According to history, the notion of compensation for work pre-dates to sometime between 10,000 BC and 1,000 BC during the Neolithic Revolution (Wikipedia). Back then, salt was used as payment till around 560 BC when coins came into circulation and money was invented (Wikipeida). Money became widely used as the payment for labour. To date, money is still the main medium of exchange between employer and employee. In today’s highly competitive market, organisations are often faced with increased competition from both domestic and foreign markets. To be able to stay competitive, attract and retain quality employees, it is imperative that the organisation have a compensation package that is valuable to its employees (Naresh 1998).
Although between employer and employee there is an exchange of money for labour, there is a driver which enables the employee to do the required task. The driver is called Motivation. Motivation is defined as the processes that account for an individual’s intensity, direction and persistence of effort towards attaining a goal (Cummings and Staw 1997). Relating motivation and compensation packages is Frederick Herzberg’s two-factor theory. There are two components to motivation and they are intrinsic motivation and extrinsic motivation (Calder and Staw 1975). Extrinsic motivation is motivation gained by externally influenced needs and is therefore for example stimulated by monetary rewards (Frey 1997). Intrinsic motivation indicates that under certain conditions, employees are prepared to undertake a task for immediate need satisfaction or for its own sake (Calder and Staw 1975). For the purpose of this report, the writer shall focus on extrinsic motivation as it links to compensation packages.
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...e more motivated and loyal they are likely to be.” The main drawback for flexible benefits is that they are usually expensive to upkeep and tedious for the management to oversee.
In conclusion, money is not the only motivator and it is not the primary motivator for everyone. However there is overwhelming evidence that money is an important motivator for most people. Base salary is important, but it based on time and not performance, hence programmes like variable pay and skill based pay should be adopted to increase motivation. Also taking into consideration of the diverse work force, organisations should consider both financial and nonfinancial tools that are flexible for attracting, motivating and retaining employees. Motivation will be higher when a compensation system is well design, however this will vary between organisations, employees and their objectives.
Compensation is made of a base salary (paid by the hour, work or the year; excluding overtime or bonuses), variable pay (bonuses, profit sharing/stock options which work hand and hand with the performance of the company), and benefits (to include health insurance/savings plans – 401(k), or tuition reimbursement). The traditional way of determining base pay for jobs was to compare jobs in the same industry. Now industry and market, no long work by themselves, the current thinking is more person-based that considers knowledge, skills, and competencies of the work. This, however, is best suited for high-performing environments that remain flexible in their deployment of human capital.
According to Herzberg’s two factor theory, there exists ‘hygiene factors’, extrinsic factors of a workplace that lead to either dissatisfaction or non-dissatisfaction, but not motivation. As well, there are motivation factors, intrinsically rewarding factors of a workplace that “[emphasize] factors associated with the work itself or with outcomes directly derived from it”. In raising the salary of his employees, Dan hoped that the extrinsic reward of a pay increase would lead to intrinsically beneficial opportunities for personal growth for his employees. The opportunities for personal growth should in turn further motivate employees in their job. When Dan chose to raise the salaries of his employees, he was “influenced by research showing
When employees were asked, what factors could be changed at USAA to help maintain employee motivation levels, a couple of them answered with, “higher wages” and “more money”. This response corroborates other studies regarding pay which state surveys will more likely under emphasize the importance of pay relative to other motivational factors. (Rynes, Gerhart & Minette, 2004). “Financial incentives had by far the largest effect on productivity of all interventions. For example, pay was four times more effective than interventions designed to make work more interesting.” (Rynes, 2004). One reason for this phenomenon is social desirable responding. It should be noted, that although pay may be under reported, the results indicate other factors are also important for employee
Intrinsic and extrinsic types of motivation have been widely studied and the understanding of each has led to great changes in how organizations run their businesses. It is clear that hourly employees have many great extrinsic motivators but lack intrinsic motivation in their job assignments which is a characteristic of our work culture. Changing the culture is one of the keys to improving motivation at that level of the organization because the best motivation occurs when employees perform because they want to and not because they are being made to do so.
It is inconceivable that people are motivated solely or even mainly by external incentives” (p. 27). Intrinsic motivation is when a person acts upon their own interest and enjoyment. Extrinsic motivation comes from avoiding punishment or obtaining external rewards. Motivation gained from intrinsic beliefs can only come to fruition once everyone is well accounted for. If humans are tasked with mindless routine as jobs, there is a chance that they can be replaced with machinery. When it comes to the workplace, running on extrinsic motivation might boost motivation the first time; however, it starts to dissipate once rewards and incentives runs
The two main forms of motivation in the work place are exentric and incentric theory’s based on many theorists in the field. Firstly incentric motivation, this focuses’ on what motivates the individual in the working environment, it specialises in employees unique needs and focuses on their strengths and goals they pursue to satisfy their needs. One of the first to construct this theory was Abraham H. Maslow, (A Theory of Human Motivation, 1943) telling us that this idea is not a contemporary one. He created the “pyramid of requirements” or “Hierarchy of needs”, theory’s which has since been used as bases for many companies. The pyramid has five main levels :( from lowest importance to highest level), at the bottom is Physiological needs- this includes the body’s automatic attempt to maintain normal functioning, for example thirst, nourishment, clothing, oxygen, sleep an...
According to Casey et al. (2012) motivation stimulates people to do things with the use of ‘incentives’. Intrinsically motivated behaviour is when a person performs well for his or her own sake. Whereas extrinsically motivated behaviour is when motivation arises from necessities for security, job and pay (Casey et al, 2012). According to Petroni, A, & Colacino, P (2008), there are thre...
In any business money is the driving force, whether it is the owner or employee. Money is the greatest incentive for performance amongst employees Lincoln Electric defined this fundamental reason for driving employees to excel at their jobs. Aside from compensation there is an understating between mangers and their subordinates that both have the same fear toward lack of income, this commonality serves to encourage all employees to deliver quality and affordable products at the best market
A number of motivational theories explain how rewards affect the behavior of individuals and teams. Performance related pay can have a motivational effect. Employees are motivated to increase prod...
Most will agree that knowledge is the ‘key’ resource in this post-industrial economy. The challenge for many companies is developing an organization that creates and cultivates knowledge and learning. Pay plays a significant role in shaping workplace behavior. Most of the traditional pay systems reward the job the individual performs rather than the skills he/she brings to the job. The system is not being able to reward the things the company needs and this presents a barrier. The trend has moved away from pay for the value of the job, service and seniority. It is being replaced with paying for skills, knowledge, competency, performance and productivity, all which can be delivered through different invitations, from changes to base pay to introducing gainsharing.
Research has shown that motivation in an employee is an important factor which determines his performance. Motivation is the “driving force within individuals” (Mullins, 2007, p. 285). It is the concerned with finding out the reasons which shape and direct the behaviour of the individuals. The people act to achieve something so that they can satisfy some needs (Gitman and Daniel, 2008). It is important for the manager to understand this motivation of individual employees in order to inspire them and devise an appropriate set of incentives and rewards which would satisfy the needs that they have individually (Kerr, 2003). Once these needs are expected to be met in return for some specific behaviour or action, they would work more diligently to have that behaviour in them and to achieve that objective (Meyer and Hersovitch, 2001). Since it would lead to early and fuller achievement of the company objectives as the individual would work more diligently, it would lead to better organizational performance (Wiley, 1997).
In daily life, we need motivation to improve our performance in our job or in studies. Motivation is an internal force, dependent on the needs that drive a person to achieve. In the other words, motivation is a consequence of expectations of the future while satisfaction is a consequence of past events (Carr, 2005). We need to give reward to our self when we did correctly or we has achieve our target. Reward is something that we are given because we have behaved well, worked hard, or provided a service to the community. Theories of motivation can be used to explain the behavior and attitude of employees (Rowley, 1996; Weaver, 1998). The theories include content theories, based on assumptions that people have individual needs, which motivate their action. Meanwhile according to Robbins (2001), motivation is a needs-satisfying process, which means that when a person's needs are satisfied by certain factors, the person will exert superior effort toward attaining organizational goals. Schulze and Steyn (2003) affirmed that in order to understand people’s behavior at work, managers or supervisors must be aware of the concept of needs or motives which will help “move” their employees to act.Theories such as Maslow (1954), McClelland (1961), Herzberg (1966) and Alderfer (1969) are renowned for their works in this field. The intrinsic reward or also be known as motivators factors is the part of Herzberg motivation theory. Motivators are involve factors built into the job or the studies itself such as achievement, recognition, responsibility and advancement. Hygiene factors are extrinsic to the job such as interpersonal relationship, salary, supervision and company policy (Herzberg, 1966. There have two factors that are called hygiene fac...
Money is an important factor in the motivation of employees, as profit acts as a
An important part of the retention of staff, reducing staff turnover and minimising absenteeism at work is ensuring that staff are properly motivated. This is not as easy as it sounds. At first glance, you might be tempted to think that merely increasing wages is the way to motivate! Not so. Most thinkers on the subject would argue that motivation is a far more complex issue than merely 'money'.
Management spends a huge amount of time to design incentive systems and schemes to motivate their workers and to ensure they work in their best possible manner. Motivating workers by giving them decent pay helps in winning employees heart to make the work done efficiently, significantly and effectively. The most effective way to motivate people to work productively is through individual incentive compensation (Pfeffer, 1998). An attraction of getting more is a powerful incentive to people for high performance. While most people agree that money plays a major role in motivating people, in organizations there is a widespread belief that money may also have some undesirable effects on morale.