Business and Management

Research Project
Higher Level

“Should Shanta Garments Ltd change its motivational strategies to increase labour
productivity?”

Word Counts:
Executive Summary: 198
Written Report: 1996
Research Proposal+ Action Plan: 314

Acknowledgements

I would like to thank the following people:

My business and management teachers, Mr. Robson and Mr. Rao for their invaluable
guidelines The board of directors of the factory especially Mr. Khondoker Jamil Uddin
for providing and trusting me with the company figures and taking time off from his
busy schedule to answer my interview questions, without which my research would
have been invalid. Ruma from the management department for gathering the data
of the factory The workers of the factory for taking their time off to fill the surveys

Table of Contents

1. Research Proposal & Action plan

2. Executive Summary
3. Introduction
3.1. About the Company
3.2. Figure 1: Falling labour productivity
3.3. Current Motivation strategies: Lack of non-financial incentives 3.4. Investigation
Aim
4. Results and Findings
5. Analysis and Discussion
5.1. S.W.O.T Analysis
5.2. Motivational Theories
5.3. Profitability Analysis
5.4. Organizational Structure Analysis
6. Conclusion
7. Recommendations
7.1. Non-financial Motivational Strategies
7.2. Financial Motivational Strategies
7.3. Matrix Structures
7.4. Other incentives
8. Limitations
9. Bibliography
10. Appendix

1. Research Proposal and Action plan

Shanta Garments Ltd is an export oriented ready-made garment manufacturing

company in Bangladesh that has recently been facing a decline in labour
productivity. As a labour-intensive factory, labour productivity and effective
motivational strategies have a significant impact on company’s production and
profits.

The research examines how the factory could use a combination of financial and
non-financial motivational strategies to increase labour productivity. Motivational
theories used include Taylor’s scientific management, Mc Gregor’s theory ‘X’,
Maslow’s hierarchy of needs, Mayo’s Hawthorne effect and Herzberg’s motivators.
SWOT and profitability analyses provide insight on the company’s capability to
employ motivational strategies and to investigate external influences that may
affect motivation. Furthermore, the company’s organizational structure is analysed
to assess its affect on motivation.

The methodology includes primary research through interviews with the board of
directors of the factory to obtain information on its current motivational strategies
and statistical data on factory performance andsecond, surveying workers regarding
their opinions of the company and incentives provided. Secondary research includes
background information on the company and the garment sector. The method
provides both qualitative and quantitative data analyses to assess the limitations of
the company’s strategies and its financial capability in order to devise new
motivational strategies.1

The limitations of the research include the reliability of the data provided by the
factory, as directors and survey participants may be involved in window dressing
and external factors influencing factory performance such as inflation causing lack
of motivation.

Action Plan
2. Executive Summary

The introduction provides background information of Shanta Garments Ltd and

illustrates the problem of falling labour productivity. It lists the current motivational
strategies used and the aim of the investigation to change them to increase labour
productivity.

The findings section discusses the company’s performance in providing incentives

to workers and its financial capability to develop convenient motivational strategies
to implement accordingly.

The findings of the company’s current performance and motivational strategies are
analysed in the analysis section using tools such as SWOT analysis, motivational
theories, profitability analysis and organizational structure. The provision of financial
motivation and the company’s centralized structure is analysed to identify reasons
for lack of motivation such as inadequacy and loss of control as owners have shifted
priorities towards real estate business.

Subsequently, the conclusion section summarizes the research and deduces

whether Shanta Garments Ltd should change their motivational strategies.

Finally, the recommendation section uses the analysis of the company’s current
motivational strategies, financial ability and organizational structure to derive
possible motivational strategies and solutions the company could implement to
increase labour productivity such as provision of cheaper non-financial motivation to
fulfil Maslow’s Love and Belonging and esteem needs and adopting matrix structure
to increase interaction.

Word Count: 198

3. Introduction

3.1 About the company:

Shanta Garments is part of Shanta Group, which is a forerunner in Readymade

Garment industry in Bangladesh since 1988. It has a global client base and serves
international brands such as Tommy Hilfiger and Ralph Lauren2.

Current Problem:

3.2 Figure 1: Falling Labour Productivity

Figure 1 shows Shanta Garments experiencing falling labour productivity3 over the
five years (2004 -2008). The drastic fall of 7% in year 2008 from 2004 reflects the
persistent low motivation of workers.

3.3 Current Motivational strategies: Lack of non-financial incentives

Financial Motivation:

The factory primarily uses the following financial motivational strategies4:

Performance Related Pay (PRP):

Performance bonus: when workers exceed the set target, all workers receive 100%
performance bonus in cash Loyalty Bonus: Tk 10,000 paid to workers completing 10
working years in Shanta Garments Attendance bonus- fullattendance receives 10%
of salary

Provident fund: if someone puts in 100tk per month, company puts another 100tk
Per festival bonus: During the annual Eid, government regulations demands full
basic salary to be given to workers (60% of salary) whilst Shanta Garments gives
100% bonus. Fringe Benefits:

Free Treatment for workers after 10 working years in Shanta Garments, which
includes injuries during work and external health problems. Free lunch

Non-financial:

Annual Picnic

3.4 Investigation Aim:

Interviews with the board of director suggests that the company’s motivational
strategies are failing with increasing worker complaints5 especially due to falling
disposable incomes aggravated by rising inflation level6. With falling sales revenue
and increases in cost of production7, an increase in wages would aggravate the
situation. Hence, effective motivational strategies instead, should increase
productivity by satisfying the needs of the workers.

Thus, my investigation is on ‘Should Shanta Garments Ltd change its motivational

strategies to increase labour productivity?’

4. Results and Findings

Current Position of Shanta Garments

4.1 Figure 2: Falling Sales revenue from 2004 to 2008 = Budget Constraints

A fall in sales revenue8 is constraining the budget to spend on incentives causing

the company to be less responsive to workers’ demand for higher payor better
fringe benefits. It also restricts the company from providing sufficient incentives or
implementing effective motivational strategies.

4.2 Figure 3: Falling cost of incentives= fall in provision of incentives

Figure 3 illustrates that expenditure on incentives is decreasing9 over the 5 years

with only 0.69% in year 2008. The company decreasing motivators, to cut back on
its fixed and indirect costs, have adversely affected feelings of recognition and
appreciation of workers, leading to lack of motivation and lower productivity. 5.
Analysis and Discussion

5.1 Swot Analysis

The factory has sound knowledge of the RMG sector, therefore has the ability to
make effective decisions on implementing motivational strategies. The shift of
investment towards the real estate industry is causing the budget constraints with
less money retained to spend on incentives for garment workers causing
dissatisfaction amongst workers.

To increase productivity, profits generated from Real Estate firm could fund towards
recovery of garment factory through expenditure on labour research and
motivational strategies. The comparative advantage and easy access to resources
enables the firm to gain potential economies of scale.

Inflation rates have left garment workers with less disposable income causing labour
strikes and damaging the reputation of the factory to foreign buyers. The inelastic
demand10 for garment workers may increase cost of production if firms are obliged
to increase wages. 5.2 Motivational theories

Currently, the company believes that ‘money’ and financial rewards are the key
incentives to workers11, as the owner believes that workers do not need the
“exclusives” which is required in the more developed nations.

5.2.1. Current Financial Motivation12 Analysis: Failing

The advantages of the PRP are it provides an incentive for workers to strive to
exceed targets. Hard work is rewarded which is ‘fair’ and satisfies Adam’s Equity
theory.

However, targets maybe unachievable, which will create resentment and hinder job
performance. Loyalty bonuses and fringe benefits of free treatment for workers are
given once workers complete 10 years, which is a very lengthy period and may
cause workers to give up. Moreover, the stress caused by the pressure to meet
targets can hamper motivation.

Taylor’s Scientific Management:

Shanta Garments follows the principles of ‘Scientific Management’ proposed by

Frederick W Taylor. The company implements Taylor’s ‘differentiated piecework’ and
sets output and efficiency targets related to pay to increase productivity. However,
the division of labour makes job repetitive and leads to boredom causing lack of
motivation and lower productivity.

Theory ‘X’ Approach

The theory ‘X’ approach proposes the idea that workers are lazy and need financial
motivation or the ‘strict approach’ to be productive. This correlates with the owner’s
autocratic leadership style13 approach. The board of directors carry out the
decision-making only14 due to lack of education of workers15. However, this may
have caused workers to feel ‘unappreciated’ resulting lack of motivation and low
productivity.

Survey Results: Wages higher than Minimum Wage

The survey indicates 22/30 workers receive wages of 47% or more than the national
minimum wage16. However, 23/30 workers answered “no” to whether satisfied with
salary received17 and the other seven workers who answered “yes” claimed, “It
does not fulfil needs”. This indicates failure of financial motivation due to
inadequacy.

5.2.2. Non-financial motivation strategies

Maslow’s Hierarchy of Needs and Herzberg’s Hygiene Factor

Shanta Garment provides workers necessities and a good working environment (28
workers rated 4/5 for working environment)18. This means they are fulfilling the
bottom 2 levels of Maslow’s Hierarchy of needs: physiological19 and safety
needs20, as well as Herzberg’s hygiene factor21. However, although workers are
committed to their owner, the owners are not giving their full attention and have
shifted priorities. Hence, there is a lack of ‘love and belonging’ and ‘esteem needs’
i.e. top levels of Maslow’s Hierarchy.

Figure 4:

The annual picnics22 and a good working environment attempts to provide non-
financial motivation to fulfil Maslow’s “safety needs”. However, there is lack of
delegation, communication, teamwork and appreciation causing dissatisfaction
adversely affecting ‘esteem needs’. Moreover, workers are not sufficiently skilled23
to achieve ‘the self-actualization’ level.

The limitations of Maslow’s theory are the levels of needs are difficult to measure
and in a developing country, workers lacking education and with low living
standards are not motivated to achieve top levels. Mayo’s Hawthorne Effect:

Elton Mayo believed human relations at work are key motivators. Shanta Garments
produces in batches and organizes only annual picnics for colleagues to interact24.
Hence, there is lack of teamwork and interaction, which is causing dissatisfaction of
job. The theory proposes that workers perform better, when management take an
interest in the welfare of workers. Owners giving less attention and only providing
good working condition are causing discontentment.

5.3 Profitability analysis: Decreasing Net profit

Shanta Garments faces a fall in net profit leading to a loss in 2007 (68% decrease
from year 2006)25. The profitability ratio (net profit margin) in 2008 is 0.8%. There
is little profit to distribute to the shareholders to invest in the business26. Therefore,
less money retained for incentives and motivational strategies is leading to lower
motivation of workers and hence lower productivity.

5.4 Organizational Structure Analysis:

5.4.1 Figure 5: Centralized Structure Analysis:

With a short chain of command and a wide span of control, the board of directors
performs all the decision-making27. Decisions simply pass to the supervisors then
to the workers. The advantages are rapid decision-making and better sense of
direction and control with board of directors well experienced and qualified28.
However, since the board of directors have shifted their interest towards real estate,
there is delay in decision-making and loss of control. This has caused lack of
motivation, as workers feel less valued adversely affecting Maslow’s Love and
Belonging and Esteem needs and Herzberg’s motivators. 6. Conclusion

Shanta Garments should change their motivational strategies because of the

following:

6.1 The financial motivational strategies of Taylor’s Scientific Management and

Theory ‘X’ approach are failing. Workers are still not satisfied with their pay even
though it is 47% more than the national minimum wage. Their disposable income
has become inadequate because of increasing inflation29.

6.2 Workers are not fulfilling top levels of Maslow’s Hierarchy of needs (love and
belonging and esteem needs) due to lack of recognition and appreciation.

6.3 The company is facing budget constraints and there is low profitability because
of shift of investment towards Real Estate firm. The low salesrevenue has led to
decreases in provision of incentives greatly causing lack of labour motivation.
Therefore, cheaper intangible incentives (non-financial motivation) could be a
solution.

6.4 Shift of priority of board of directors has caused communication gaps, lack of
recognition as the company has a centralized structure. This has caused workers to
be lazier, dissatisfied and hence less productive.

6.5 With a centralized structure, workers feel lost and underappreciated as

employers are not present to give directions. This adversely affects workers
‘esteem’ and ‘love and belonging’ needs.

6.6 The company, with many branches and high profit margins in the real estate
business, could shift investment and profits to garment factory to increase number
of incentives and employ new motivational strategies. More investment could go
towards labour research.

7. Recommendations

7.1 Because of the budget constraint, the company should employ more non-
financial motivation (cheaper to implement).

Herzberg’s motivators:

Job Enlargement: Depending on the skills of the workers, providing a variety of tasks
would make work more interesting and workers more flexible. The drag of repetitive
and monotonous tasks of producing in batches is improved. Due to lack of education
and training, job enrichment and job empowerment is not appropriate30.

Mayo’s Hawthorne Effect:

More picnics or other social gatherings would improve teamwork and interaction
between colleagues, which would increase productivity and motivation, as workers
feel recognized and have a sense of belonging. Thereshould be team spirit and
group dynamics through sharing of skills and expertise.

Recognition and praise:

Henry Ford’s theories of providing ‘worker of the month’ schemes could increase
productivity.

More training would increase loyalty and productivity, as workers are more skilled to
carry out delegations and require less direction.

7.2 More Financial Motivation:

Increase spending on incentives such as bonuses and fringe benefits

This will increase costs in the short run but potentially increase efficiency and
productivity leading to eventual lower average costs and higher revenue.

7.3 Figure 6: Matrix structures

Teamwork, sharing of skills and communication is achieved through matrix

structure. This will fulfil Mayo’s Hawthorne effect, Herzberg’s motivators and
Maslow’s top levels, as it provides a sense of belonging and recognition, which
would increase productivity. The limitations include loss of control as authority is
shared and the reliance of communication. Workers with less experience can make
more mistakes with decision-making, adversely affecting productivity.

7.4 ‘Zakat’

As Bangladesh is a Muslim country, the ‘zakat’31 could go towards workers. The

owners being religious would not consider this as a cost.

8. Limitations

Reliability of the data provided by the owner and the workers as the validity of the
data depends on the answers that the company decided to provide which includes
their honesty. Solution: Workers can be questioned by other workers who they are
more comfortable with to share information The external factor of Inflation of 9.1%
in 2008 greatly affected the motivation of workers as their disposable incomes
decreased. This could have led to decreasing labour productivity. Inflation also
increased production costs causing budget constraints for the business.
*
9. Bibliography

Bangladesh Garment Manufacturers and Exporters Association. “Growth of RMG

Industry and Employment.” Bangladesh Garment Manufacturers and Exporters
Association Annual Report. 2008 ed. 105. Dhaka, Bangladesh. Minimum Wage
Board. Minimum Wage Structure for Workers . N.p.: Minimum Wage Board, 2006.
Hoang, Paul. “Motivation.” Foreword. Business and Management. By Paul Hoang.
Victoria, Australia: IBID Press, 2007. 270-291. - - -. “Organizational Structure.”
Afterword. Business and Management. By Paul Hoang. Victoria, Australia: IBID Press,
2007. 208, 216-219. - - -. “Ratio Analysis.” Foreword. Business and Management. By
Paul Hoang. Victoria, Australia: IBID Press, 2007. 420-22. Index Mundi. “Bangladesh
Inflation rate (consumer prices).” Index Mundi. 2009. CIA World Factbook. 10 Nov.
2008 . Khondoker, Jamil, Uddin. Personal interview. 14 Nov. 2008.

Shanta Group. “Corporate Overview .” Shanta Group. 2008. 23 Oct. 2008 .

10. Appendices
Source: Directly from the Shanta Garment Ltd Factory

Appendix Item 3: Minimum Wage Structure for workers (labour community)

Minimum wage for worker from 2006 onwards as shaded in table:

Salary Grade for worker(Bangladesh Labour Law,22/10/2006)

Grade
Basic
house rent
medical
Total
1
3800
1144
200
5140
2
2800
800
200
3840
3
1730
519
200
2449
4
1577
473
200
2250.1
5
1420
426
200
2046
6
1270
381
200
1851
7
1125
337
200
1662.5

Source: Government Statistics from the Minimum Wage Board

Appendix Item 4: Growth of RMG industry (BGMEA BOOK SCANNED) —FOR SWOT
ANALYSIS

Source:

BGMEA

Bangladesh Garment Manufacturers and Exporters Association

“Annual Report 2007”

Pg 105

Appendix item 5: Survey conducted by 30 workers of Shanta Garments -For

motivational strategy analysis

Note: The survey questions were translated in Bengali via verbal communication by
the researcher (me) so workers understand the questions.

Survey for Shanta Garments (Gulshan) Workers

1. Please indicate (via circle) the salary you receive

2. Please circle your opinions regarding the following areas.

4) Please tick the following you have completed during your education life

School (class 1-5)

School (class 1-10)

College (class 11-12)

University

5) Are you satisfied with the salary you receive? Is it enough to fulfil your needs?
Tick Yes or No
Comment (optional)
Yes

No

6) Please tick the following that motivates you to work in the company

Higher Wages

Bonuses

Promotion

Commitment to owner

Other benefits

Source: Conducted by garment workers of Shanta Garments

Appendix item 6: Tallying of Survey of 30 workers for convenience

Overall satisfaction of job

Tally
Total Tally
1
II
2
2
I
1
3
IIIII(5)IIIII(5)
10
4
IIIII(5)IIIII(5)IIIII(5)I
16
5
I
1
Overall satisfaction of salary received
Tally
Total Tally
1

0
2
IIIII(5)IIII
9
3
IIIII(5)IIIII(5)IIIII(5)III
18
4
III
3
5

0
Overall satisfaction with the company (Shanta garments)

Tally
Total Tally
1

0
2

0
3
I
1
4
IIIII(5)IIIII(5)IIIII(5)IIIII(5)
20
5
IIIII(5)IIII
9
Overall satisfaction of the work environment
Tally
Total Tally
1

3
II
2
4
IIIII(5)IIIII(5)IIIII(5)I
16
5
IIIII(5)IIIII(5)II
12

Education life
Tally

School (class 1-5)

IIII
3
School (class 6-10)
IIIII(5)IIIII(5)IIIII(5)III
18
College (class 11-12)
I (highest paid)IIII(5)II
3
University

Footnote: In Bangladesh College is referred to class 11-12

Satisfied with Salary Received
Tally
Enough to full-fill needs? (only those who said yes)
Tally
Total Tally
Yes
IIIII(5)II -7
Yes

0
No
IIIII(5)IIIII(5)IIIII(5)IIIII(5)III - 23
No
IIIII(5)II
7
What motivates you to work in the company?
Motivation
Tally
Total Tally
Higher Wages
I(highest paid)IIII(5)I
6
Bonuses
IIIII(5)IIIII(5)IIIII(5)IIIII(5)IIIII(5)III
28
Promotion
IIIII(5)IIIII(5)II
12
Commitment to owner
IIIII(5)IIIII(5)IIIII(5)IIIII(5)IIIII(5)II
27
Other benefits
IIIII(5)IIIII(5)IIIII(5)IIIII(5)IIIII(5)III
28
Appendix item 7: Interview with Board of director, Mr. Khondoker Jamiluddin (owner)

Interviewer: Zahia Khondoker (me)

Interviewee: Mr. Khondoker Jamil Uddin, Board of Directors of Shanta Garments Ltd
Place: Gulshan Branch, Mr. Khondoker’s office.
Address: 31, Gulshan Avenue, Circle-01, Dhaka, Bangladesh
The interview was recorded in writing.

Short Interview with Mr. Khondoker Jamil Uddin

Q: What kind of incentives or motivational strategies does the company use to

motivate its workers? A: We primarily use financial motivation because in a
developing country, workers do not need the exclusives that workers in developed
countries need. Money is the main motivator because without money they cannot
even feed their families. First, the necessities must be given then when Bangladesh
reaches a point where we are all endowed with necessities, then workers will think
about job satisfaction.

Q: What kinds of financial motivators are given to workers?

A: We give all the necessities that the government asks companies to provide. Other
includes: Financial Motivation:
10,000 Tk ($ 145) after completing 10 working years in Shanta Garments
Attendance Bonus: full attendance receives 10% of salary
Free Treatment
Provident fun: if someone puts 100tk per month, the company provides Tk 100
100% bonus flat basic for festival bonus instead of 60% bonus asked by the
government Q: Does the company provide any non-financial motivation?

A: We have annual picnics and free lunches to workers

Q: To what extent are the motivational strategies successful in motivating workers?

A: Well, comparatively to many factories, our workers cause less strikes. However,
there are frequent worker complaints about salaries and wages even though we
give them 100% bonus. This is more than enough for the country’s working class.
However, because of rising inflation in this country, which we have no hands in
controlling, workers are very unsatisfied.

Q: I have heard of Shanta Group investing in the Real Estate business. Does that
help the garment factory? A: Now in Bangladesh, there are high profit margins in
the Real Estate business. We have made the real estate business a focus now so we
are hoping to gain more profit, which we can easily use within the garment factory.

Appendix item 8: Organizational Structure (chain of command)

This excludes the Quality department, as it is separate from the hierarchy with only
board of directors above them.

Abbreviations:

GM: General Manager

AGM: Assistance General Manager
MM: Maintenance Manager
FM: Finishing Manager
PM:
APM: Assistance production Manager
CM: Cutting Manager
SM: Sample Manager
CAD M: CAD Manager

Source: Directly from the Shanta Garment Ltd Factory

Appendix item 9: Profitability Analysis

Net profit Margin (NMP)

NPM = (Net profit/ Sales Revenue)* 100

= 0.80%

Net profit margin shows the percentage of the sales revenue that is turned into net
profit. Therefore, for every Tk 100 of sales, Tk 0.8 is only net profit. This profit is left
after all the costs of production (both direct and indirect costs) are accounted for. I
have chosen to calculate NMP ratio because it is a better measure of a firm’s
profitability because it accounts for the cost of sales and the expenses, the higher
the NMP, the better for the firm. The results indicate that there is less profit to
distribute to the shareholders to invest in the business. Therefore, there is less
money to be spent on incentives and motivational strategies leading to lower
motivation of workers and hence lower productivity. As there is less profit made in
the garment factory, the directors have decided to shift investment towards their
business in the Real Estate.

Source: Refer to Appendix 2 for data –collected directly from Shanta Garment Ltd

Appendix item 10: Persistent increase in inflation and consumer prices

Bangladesh Inflation rate (consumer prices)

Source: International Monetary Fund - 2008 World Economic Outlook

Barrientos, Miguel. "Bangladesh Inflation rate (consumer prices)." Index Mundi.

2008. 28 Oct. 2008 http://www.indexmundi.com/bangladesh/
inflation_rate_(consumer_prices).html

Appendix item 11: Proposal letters for Garment factories:

Dear Mr. Khondoker Jamil Uddin,

My name is Zahia Khondoker from International School Dhaka. For my business and
management research project, I was hoping to choose your factory to identify one of
the problems and carry out an in-depth research to recommend you some solutions
from my knowledge of business. The purpose of this letter is to enquire your
permission and to request your assistance in allowing me to gather the necessary
information I need from your factory. A few examples of the type of data I need are
motivational strategies, sales revenue, cost of production, profits etc of the
company over 5-10 years. If it is possible, I was hoping to interview you in your time
of convenience for this project.

If I am given the permission, I can ensure that your confidentiality rights will be
retained and the data will only be used for educational purposes.

I look forward to hearing from you

Thank you,

Zahia Khondoker
Grade 12
International School Dhaka

Appendix Item 12: Feedback on the research project from the owner of
ShantaGarments via Email
Dear Zahia,

Firstly, I really appreciate your interest in my company and conducting an in-depth

research to help the company perform better. Your research covers everything that
the company is facing and has provided a great insight on the limitations of our
strategies. I found it very useful to see that our financial motivation strategies were
not sufficient for the workers and especially because of the rising inflation in our
country. The survey results were a great help to me to understand my workers. Your
recommendations are very comprehensive and I agree with you that the factory due
to increasing cost of production and tight budget constraints is unable to provide
effective financial motivation. In our country, we are often too led by the idea that
everyone is motivated by money only. I will try to arrange more picnics and invest in
training so the workers can carry out some decisions. The idea of giving zakat was
an excellent idea. Reading this research, I have come to realize that more attention
needs to be towards the garment factory. The reason why we have shifted priorities
as I have told you in the interview is that firstly higher profit margins in the real
estate business and secondly because we have just begun developing this business.
However, from the survey results and your research, I feel that the directors should
give more recognition and appreciation to the workers.

Thank You again for helping my company, its workers and me. I wish you best of
luck with the research.

Khondoker Jamil Uddin

Director
Shanta Group
STS Group
Dhaka Bank Limited

Chairman
Jazz Concerns Ltd
A & A accessories Ltd