. There are weaknesses, however, in that management can set targets that fail to get the real support of the workforce, and provide little feedback so that the employees have little knowledge of how they are actually performing. Both these weaknesses can demotivate employees.