Sample Essay On Compensation

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On page 11 in your text, the authors say that employees may see Compensation as a “return in a exchange,” an “entitlement” or a “reward, ” or all three. What do you think?
Compensation is a broad concept although in a business organization perspective, it is mostly regarded as payment for the services rendered by an individual. The concept behind compensation can be strongly associated with the theory of social exchange. The social exchange theory was developed in the 1960’s by social scientists and philosophers to understand workplace behavior, and in this context, the nature of compensation. According to this theory, actors that conduct the exchange of tangible or intangible resources seek to find the best value for the exchange. However, when equality is not realized in the exchange, there exists a strong tendency for conflict to occur and the eventual breakdown of the relationship. For the same reason, a party or individual who finds that the exchange does not benefit him or is not of equal proportion to the services or goods that he has rendered would see the relationship negatively and would seek to equalize his position in the exchange. It is, therefore, desired that in each exchange, the relationship is mutually beneficial for both parties in order to achieve long-term harmony.
Some argue that money doesn’t motivate. Read these two short articles and express you opinion. http://www.physorg.com/news4126.html, http://www.alfiekohn.org/managing/cbdmamam.htm
It is conventional wisdom that economic compensation is the only major motivation for people. However, recent studies have shown that money is not the only thing that employees value most and that the needs of individuals when it comes to work satisfaction and motivation is more complex than the conventional knowledge of having a huge paycheck. The delicate balance between economic and non-economic compensation is reflected in studies on retention of employees. According to Branham, the underlying reasons why employees leave their job is not only because of monetary considerations but also because of work stress, value and recognition, poor advancement opportunities and the loss of trust and confidence on the organizational leadership.

Compensation for many people is an inherently personal, emotional issue. How does this play-out on the job?

In general, compensation can be classified into two; economic and non-economic compensation. Economic compensation comprises the salary, benefits as well perks that have monetary value. On the other hand, non-economic compensation are those related to the personal satisfaction of the individual toward his work such as working relationships, recognitions, career advancement and other things that an individual values. According to research, economic compensation is the most important aspect of work, which is valued by most employees. In a yearly survey conducted by the Society for Human Resource Management (SHRM), it was found that economic compensation or pay is consistently rated as ‘very important’ by employees with regards to job satisfaction. However, it is also worth noting that non-economic compensation is not far behind the things that employees value most. For the same reason, job security, the opportunity to use one’s skill and abilities as well as the quality of their relationship to their supervisors and leaders are also highly valued by employees.

Can pay systems be effectively tailored to support differing business strategies? Explain your answer and give an example.

Compensation does not necessarily have to follow a rigid model. In fact, there are several types of compensation package that works for each type of business. Contractual businesses that do not require long-term employees, for example, may not be constrained to provide non-economic compensation to their seasonal employees and still gain the desired results. On the other hand, repetitive and production oriented jobs wherein employees can be easily replaced could be more complacent on developing elaborate compensation strategies. Examples of such types of work environments are fast foods and similar establishments such as McDonalds and Starbucks.

How effective is your company in using Compensation to create a high-performance work culture? Explain your answer.

Apparently, there is a delicate balance between economic and non-economic compensation and both are equally important and should be considered when developing an effective compensation package. Branham’s observation tells a lot about the true nature of compensation, which implies that business organizations should not only focus their strategies on increasing their employee’s paycheck but also they need to develop the whole working environment to address the intrinsic and extrinsic needs of an individual. Almost all businesses today incorporate the human side to their compensation package. The best examples of these innovative compensation packages are the vacation incentives, rewards and recognition, promotions as well as other non-monetary but equally motivating compensation initiatives that most companies offer their performing employees.

Works Cited

Branham, L. THE 7 HIDDEN REASONS EMPLOYEES LEAVE. June 2005. October 2014 <http://www.12secondstoprojectmanagementgreatness.com/member/resources/summaries/Personnel_HR/7_Hidden_Reasons_Employees_Leave.pdf>.
Cropanzano, R., & Mitchell, M. Social Exchange Theory: An Interdisciplinary Review. 2005. January 2015 <http://www.nbu.bg/webs/clubpsy/Materiali%20za%20kachvane/Library/razlichni%20lekcii%20na%20angliiski/Social%20Exchange%20Theory.pdf>.
Holthausen, J. Scientific review of the Social Exchange Theory and its contribution to solving purchasers’ decision making issues. n.d. October 2014 <http://www.utwente.nl/mb/ba/education/ba-thesis-2013/sm/holthausen.pdf>.
Kohn, A. Challenging Behaviorist Dogma: Myths About Money and Motivation. 1998. January 2015 <http://www.alfiekohn.org/article/challenging-behaviorist-dogma/>.
Ohio State University. Intrinsic Motivation Doesn't Exist, Researcher Says. 2005. January 2015 <http://phys.org/news4126.html>.
Society for Human Resource Management. Employee Job Satisfaction and Engagement. August 2013. October 2014 <http://www.shrm.org/Research/SurveyFindings/Documents/14-0028%20JobSatEngage_Report_FULL_FNL.pdf>.