Rewards and Compensation Systems Term Paper

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Rewards and Compensation Systems

Human capital is an important contributor to the worldwide wealth, and this recognizes the vital role in increasing the organization's effectiveness. One important function of the HRM is motivation of the employees, which has noticeable results in all levels of an organization. This starts from the managers who must recognize the factors that motivate their employees to improve their performance through designing and implementing effective compensation and reward systems. Motivation is a significant aspect of the HRM and organizations need motivated employees to achieve their strategic objectives (Kirstein, 2010).

Motivation is a complicated topic and not many managers know what to implement in order to motivate their employees. Some companies use the money as their main tool for employee motivation this is inclusive of performance related pay (Kovach, 1987). However, when an organization faces a financial crisis and opts to cut costs by reducing salaries, and bonuses, it raises concern on whether there exist cost efficient ways to motivate employees (Kirstein, 2010). Prior literature on this topic shows that there are several ways to motivate employees by suggesting two theories, content theory, and process theory. The content theory focuses on what motivate people while the process theory tries to find out how motivation occurs.

In designing reward structures, the HRM should consider the diversification if it exists in their organizations because cultural values have significant impacts on employee parity, equity, and motivation concerning reward systems (Wheeler, 2001). In addition, previous research offers several suggestions on motivators that could offer significance influence in increasing employee performance. Therefore, the HRM should also consider job design plays a vital role in shaping employee's behavior. However, other studies suggest that the leadership style and employee freedom are crucial in motivating employees.

Concept of Work Motivation

Motive refers to desires, needs, emotions, or impulses that make someone do something. Using the definition, we can deduce that motivation is the incitement to act. In a work situation, work motivation refers to motivation in the workplace. The ultimate definition becomes the employee's motivation to perform, stay, and contribute to an organization, collaborate, or support a manager. In a workplace setting, motivation has an association with the achievement of goals, and objectives. In such a setting, a motivated workforce will most likely deliver the desired result. This may mean that proper motivation for employees is likely to take action that they believe will achieve their defined goals and objectives (Kirstein, 2010).

Scholars suggest that motivation is an invisible phenomenon, but analyzing behavior caused by the environment, or inherited factors may be observed through their effects on abilities, beliefs, knowledge, and personality. From this information, motivation comes out as an action or focused behavior and maintained because of motivation. In addition, motivation is an invisible force that makes people focus and behave in a certain way. The use of force suggests that motivation requires an effort, and can have weakness, strengths depending on the circumstances (Kirstein, 2010).

Motivation Theories

The topic of motivation dates back to the beginning of the 20th century and many theories established including ample research, but still the factors that motivate employees to perform well in work remain controversial. For instance, Taylor's theory of motivation to work relates to rewards and penalties that have a direct correlation to performance (Kirstein, 2010). Maslow's concept of hierarchy defines motivation as dependent to the satisfaction of people's needs, but it uses a less instrumental advance. An evaluation of Herzberg focused on the difference between extrinsic and intrinsic motivators. These previous theories are important, but they are not perfect because they portray some significant weaknesses.

The process theory is the most current motivational theory, which offers a different view on the issue of motivation. For instance, Vroom's expectancy theory suggests that motivation exists when a certain condition fulfills; that is only when there is a clear and usable relationship between performance and outcome (Armstrong, 2007). The Goal theory emphasizes the significant role played by feedback and setting goals in relation to motivation and performance. To add on this, equity theory suggests that motivation of people happens when there is equal treatment by the organization. As for this theory, it recognizes the effects or rather the influence of having a diverse culture in a work setting whereby equal treatment of people may arise.

Content theories

The content theories put an emphasis on what motivates people by having concern for personal goals and needs, which it suggests being similar for every individual. Although the theories have a common ground by assuming that people's needs are similar, they show distinction when it comes to defining the needs. The often-cited motivation theory is Maslow's hierarchy of human needs (Kirstein, 2010). In Maslow's perspective, the driving force of human behavior is unsatisfied needs. His hierarchy begins with psychological needs and leads through security needs, social needs, and self-actualization needs on the top position. Maslow's theory suggests that in order to fulfill higher needs, people should satisfy lower needs, and people do not feel higher needs if the lower needs have not passed (Kirstein, 2010).

Maslow's Hierarchy of Human Needs: Maslow suggests that for one to feel higher needs, lower needs have to pass, and satisfaction of the need means that they will not influence human behavior because the focus moves to the higher need in the hierarchy (Kirstein, 2010). In Maslow's theory of needs, there is division of needs into two categories; deficiency needs and higher-order needs. The deficiency needs are all the basic requirements such as hunger, food, shelter, and protection (Kirstein, 2010). Satisfaction of this deficiency needs leads to motivation of the higher needs such as the need for supportive and satisfactory relationships with others, freedom, independence, recognition, and achievement (Kirstein, 2010). The self-actualization needs tops in the hierarchy of Maslow's needs and it is the ending point of the maturation process. It is the final level, which few people achieve.

Herzberg's Two-Factor Theory: Herzberg's two-factor theory also falls under the content theories. This theory has helped many managers who seek ways of motivating their employees, mainly because the theory not only illustrates the employee's needs but also goes further and show how to supplement jobs, and make their workforce more motivated. Herzberg puts forward that satisfaction and dissatisfaction result from different factors (Kirstein, 2010). For instance, employee satisfaction in their workplace is because of the content of that work. Such factors are intrinsic motivators and constitute of achievement, recognition, interesting work, responsibility, advancement, and growth. However, Herzberg found dissatisfiers such as company policy, supervision, working conditions, international relationships, salary status, and security. These factors are different from motivators because they have a relation to the job (Kirstein, 2010).

Process theories

The dynamic character offers the main characteristic of the process theories, not static compared to content theories. The theories do not only focus on what motivates people, but also concerned on how the motivation occurs. These theories try to offer an explanation on how and why people's behavior relates to certain factors. The aim of all process theories is on the role of individual's cognitive processes in determining the level of the individual's motivation (Kirstein, 2010).

Expectancy Theory: Expectancy theory is one of the core theories in the process theories, and Vroom is behind its development. The theory compromises three factors: valence, instrumentality, and anticipation. The theory describes valence in relation to people's affecting preferences towards outcomes. For instance, the valence for a positive outcome depends on the person's preferences on either they prefer to attain or not to attain. The outcome becomes positive if an individual prefers to attain instead of not, on the other hand the negative valence comes in when an individual prefers not to attain (Kirstein, 2010).

There is another valence outcome; however, in this case it happens when an individual cannot make a decision on whether or not to attain (Kirstein, 2010). The other aspect is instrumentality, which is a belief of an individual that one action will lead to another. Finally, expectancy refers to the belief about the probability that an individual's behavior will initiate a certain outcome. Determination of motivation is through the calculation of the values of the three factors. In addition, Vroom states that a job is motivating to employees if the relationship between performance and the outcome is clear (Kirstein, 2010).

Equity Theories: The equity theories also fall under the process theories. Equity theories comment on distribution of resources, and they have three common factors. First, the theories suggest that employees expect a fair return for their input at work. Secondly, they mean that employees judge against what they receive to the share received by other employees for the same job. Finally, the theories assume that employees who are in discriminatory positions comparing to others will try to do something to condense the variation (Kirstein, 2010).

Therefore, the theories emphasize the unlike inputs and outcomes as the most important for them. However, all employees evaluate their outcomes in relation to their efforts and critic the fairness of…

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