Employee motivation is a major concern to the management of anyinstitution. This is because the employees have the power to elevateor destroy that institution, given their vital roles in running dayto day affairs. Different recognition schemes have been developed toincrease productivity of employees. These include monetary rewards,acknowledgements, appraisals and promotions. On the other hand paycuts and demotions are also regarded as means of employeemotivation1.

The greatest challenge on the management is whether or not theirschemes are effective. It is therefore important to analyze whatemployees value most, in their work places. To begin with, employeeswant to feel appreciated for their respective contributions.Secondly, the employees want to be involved in decision makingprocesses. This gives employees a sense of belonging as theyparticipate and give their opinions. Most importantly, they want tohave a sense of job security for assurance of growth in their careerpaths. On the other hand the managerial team seeks to build loyaltyamong employees for increased productivity. This is in an effort toalign the institutions goals with the interests of the employees2.

However, most institutions have resorted to seasonal pay rises as theonly means of motivation. This is a necessary but not sufficientmeans of employee satisfaction. Therefore there is need to criticallyassess any recognition scheme beforehand so as to understand all theunderlying implications. This report will focus on American Airlinesrecognition scheme which involves paying flight attendants anadditional 4% while pilots will get an additional 23%3.This comprehensive analysis investigates the effectiveness of the payrise, its impact on the employees and the long run implications onthe company.

American Airlines Pay Rise

American Airlines Incorporation was founded in 1930 as AmericanAirways and is one of the largest airlines in the United States ofAmerica. It serves both domestic and international networks and is aheadquartered at Fort Worth, Texas. American Airlines merged with USAirways in 2013. The company recorded high profits last year, just ayear after the merger. It recorded 2.9million dollars in profit andhence is in a position to increase its pay. This is meant to motivatethe employees so as to improve overall performance of the Airline.Among the employees, twenty four thousand are flight attendants andfifteen thousand are pilots.

The management needs to formulate criteria on which to baseallocation of pay rises and pay cuts, without demotivating employees.The workplace is a competitive avenue for individuals and althoughall employees work for the well-being of the company as a whole, eachof them as an individual has self-interests. Therefore, if themanagement allocates these pay rises or pay cuts inappropriately,they risk creating unwanted friction in the workplace which threatensteamwork. Some of the key factors to consider while allocating payrises and pay cuts are the workload, the merit, performance,prevailing market value and the financial standing of theinstitution4.In addition, workers who have displayed loyalty by working for thecompany for a long period of time should be considered. In the caseof American airlines, the pilots who have worked more years and aresubsequently more experienced receive a bigger pay rise. Pilots whoare at the helm of all operations received a higher pay rise thanflight attendants. This is based on the workload and market value,which the pilots’ union has been advocating for.

The pay rise by the American Airlines will create a positive workenvironment for their employees. They will feel motivated to workharder and this will increase overall productivity. Improved customerservice by the flight attendants will boost business for the AmericanAirlines. Employees will be satisfied and this will improve theirmorale. On the other hand, the management should ensure that the payrises are allocated proportionately. Despite the difference in thepercentage of pay rises, the employees should feel equally motivated,embracing their differences and appreciating each other’scontribution in the team. The management should also ensurecontentment of employees that were not considered in the pay rise andshould work to motivate them using alternative means. In addition,allocating pay cuts is a very counterproductive means of motivatingemployees and yields negative results such as absenteeism. Beforeimplementation therefore American Airlines should consideralternative means of punishing non-performers.

The ultimate goal of the management is to increase productivity ofthe American Airlines and subsequently record higher profits. Themanagement also seeks to build a lasting legacy which will ensure itis esteemed highly by the public. The pay rise therefore seeks tocreate a positive environment intrinsically. The employees signedcontracts to agree to the terms and conditions of the pay rise andalso to avoid arbitration. By consulting the employees on thesechanges, a strong bond is created eliminating communication barriershence promoting both vertical and horizontal communication. Havingmotivated their employees, the company’s image will be positivelyreflected extrinsically. The management will also benefit in terms ofimproved quality with minimum supervision. Once employees areself-motivated in their duties they will work with integrity with orwithout supervision.

The American Airlines management is also working to repair damagedrelations. Previously there was a huge clash after the merger betweenthe Transport Workers Union which represented American airlinesworkers, and International Association of Machinists and AerospaceWorkers who represented the US Airways. These unions representpilots, flight attendants and ground workers. The workers alsocomplained of low income in comparison to other leading airlines inAmerica. By increasing the pay, the management enhances loyalty ofthe employees. Continuous efforts to motivate the employees willgradually improve employee performance and will also eliminate thefear of unexpected layoffs5.

Before increasing the pay, the management should consider theprevailing financial conditions. They must foresee the implicationsof their actions in the future. Increased pay should not create roomfor deficits. The total cost of the increases should not exceed therevenue. Thus the process should be sustainable over the years so asto guarantee consistency which adds on to employee motivation. Inthis case, the fluctuating cost of fuel should be considered. Theoperations should be managed in such a way that profits areproportionate to the pay rise. Therefore, in the event that fuelprices sour, the Airline will still be guaranteed to make profits.

In conclusion, pay rises yield positive results in maximizingproductivity in the work place. This should be implemented alongsideother recognition schemes which complement pay rises. The pay risesshould also be consistent, preferably annually so that appraisals areguaranteed. On the other hand, the management should give employeesperformance contracts so as to maintain quality of output. Hightargets should be set to merit recognition so as to retain highstandards. In the case of American Airlines, the pay rises will go along way in improving performance and will ensure high profits. TheIncorporation will also regain its esteem and this will be importantfor public relations.


Finger,Richard. &quotWhy American Airlines Employees Loathe Management.&quotForbesMagazine,

April29, 2013.

Frey,Bruno S., and Margit Osterloh. SuccessfulManagement by Motivation: Balancing Intrinsic

andExtrinsic Incentives.Springer, 2001.

Hethcock,Bill. &quotAmerican Airlines pilots approve contract with 23 percentpay raise.&quot Dallas


1 Frey, Bruno S., and Margit Osterloh. Successful Management by Motivation: Balancing Intrinsic and Extrinsic Incentives. Springer, 2001.

22 Ibid, 2001.

3 Hethcock, Bill. &quotAmerican Airlines pilots approve contract with 23 percent pay raise.&quot Dallas

Business Journal, 2015.

4 Frey, Bruno S., and Margit Osterloh. Successful Management by Motivation: Balancing Intrinsic and Extrinsic Incentives. Springer, 2001.

5 Finger, Richard. &quotWhy American Airlines Employees Loathe Management.&quot Forbes Magazine,

April 29, 2013.