Great Business Ideas: Three-factor theory

Great Small Business Ideas to Start: Three-factor theory

Three-factor theory is based on the premise that workers have basic human needs that management can and should work to address. Creating an environment in which these needs are met results in enthusiastic employees.

The idea

During the last three decades of the twentieth century, American firm Sirota Consulting surveyed 237 organizations worldwide across a range of industries, providing more than 2 million responses, about what employees wanted at work. This research suggests that there are three primary sets of goals for people at work (this is known as “three-factor theory”): equity, achievement, and camaraderie. For most workers, no other goals are nearly as important. Also, these goals have not changed in recent times, and cut across demographic groups and cultures. Establishing policies and practices in tune with these goals is, Sirota believes, the key to employee engagement.

In practice

Meeting the goals of equity, achievement, and camaraderie is the key to high morale and engagement, and is a condition for long- term success. The extent to which these three factors hold true for everyone is less important than the fact that they matter a great deal to many people. Equity. This means being treated justly in relation to the basic conditions of employment.

These basic conditions are:

  • Physiological—such as having a safe working environment or manageable workload.
  • Economic—including pay, benefits, and job security.
  • Psychological—being treated consistently, fairly, considerately, and with respect.

Feelings of equity are influenced by a sense of relative treatment. For example, people ask themselves, am I being treated fairly in relation to my peers and colleagues? Achievement. This means taking pride in one’s accomplishments by doing things that matter and by doing them well, receiving recognition for those accomplishments, and taking pride in the team’s accomplishments.

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Sirota Consulting’s research suggests that this sense of achievement has six primary sources:

  • The challenge of the work and the extent to which an employee can apply his/her skills and abilities.
  • Acquiring new skills and the opportunity to develop, take risks, and expand personal horizons.
  • Ability to perform—and possessing the resources, authority, information, and support to do the job well.
  • Perceived importance of the job—knowing the work has a purpose and value, whether to the organization, customer, or society as a whole.
  • Recognition for performance—this is non-financial as well as financial.
  • Pride in the organization—resulting from the firm’s purpose, success, ethics, the quality of its leadership, as well as the quality and impact of its products.

Camaraderie. Employees like to have warm, interesting, and cooperative relations with others in the workplace.

The most significant aspects of camaraderie are:

  • Relationships with coworkers.
  • Teamwork within a worker’s business unit.
  • Teamwork across departments in a specific location.
  • Teamwork and cooperation across the entire organization.

Equity is the most important factor in shaping employee engagement. When equity is rated low, even if achievement and camaraderie are rated high, overall enthusiasm can be two- thirds lower.

Employee morale is a function of the way an organization is led, and the way that leadership is translated into daily management practices. Employee enthusiasm results in significant competitive advantage, as it impacts on all aspects of business success, including customer satisfaction. Finally, success breeds success, as morale drives performance and performance enhances morale in a virtuous cycle.