The ERG theory was developed by American psychologist Clayton Alderfer between 1961 and 1978. The ERG theory is a motivational model based on Maslow’s hierarchy of needs. The ERG theory is based on an acronym of three groups of core needs: existence, relatedness, and growth.
Understanding the ERG theory
The ERG theory was developed by American psychologist Clayton Alderfer between 1961 and 1978.
ERG theory is an extension of Maslow’s hierarchy of needs, which Alderfer refined in line with empirical research on motivation over seventeen years.
After concluding his research, Alderfer simplified Maslow’s five-level interpretation into a three-level hierarchy.
He also stipulated three fundamental differences to Maslow’s model:
Different levels of need could be pursued simultaneously, with no requirement for an individual to start from the bottom of Maslow’s pyramid and work their way up.
The order of needs were not fixed but instead varied from person to person.
The ERG theory also noted that if a higher level need remained unfulfilled, the individual could regress to a lower level need to increase satisfaction. This became known as the frustration-regression principle.
In the context of employee motivation, Alderfer suggested the frustration-regression principle negatively impacts motivation and personal growth.
As a result, the ERG theory has an important role to play in employee morale, productivity, and predicting sources of workplace conflict.
More broadly speaking, Alderfer’s work may also be useful to analyze different leadership styles or help employees transition through change.
The three groups of needs comprising the ERG theory
The ERG theory is based on an acronym of three groups of core needs. These are:
Existence
Or the basic material requirements for living. Maslow categorized these as physiological needs (food, water, shelter) and safety needs (health, employment, property).
When these needs are met in the workplace, they remove distractions and boost productivity.
Relatedness
Or needs related to the maintenance of interpersonal relationships.
These needs align with Maslow’s third and fourth levels which encompass friendship, family, intimacy and gaining the respect of others.
In a work environment, relatedness is a need to have satisfactory or mutually beneficial relationships with colleagues, superiors, or subordinates.
Growth
Or the need for personal development through meaningful or creative work.
This is an intrinsic desire for most people and has obvious benefits in workplace and non-workplace settings.
Growth is related to Maslow’s upper level which contains self-esteem, self-confidence, discovery, morality, and achievement.
It’s also important to note that each of the three groups has been studied extensively since the ERG theory was released.
With their effectiveness verified several times over, the most successful organisations will be those that create an environment where all three levels are available to every employee at all times.
ERG theory examples
To conclude, we will share two representative examples of how ERG theory can be used to assist employees and organizations.
Start-up entrepreneur
The life of a start-up entrepreneur (and indeed the start-up itself) is almost exactly aligned with the key components of ERG theory.
For the individual, this may be a living salary that pays the bills.
For the business, its needs are raw materials, electricity, and a physical or online presence to conduct operations.
With these important needs in place, the start-up can establish a presence in the market, develop relationships with suppliers, and collaborate with other institutions to innovate and increase sales.
With their basic needs covered, the start-up founder can start to create a professional network and hire the best talent to share their immense workload.
In the third and final growth stage, the start-up founder is supported by a team of subordinates who attend to less critical needs.
This frees them up to fulfil their potential in areas where they can make the most impact. For the business, growth tends to be characterized by market leadership, better margins, and increased size.
Unmotivated employee
The ERG theory can also be used to tackle the problem of unmotivated employees. For better or worse, many employees earn a salary that covers basic survival needs such as food and shelter but little else.
Those who are worried about paying their mortgage each month tend to be less interested in socializing with others since it is too expensive to do so.
However, a lack of socialization causes a deficiency in the second basic need of relatedness.
This may result in the employee feeling excluded from social circles at work which then causes a decrease in collaboration, motivation, and productivity.
To enable the employee to meet the needs of relatedness and growth, the business could look at more inclusive work practices and, if their performance merits it, a promotion or salary increase.
Businesses are now also turning to companies such as Nudge that provide financial literacy training to increase the well-being of employees.
Alternatively, the business could ask the employee whether they would be open to moving into another position or department.
Finding themselves in a role that better suits their unique skillset, they may become more motivated to engage with other employees and work productively toward organizational goals.
Career choices
In the final example, consider an employee who wants to determine the best career choice for their needs and skills.
The individual starts with existence-related needs to first determine how much money they require to cover their expenses.
Based on this information, industries with average salaries in the desired range can be identified.
In terms of relatedness, the person thinks about their social needs and whether they are introverted or extroverted.
They also look for employers with desirable workplace cultures where managers and subordinates work collaboratively.
Lastly, the potential for career development and opportunities to advance within the company is assessed.
Since the individual works best under pressure where every day is different from the next, they look for dynamic businesses with ambitious missionstatements and objectives.
Subordinate management
In the context of management, ERG theory reminds leaders that the subordinates over which they have control are not motivated by the same things.
In a hierarchical organization, for example, those near the top are more likely to be motivated by needs that relate to self-actualization or personal development.
Those at lower levels are more concerned with earning a wage to meet basic existential needs such as food and shelter.
Management must also remember the need for a subordinate to satisfy multiple needs simultaneously.
Leaders who only focus on one employee need at a time will be unable to motivate their staff.
When certain needs remain unfulfilled in the workplace, there is a risk that the individual reverts to a lower level they deem easier to satisfy.
From earlier, we know this process as the frustration-regression principle. But how can leaders recognize it in the workplace?
The employee who feels stunted or unmotivated in their career may choose to socialize more frequently with co-workers at the expense of productivity.
They may also (intentionally or otherwise) sabotage harmonious relationships with their superiors and other co-workers.
When management recognizes these important early warning signs, they can step in and take corrective action before it is too late.
Writer for a local news website
Carol, a senior editor, has been unemployed for some time after the major online publication she wrote for went bankrupt.
One day, she is offered an entry-level position as a copy assistant at a small community news website.
Desperate to put food on the table and meet her rent repayments, Carol accepts the offer with the hope that her experience will quickly see her promoted to a more senior role.
With her basic needs satisfied by her salary, Carol turns her attention to relatedness-based needs.
To fit in and build rapport with her co-workers, Carol, an editor herself, naturally gravitates toward the other editors at the company.
Twelve months later
Fast forward twelve months and Carol is still in the same role, with most of her day spent tediously checking news stories for factual inconsistencies.
When she has a moment or two free, she peruses job boards for freelance writer positions and makes it a habit to send at least one cold pitch per week to a relevant publication.
Carol’s natural tendency to seek out meaningful or creative projects is an attempt to satisfy her growth-related needs.
Two more months pass and Carol is frustrated at her lack of success.
Many publications are not hiring because of the prevailing economic climate, while others are operating in skeleton mode over the holiday period.
Carol then regresses to satisfying relatedness-based needs and can routinely be found chatting with staff in the editorial department.
Back in the copy room, Carol realizes that she will never become an editor at the community news website.
The company’s budget is too small to promote her, and the editors it does have on the payroll are comfortable in their roles and not likely to move on any time soon.
Soon after, however, one of the editors lets her know of an unadvertised editor role at a city newspaper.
Since the pair have become good friends, the colleague in question is happy to recommend Carol for the role.
After a brief and relatively informal interview, Carol discovered that the position would fulfill her growth-based needs and accepted without hesitation.
Key takeaways
The ERG theory is a motivational model developed by American psychologist Clayton Alderfer and is the result of seventeen years of empirical research.
The ERG theory was developed in the context of employee motivation, but it may also have applications in change management, conflict resolution, and leadership style influence.
The ERG theory is based on three core needs: existence, relatedness, and growth. For maximum organizational effectiveness, each need must be available to every employee at all times.
What are the three needs according to ERG theory?
The three groups of needs comprising the ERG theory are:
Existence – or the basic material requirements for living.
Relatedness – or needs related to the maintenance of interpersonal relationships.
Growth – or the need for personal development through meaningful or creative work.
What is the purpose of ERG theory?
The ERG theory was developed in the context of employee motivation; it’s based on three core needs: existence, relatedness, and growth. For maximum organizational effectiveness, each need must be available to every employee at all times.
What are the benefits of an ERG?
Some of the critical goals of the ERG, which it tries to address, comprise:
Increased group performance.
Improved employees’ motivation.
More effective team building.
Growth of the team and ability to perform at scale.
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Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
