Every individual may have different needs when it comes to the set of compensation that an organization can give. Keeping flexible compensation are things that help the individual choose from a set of compensations as to which one fulfills his needs more.
The Process Theories or the Expectancy Theory focuses on what is going inside the employee's head and what is he getting, in terms of value of rewards, out of his behavior. They think in terms of equity and fairness of the exchange process like a ratio between what is expected and what is received. Compensation plays a vital role here. Employers look for the most important tasks and compensate on the basis of how much are the tasks and objectives achieved. They even penalize if the employees deviate badly from the required objectives.
Rewards usually given by organizations include empowerment, recognition and opportunities for advancement. These rewards can influence employee behavior because the employees value it. We may pay them a lot but it may not be fulfilling the employee desires completely. Lets see how non-financial rewards influences behaviors. Job enrichments give workers the chance to test themselves and use their full range of ability, Job enlargement reduces monotony of the job work and employees' retain their interest in the work, team work helps fulfilling an employees social needs where they can build relationships and make friends and feel a sense of belonging and unity to a group and lastly empowerment where the employees are encouraged to consider the problems faced and come up with solutions.
5. Summarize the key research evidence related to the role of compensation to motivate the four types of employee behaviors.
Lets look at the evidence available first and then decide upon the role of compensation. In 40 out of 42 studies of Heneman reports, it was deduced that the performance of the employees improved when merit pay system was used. A study of 841 union and non-union companies had an increase of 18% to 20% on individual and team performance when profit sharing and gain sharing was introduced. Gerhart and Milkovich found 1.5% increase in return on assets for every 10 percent increase in the size of a bonus, across 200 companies. Equity Theory research in the 1970's showed that workers who felt untreated would leave the organization when pay was based on performance. This was good in a way for the organization as below average workers would leave the organization on their own. In the early 2000's it was noticed that key employees had started leaving those organizations where they saw the organization in financial troubles just like the airline industry after the 9/11 attacks. When we talk of skills, the evidence shows that pay for skills may not increase the productivity but may let the employees know of the importance of skills. One