The following appeared in a memorandum from the CEO of a consumer electronics manufacturing firm to the head of the company’s human resources department, who is responsible for hiring new employees:
“Eight years ago, our firm’s profits were increasing with each new employee we added. We discovered that each employee had the skills and motivation to generate more revenue for the firm than his or her salary cost us. However, for the past two years, our profit margin has been falling, even though we have continued to add employees. Thus, our newer employees are not generating enough revenue to justify their salaries. We must not be hiring new employees with the same level of skills and motivation as those we used to attract. Clearly, then, failures in the human resources department account for our falling profits.”
Discuss how well reasoned you find this argument. In your discussion be sure to analyze the line of reasoning and the use of evidence in the argument. For example, you may need to consider what questionable assumptions underlie the thinking and what alternative explanations or counterexamples might weaken the conclusion. You can also discuss what sort of evidence would strengthen or refute the argument, what changes in the argument would make it more logically sound, and what, if anything, would help you better evaluate its conclusion.
While it is true that the firm’s profits dropped over the last two years, it is not true that this failure was caused by a lack of motivation in its new hires. It could be that the company’s profits were in long term decline, and hiring new employees in the belief that they would boost profits was an exercise in futility. The human resources manager’s argument about the value of motivation is based on the premise that only motivated workers who possess the necessary skills can boost the firm’s profits. However, many studies have shown that workers with highly specific skills may not necessarily perform as well when they are motivated as when they are unmotivated. For instance, when a group of employees is given a raise, they will generally work harder, but if they already enjoy their jobs, the additional pay may be viewed as an ’employee bonus’ rather than as a wage increase. Moreover, a pay raise does not typically boost profit if the cost of providing the raise is greater than the benefit. For example, if the raises are offset by increased employee benefits, such as health insurance, then the firm may enjoy higher profits in spite of poorer worker performance
One of the weaknesses in the human resources manager’s argument is that he assumes that the new employees hired over the past two years were motivated primarily by high salaries. However, it may be more likely that these new employees were motivated by the prospect of working for a particular company. Employees who switch companies often cite better pay as the principal reason for their move. Fewer than 10% of employees actually leave a company because of pay. In addition, employees may be motivated to stay with their employer for another reason, such as a strong corporate culture, opportunities for advancement, or strong job security. Moreover, even if the new employees worked primarily from a desire to earn money, they may not necessarily have been as productive as the firm’s previous employees. The human resources manager’s assumption that the new employees were motivated by high salaries does not necessarily stand up to scrutiny. If, for instance, the new employees were not as productive, then their salaries would not be as high as they would have been if the other workers had been replaced by the new workers
Another weakness in the human resources manager’s argument is that he assumes that the previous employees were motivated primarily by high salaries. However, it may be more likely that these employees were motivated primarily by a desire to work for the company. Employees who switch companies often cite better pay as the principal reason for their move. Fewer than 10% of employees actually leave a company because of pay. In addition, employees may be motivated to stay with their employer for another reason, such as a strong corporate culture, opportunities for advancement, or strong job security. Moreover, even if the new employees worked primarily from a desire to earn money, they may not necessarily have been as productive as the firm’s previous employees. The human resources manager’s assumption that the new employees were motivated by high salaries does not necessarily stand up to scrutiny. If, for instance, the new employees were not as productive, then their salaries would not be as high as they would have been if the other workers had been replaced by the new workers
Finally, his argument assumes that the employees hired in the past two years were motivated primarily by high salaries. However, it may be more likely that these employees were motivated primarily by the prospect of working for a particular company. Employees who switch companies often cite better pay as the principal reason for their move. Fewer than 10% of employees actually leave a company because of pay. In addition, employees may be motivated to stay with their employer for another reason, such as a strong corporate culture, opportunities for advancement, or strong job security. Moreover, even if the new employees worked primarily from a desire to earn money, they may not necessarily have been as productive as the firm’s previous employees. The human resources manager’s assumption that the new employees were motivated by high salaries does not necessarily stand up to scrutiny. If, for instance, the new employees were not as productive, then their salaries would not be as high as they would have been if the other workers had been replaced by the new workers
The human resources manager’s argument appears to be sound on the surface, but closer inspection raises a number of questions that cast doubt on its conclusion. The fact that profits were increasing with each previous hire is evidence that the company was not paying its workers sufficiently. If the company could not or would not pay its workers more, then those workers would either quit or look for work elsewhere. Since the company had been unable to find replacements, additional hires would be expected to boost profits. However, if these new hires were not as productive as previous ones, then the profits would not increase. The human resources manager’s assertion that the new employees hired by the company were not as motivated as those hired in the past is also suspect. If we assume that the motivation of the new workers was tied to money, then the manager’s assertion that the profits were declining because of poor employee performance rests on the assumption that the previous employees were motivated primarily by money. However, if previous employees were motivated by the opportunity to work for this company, then it may not be possible to determine exactly how much that factor contributed to the profits of the company. Therefore, the manager’s argument should be supplemented or amended in order to adequately address the reasons for the decline in profits.