With or state of compensating, as by rewarding someone

With unprecedented advancements rapidly occurring in today’s fiercely
competitive environment, it is imperative that organizations function
efficiently and effectively.  Well paid
and motivated staff is considered to be the nucleolus of good performance which
intern promotes organizational growth. 
This section of the study deals with the academic literature on
Compensation and its impact on performance in the workplace.

Compensation

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Abowd and Bognanno (1995), defines compensation as the sum of base salary;
annual bonus monetary compensation; all benefits, payments in kind, and
perquisites; and all long-term monetary compensation.

The act or state of compensating, as by rewarding someone for service is
Dictionary.com definition.

According to Armstrong and Murlis (2004), a number of mechanisms make up
the notion of compensation although the grouping varies from organization to
organization and country to country. 
Chew (1997) provides a breakdown of the constituents of compensation,
noting that it refers to wages including salaries (base pay), allowances, and
contributions to employee provident funds (Armstrong & Murlis, 2004; Chew,
1997).   In essence, compensation is the
amount of the financial and non-financial wage provided to a worker by a
company in return for work performed. 

The performance of government workers are directly linked to the type of workers
they employ and method of compensation offered in returned for time and their
health. Bernstein and Shierholz (2014) 
in made reference to three theories which sought to categorize workers
base on their motivation to participate in the work for money system. These
include the agency, stewardship and public service motivation theory.  The agency theory speaks to workers who put
their interest above the needs of the company, their performance is tied to
their salary, therefore they will match their effort to the quantity of
compensation. The stewardship theory describes workers that put the interest of
the company ahead of their ambitions and will do what is necessary due to their
morals. Lastly, the public service motivation theory identifies with persons
that gain fulfillment in improving the lives of the public or the persons there
are compensated to serve (Bernstein & Shierholz 2014).

Performance in the workplace

Business dictionary.com defines performance as “the work-related
activities expected of an employee and how well those activities were
executed.” It further stated, “Many business personnel directors assess the job
performance of each employee on an annual or quarterly basis in order to help
them identify suggested areas for improvement.” 

Berman (2006, p. 5) defined performance, has to be both “effective and
efficient use of resources to achieve results”. 
Bouckaert and Halligan agree with Berman stating that “performance is a
tangible operationalization of results” (Bouckaert & Halligan, 2008, p.
14). In essence, the definition of performance commonly relates to managing and
achieving results.  Therefore,
performance is the ways in which organizations utilize individuals and other
resources to achieve organizational goals. 
Performance in the workplace, however, needs to be managed in order to
safeguard good performance and increase productivity and accomplish the
required results.

Performance Evaluation/Appraisal

According to Dickinson (1993), Performance appraisal/evaluation is the
process by which employees of an organization are evaluated formally to
determine the nature of their contribution to the organization.  This system assists both organization and
employees achieve important outcomes Dickinson (1993).  Outcomes include rewards, sanctions, goals,
and plans developed by the organization. 
Performance appraisal is a very vital tool to examine employees’ quality
of performance.  Coastes (2004, p, 567)
argued that “appraisal is a formal organizational mechanism for controlling the
performance of work tasks on a rational, subjective and continuous basis”.  So, the appraisal should not only align
employee goals and objectives to company’s goals but also tie performance to
rewards.  Fundamentally, performance
cannot be managed except it can be measured.

Some writers’ focal point results when they appraise performance: “the
measurement must be on results and not on methods or performance as the results
are measurable” (Ridley, as cited in Bouckaert & Halligan, 2008, p. 73).  Results can be compared from year to year and
from unit to unit to find out efficiencies or the achievement of objectives
(Meyer, 2002, pp. 22-26).   

Performance Measurement

Speklé, R. F., and Verbeeten, F. H. M. 
(2014) state that “an exploratory use of the performance measurement
system tends to enhance performance; this positive effect is independent of the
level of contractibility.  The
effectiveness of the introduction of performance measurement systems in public
sector organizations thus depends both on contractibility and on how the system
is being used by managers”.  

Performance measurement in the public sector would have to widen the scope
of Meyer’s items and evaluate such things as inputs/resources, activities,
products/services delivered and outcomes/effects (Berman, 2006, pp. 23-37;
Bouckaert & Halligan, 2008, pp. 78-83; Clark, 2005, pp. 323-34).  To achieve this, Andrews et al. (2006, p. 16)
and Boyne et al. (2006, p. 5) looked at two ways of measuring performance:
objective measures/archive data and subjective measures/conceptual data.  Quantitative measures which derive from
performance results are important in public management research; they are
thought to be trustworthy indicators of public sector performance (Andrews et
al., 2006, p. 16; Boyne et al., 2006, p. 5).

Motivation and the relationship between compensation and performance

Is pay motivating?  This aspect of
compensation has stirred up a lot of debate. 
The confirmation on this issue is unmistakable; pay can be and has been
used effectively to motivate employees. 
Gupta N. and Shaw J. D. (2014). 

 

Wood et al. (2006, p. 78) definition of motivation is as follows:
“motivation to work refers to the forces within an individual that account for
the level, direction, and persistence of effort expended at work”.      A comparable view of motivation was held
by Daft and Pirola-Merlo (2009, p. 230) stating that motivation “refers to the
forces, either internal or external to a person, that arouse enthusiasm and
persistence to pursue a certain course of action”. 

By putting persons in perspective Robbins et al. (2010, p. 118) argued
that “motivation is the result of the interaction between an individual and a
situation. And it can vary across individuals and across situations”. In
contrast, Wagner III and Hollenbeck (2010) presented a simpler definition,
stating that “motivation refers to the energy a person is willing to devote to
a task” (Wagner III & Hollenbeck, 2010 p. 80). The example they gave was
that “a person who is highly motivated will start work sooner and leave work
later relative to someone who is unmotivated, and may come in on weekends to
finish up tasks that were left undone during the week” (Wagner III &
Hollenbeck, 2010, p. 80). A motivated individual would perform at a higher
standard and faster to achieve goals. 
However, persons are not always motivated positively. In essence, it may
be agreed that productivity can be affected by hence low or high levels of
performance is achieved.

 

What if any is the connection between motivation and performance?  Researchers have provided a range of answers
to the question of the connection between motivation and performance. There are
basically two approaches factors and theories with sub-divisions within them.

 

In the performance of their jobs, one approach seeks to identify factors
or motives which encourage individuals. Perry and Wise (as cited in Mann, 2006,
p. 34) gave three types of motives which encourage people to work. These are
rational, norm-based and affective motives (Mann, 2006, p. 34). Rational motives
are concerned with self-interest; norm-based motives support behaviors oriented
to the public interest, while effective motives concern readiness to help other
people. An alternative way to understand motivation was offered by Milkovich et
al. (2005, p. 261) “(1) what is important to a person, and (2) offering it in
exchange for some (3) desired behavior”. 

 

Armstrong and Murlis (2004, p. 14) have given a more difficult
classification of motivational factors that have an effect on performance, they
are grouped in six clusters. These clusters consist of quality of work, work
and life balance, tangible rewards, inspiration and value, future growth and
opportunity, and enabling environment.

 

 

Because of the prevalence of low pay, an assumption is made that pay,
reward or compensation affects how public servants in developing countries such
as Jamaica act at work. This point is supported by the research work of
Armstrong and Murlis (2004), Milkovich et al. (2005), Chew (1997), and
Klitgaard (1997). It means, for example, that while inspiration, value, and
opportunity for job advancement may be major factors to motivate public
servants to perform well in some rich countries such as Australia, the UK and
the USA where salaries are paid at least at a country’s subsistence level,
these factors may not be applicable for some developing countries, like
Jamaica, where public servants are paid sums that cannot support a decent
standard of living.  Like Milkovich et
al. (2005, pp. 4-5) claimed, the amount of money people are paid affects the
quality of their work and their approach towards customers in both public and
private sectors. 

The second approach to motivation speaks to theories for an
explanation.  Two major theory types will
be investigated in this section. They are needs-based theories and the
expectancy theory. What motives people to work have been explained in these
theories.

 

 

Needs-based theories

 “Needs-based theories emphasize the
needs that motivate people” (Daft & Pirola-Merlo, 2009, p. 234). There are
three main types of needs-based theories: the hierarchy of needs; the
two-factor theory and the acquired needs theory.  This study will look at the hierarchy of
needs and the two-factor theories. 

 

Hierarchy of needs theory

 The Maslow’s theory of needs has
been modified by many theorists and writers. 
As stated by Daft and Pirola-Merlo (2009, pp. 234-35): “Maslow?s
hierarchy of needs theory proposes that humans are motivated by multiple needs
and that those needs exist in a hierarchy… wherein the higher needs cannot be
satisfied until the lower needs are met”. 

 

 

Figure 2.1: Maslow’s hierarchy of needs theory

 

Self-actualisation needs

Esteem needs

Belongingness needs/love needs

Safety needs

Physiological needs

 

Source: Daft & Pirola-Merlo, 2009, p. 235; Maslow, 1943, pp. 372-83

 

 

As illustrated in Figure 2.1, there are five levels in this Maslow theory:

•    Physiological needs include
food, water, oxygen, heat, air and a base salary to ensure survival.  These needs are the essential needs of
individuals and are “the most pre-potent of all needs” (Maslow, 1943, p. 373).

•    Safety needs include a secure
environment and no threats, safety at work, fringe benefits and job security.

•    Belongingness needs/love needs
these needs include relationships with friends and peers workgroups, clients,
co-workers.

•    Esteem needs refer to a
positive self-image and receiving attention, recognition and appreciation, an
increase in responsibility, high status and credit for the contribution. 

•    Self-actualisation needs
include personal fulfillment, the opportunity for advancement, autonomy, growth
and creativity.

 

In explaining the hierarchy needs, when one level of needs have been met,
persons then look to satisfy the next level of needs.  This theory, however, is too linear: one need
has to be fulfilled before another need will surface. Some individuals might require
self-esteem more than love or belongingness needs.  Based on the situation in life for them, the
theory has little relevance. 

 

Two-factor theory

 

Another approach is found in the two-factor theory, which is another
needs-based theory developed by Frederick Herzberg. It suggests that two
factors control work motivation: hygiene factors and growth or motivator
factors (Herzberg, 1968; and 2003). 
Herzberg observed that “the things that make people satisfied and
motivated on the job are different in kind from the things that make them
dissatisfied” (Herzberg, 2003, p. 87). 

 

Herzberg’s theory has satisfaction level being influenced by growth or
motivators and dissatisfaction level being influenced by hygiene factors.  Hygiene factors such as bossy superiors,
stupid rules, uncomfortable workspace and low salaries make people
dissatisfied, and “can certainly be demotivating” (Herzberg, 2003, pp. 87, 92

Both the Maslow’s hierarchy and Herzberg’s two factors presume general
application but in reality, contexts can vary a great deal.  In many developing countries, compensation is
seen to be a motivating factor rather than only a hygiene factor.

 

Expectancy theory

 

Expectancy theory states that “motivation depends on individuals? mental
expectations about their ability to perform tasks and receive desired rewards”
(Daft & Pirola-Merlo, 2009, p. 242). According to Nadler and Lawler III
(2007, p. 173) “people make decisions among alternative plans of behavior based
on their perceptions expectancies of the degree to which a given behavior
will lead to desired outcomes”.  This
theory professes that people do things because of the expected outcomes or
rewards.  In contrast, they refuse to do
things or perhaps doing them well if they do not expect to get their desired
outcomes or rewards.

 

Expectancy theory describes individual motivation as follows:

 

•    Performance-outcome expectancy:
every behavior is connected with performance outcome expectancy.  It means that “the individual believes or
expects that if he or she behaves in a certain way, he or she will get certain
things” (Nadler & Lawler III, 2007, p. 173).

•    Valence: each outcome of
performance has a value, worth, and charm to an individual’s needs (Nadler
& Lawler III, 2007, p. 173).

•    Effort-performance expectancy:
is similar to performance-outcome expectancy; however, it “represents the
individual’s perception of how hard it will be to achieve such behavior and the
probability of his or her successful achievement of that behavior” (Nadler &
Lawler III, 2007, p. 174).

 

In expectancy theory, attainment of required outcomes not only relies on
motivation but also on skills and knowledge.

The theory is an explanatory tool for motivation in organizations.  The theory does not include any mention of
human needs and job satisfaction/dissatisfaction factors.