The Effects Of Compensation On Non Monetary Compensation Essay

The Effects Of Compensation On Non Monetary Compensation Essay

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“Extinguishing intrinsic motivation, diminishing performance, crushing creativity, encouraging unethical behavior and fostering short-term thinking” are accidental results of focusing on monetary over non-monetary compensation (Delves, 2011, para. 5). Ellard Williams, Incorporated (EWI) is victim to most of these attributes without understanding the cause. Compensation affects motivation and corresponds to production and turnover (Aguinis, 2013). EWI requires motivational influences and a compensation plan inspiring employees to improve their performance and remain with the organization.
EWI is a manufacturing firm employing nearly 11,300 people (Colorado State University - Global Campus, 2015a). Unstable compensation practices are causing motivation and performance to decline, leading to production delays, high defect rates, high turnover ratio, and employee sick leave usage (2015a). The absence of a motivation philosophy and compensation plan does not hold management accountable for rewarding high performers. Instead, the perception among the workers is compensation practices favor upper management (2015a). A decline in EWI profits leaves financial resources scarce, leading human resources (HR) to develop non-monetary compensation practices to supplement the lack of monetary rewards.
EWI’s motivation, productivity, and performance are suffering, which results in production delays, high defect rates, and volatile labor relations (Colorado State University - Global Campus, 2015a). The organization shall provide motivational tools to encourage employees to perform at a rate of excellence and decrease the turnover percentage. Managers cannot motivate employees because motivation comes fr...

... middle of paper ...

...loyees (2012).
To support the changes at EWI, senior managers will refrain from receiving bonuses or salary increases until profits begin to escalate. When profits improve, HR will reevaluate the compensation plan for all employees and include extrinsic rewards for performance. Bonuses, pay increases, stock options, or promotions will be in connection with the results from the PMS.
Connecting compensation with motivation can increase production and decrease turnover. Introducing TQM to EWI will align employee performance with the organization’s goals and provide a tool to measure accomplishments and justify rewards. Initially, employees will receive intrinsic rewards to reflect the value they add to the organization. Upon profit increase, HR will reevaluate the compensation plan to include monetary rewards for performance excellence in all positions.

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