The Power of Compensation
Columbia Southern University
Pros and Cons of Compensation
Within any organization in any workforce, there is some form of compensation. No one works for free. Not even in a family owned business. There is different form of compensation such salary, which is a set amount paid to an employee annually. This can be given to that employee either in monthly increments, bi-weekly increments, or in weekly increments. There are also hourly wages where you make an hourly amount agreed upon at hiring, and you then clock your hours and management pays you based off hours worked. There are pros and cons to every form of compensation and philosophies of compensation. There are different types of philosophies when it comes to compensation, such as market pay, equal pay, and flexible pay. Each one of those philosophies come with their own sets of pros and cons.
Market pay jobs are salary level positions that have a set value for low to high positions within an organization. According to an article posted by Norbert Schwarz, he stated, “market pay compensation philosophy tends to eliminate subjective judgment from the process. Compensation decisions can be more easily accepted because they are based on non-emotional, rational criteria. What can be a very personal issue is thus depersonalized.” (Schwarz, 2020). This would mean that there is one set pay and there is no need to go back and forth and make people upset about who gets paid more and why. It would all depend on what position you hold and what your experience level is in that position that will determine your salary. The con to this type of pay, however, is that there are flaws with the value of effort. Like Schwarz said, “market pay does not, however, take into account is unique individual contributions to an overall effort.” (Schwarz, 2020). An entry level employee may be pulling longer hours and contributing more work than that of other senior employees, but is being paid far less because he may have just started or hasn’t had the tenure the other employees have had before him. This can cause tension in the workplace. Pay should be based on performance rather than position at times, or a medium of both.
Equal pay is when everyone in the workplace makes the same amount, from the bottom to the top. This is usually found in a small family business. This works out for family business’ because it limits the conflict of compensation within the family and negates the struggle of power and of who is in charge. Everyone is treated as an equal partner and shares a common ownership and command decision within the company. By setting the pay the same, this limits the family conflicts in compensation and does not let one family member rise above the other. The issue with this though is the effort one puts into the work, or what one’s job is in the business. Like Schwarz said, “positions do not carry equal responsibilities or impact on the overall success of the business.” (Schwarz, 2020). This con can be an example of when the equal pay would not work. If I worked as a cleaner and my sister works as the manager and advertiser, why would I get the same amount when I really do not do much for the company as far as revenue? I do not get customers in the door or keep them in the door. I work maybe 4 hours a day and she manage about 8-9 hours a day. This example is when tensions could start to rise about pay. For a business to thrive in this pay market, everyone must share the overall burden and not have assigned positions, but one goal of success.
Flexible pay is when one person or a board decided on what the wages will be for an individual person based off evaluation during a hiring process. This can be adjusted at any time based off this idea. This can be both good and bad for the person and the organization. You get paid for the work you put out. If you are a hard worker and always give your best effort and you positively effect the company, then your pay can be limitless, but if you come to work and not try and just try to clock in and clock out to receive a check with little effort, then you wont make much money or will be fired. More jobs need this, in my opinion. I have seen so many people make a lot of money and not do anything to positively impact a company, while the lowest paid workers put their blood sweat and tears into their work and barely put food on their table. If they had this type of pay, I bet the tables would turn and the workers eyes would be opened. The bad side of this pay is favoritism. If a boss likes someone more, then they can make that persons pay increase knowing they do not put as much effort as the guy or girl next to them. Friends in the workplace is hard when this pay exists, especially with management. Are they really friends, or are they just using you for their benefit?
What Motivates Employees
There are many ways to motivate employees, and the best ways that I have found in the Army is by rewarding them. Within the Army, there are many times a “thank you” never comes around for doing a good job, your just expected to do the best you can and if you over achieve, then you did your job. Most think there is no need for recognition if you do what you were hired, or signed up, to do. But that is not the case. Some people need assistance and motivation to keep working at the above standard level they are currently thriving at. An article titled What Motivates Employees More: Rewards or Punishments states, “It is not surprising, then, that when we attempt to motivate people, we try to elicit an anticipation of pleasure by promising rewards (for example, a bonus, a promotion, positive feedback, public recognition).” (Sharot, 2017). By passing out rewards for great work, and management or supervisors showing appreciation for the hard work subordinates do for them and the company, they will continue that work ethic and others will work just as hard to try and prove themselves and try to earn those rewards. Another article states, “a simple model of human motivation also concluded that a person’s satisfaction can be received in the process of performing an action, intrinsic rewards, and others could receive their satisfaction from rewards given by the others, such as a promotion given by a manager, extrinsic rewards.” (Kim, 2006). Either way, you get better employees and the company in turn becomes more successful.
Another way to motivate employees is through punishment. This may not be a means as a good thing and way people define motivation, but if it is needed, it can turn an employee’s actions or another’s actions around for the better of the company. If bad behavior or insubordination is allowed in any workplace, then people will begin to look down on the organization and look like there is no control or discipline from management. Sometimes management needs to make the hard decisions and make an example of some employees and show what happens when insubordination occurs and that those actions and work performances are not tolerated at that organization. In turn, that may change the course of those said employees and others that were looking at the situation may get their act together before they are punished for the same thing. Sometimes employees can get so complacent that they forget that they are acting in a negative way, and reminders may be needed to get back onto the right track. The article titled What Motivates Employees More: Rewards or Punishments also stated, “we try to warn of the pain of punishment (a demotion, negative feedback, public humiliation). (Sharot, 2017). Warnings are a good method of getting employees back on the right track, but when they do not listen, action must be taken, and others will change their course naturally to avoid those punishments.
Does Compensation Motivate Employees
Money is not the only factor that motivates employees. Although it is a large aspect of company motivation, it is not the one and only factor. Employees need more than money to become successful and to be happy at their jobs. For instance, in the Seoul Journal of Business, Dongho Kim wrote and article titled Employee Motivation: “Just Ask Your Employees” and he mentioned a list of motivational factors from a survey in 1992 and ranked from number one to number 10 in most important. Starting with number one to ten they are good wages, full appreciation of work done, job security, promotion and growth, interesting work, personal loyalty to employees, good working conditions, tactful discipline, feeling of being in on time, and sympathetic help with personal problems as the least motivational factor. (Kim, 2006). According to this, and over time, money is the driving factor to motivation on how hard someone works in an organization. If they do not make enough, but are required to perform at a high productivity, then you will have an unhappy employee with poor work ethics. Now, with that, money is not the only thing. You will also need other factors as stated above. Appreciation and promotions within the workplace are important and having good working conditions will make a happy employee. I know from experience that if you go to work in a professional environment, it is uplifting, and it feels as if you “want” to be there instead of “have” to be there. The Army has a lot of bad places, but everything is what you make of it. Positivity is key to getting the most out of the people you work with. High morale helps get people to work, not just the money that make.
Elements of Motivation
The course textbook states there are three elements of motivation: (1) what’s important to a person, and (2) offering it in exchange for some (3) desired behavior. (Milkovich, 2017). An organization needs to see what is important to each individual person. Assessments and performance evaluations are a good start in finding out their goals and what their needs are. That is what we do in the Army. We get their goals, long term and short term and we state our expectations. We also get their expectations and anything they would like to see within the organization. This lets leaders like myself know what is important to them and what they value. Being able to help achieve their goals during their time in the organization will show them that you care about their needs and their success. In turn, this will make them want to provide the best work they can for you and for the organization. If you show that you appreciate people and give them something that they want, no matter how large or how small, they will give something back in return. It is human nature. Value one another and you will see success. Care for one another. Show appreciation for what they do for you and for others and recognize those who go above and beyond what is expected, and you will see how quickly work ethic turns in a positive direction.
Can Compensation Attract and Retain Employees
Money is an important factor for attracting and retaining employees, but not the only thing. Face it, when you look on USA Jobs or other online based job search websites, you look for the job title and the salary first and foremost. Then, you look at location. You obviously only will be searching for the job you have experience in, so lets not look deep into that aspect of retaining employees or attracting employees for this topic. The one you look at is the salary. Money is the driving factor for a lot of people. You have an image to keep or an ego to keep intact. Maybe you have bills and a lifestyle you need to keep up with and do not want to show that you struggle like most Americans. Well, there is a lot to look at other than money. An article posted by Canada stated, “ While direct pay may always be the first reason people come to work, a tailored total compensation package can tap into all the other factors that help build loyalty and a strong employee-employer relationship.” (Campeau, 2018). The whole package concept includes the benefits that come with the pay. What medical coverage will be included with this job? Will I have a life insurance policy or will my family members be able to use any of my benefits provided to be by this company? These are all great questions and things organizations need to look at when putting together compensation packages for their employees.
In the Army, we have the best benefits, and that is why I have reenlisted 4 times so far and have served for a total of 12 years. We do not ger a large sum of money in my monthly pay, but when you add up the benefits, there is no job out there that competes in comparison. Instantly, my family and myself have free medical coverage for all instances and no co-pays in emergency rooms or urgent cares, free dental coverages, free college tuition, free housing allowance, free clothing allowance, free food allowance, healthcare coverage for all members, tax free stores on military instillations, and so much more. All those benefits are all on top of the pay I receive, so what I get paid is all the extra fun money for my family and I to enjoy ourselves. All these benefits start the second I competed my training. Organizations who can use some of these benefits with their compensation packages will surely retain and gain the attention of inquiring employees as well as raise morale within the organization.
Behaviors Compensation Should Reinforce
When you hire someone to do a job, you expect them to perform to the best of their ability. That is why you have them fill out an application, and review resumes before the initial interviews. You want the best of the best. And to get these people and not have them go to another competitive company, your compensation package and recruitment needs to be attractive to them. The textbook states, “compensation should be sufficiently attractive to make recruiting and hiring good potential employees possible (attraction).” (Milkovich, 2017). Once you have their attention, and hire them, you need to keep them there. People leave careers all the time to move to better opportunities in another location. Take a law firm for example. One lawyer may move to another firm that has more cases or has more intricate case types just to further expand their career. An opportunity that their current employer does not currently have or wants to begin developing at that time. You must be willing to adapt and change to retain the good employees. The book also states, “we need to make sure the good employees stay with the company (retention).” (Milkovich, 2017). Organizations must understand what they are paying someone to do. What all are they offering employees as far as compensation, benefits, incentives, and other packages that make someone want to be, and keep being, a valuable employee to their organization? The harder you work and the more effort you produce, the more money you should receive. The less you do, and the less effort you make, the less you should receive. Someone who knows they are appreciated and works for a company who cares about them and their needs, both professionally and personally, will have a far better work ethic than the person who ignored or forgotten about daily. The more a company puts out, the better the behaviors of their employees.
Campeau, M. (2018). Does Money Talk? In This Era of Tightened Belts, Organizations Are Leveraging Every Tool in the Compensation Toolkit to Attract and Retain Top Talent. HR Professional, 35(3), 18–21.
Kim, D. (2006). Employee Motivation: “Just Ask Your Employees.” Seoul Journal of Business. Retrieved from http://s-space.snu.ac.kr/bitstream/10371/1819/1/sjbv12n1_019.pdf
Milkovich, G. (2017). Compensation. [VitalSource Bookshelf]. Retrieved from https://online.vitalsource.com/#/books/9781259738104/
Schwarz, N. (2020). Pros and Cons of Compensation Philosophies. The Family Business Consulting Group. Retrieved from https://www.thefbcg.com/Pros-and-Cons-of-Compensation-Philosophies/
Sharot, T. (2017). What Motivates Employees More: Rewards or Punishments? Harvard Business Review Digital Articles, 2–5
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