Diaco’s environment focus is appealing to many people, and particularly as the company donates 1% of its revenues to environmental groups.

Diaco Pharmaceuticals is an Australian researcher and manufacturer of pharmaceutical products, based at Bondi Beach in Sydney. They are perceived as enlightened and a protector of the environment. Their goal is to produce the highest quality products with the minimum negative impact on the environment, which is an inspiration to their 250 employees. While some mission statements are meaningless general statements, Diaco’s “green” philosophy guides all decisions. Despite strong competition from larger multinational corporations, Diaco has developed a strong reputation in the industry.

Diaco realise that having a highly motivated workforce is the key to survival in a highly competitive environment. The company believes that the two approaches used to keep employees performing well in many other large corporations have been by:

1. ruling by fear with aggressive Theory X management style, or
2. using a “feel-good” approach with a kind and gentle management style and generous benefits.

However, neither approach is ideal, since a recent survey found only a quarter of Australians felt passionate about their work. Other companies have tried different approaches, by stressing continuous improvement, and making their employees feel comfortable by trusting them and giving them the equipment and time needed to do their jobs properly.

Diaco provides a day care centre and pays medical insurance for all employees, including casuals. On very hot days, the CEO encourages employees to take a break at the beach, but the company also requires hard work, creativity and teamwork. Those who do not fulfil these requirements do not keep their jobs for long.

Diaco’s environment focus is appealing to many people, and particularly as the company donates 1% of its revenues to environmental groups. Few Diaco personnel are there for the money, since the company pays at the market rate, or slightly higher. The main rewards are not monetary. Employees can take up to 6 weeks off at full pay working for environmental groups, and if they want to pursue their studies, the company pays 50% of their tuition fees. Diaco’s culture attracts talented applicants and, on average, they get over 500 applications for every job opening.
(Note: This is a fictional company case study based on a number of real case studies)

1. How can equity theory explain the motivation of employees working at Diaco?
2. To what extent is Diaco’s approach to employee motivation consistent with expectancy theory? Discuss.

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