The Effect Of Compensation And Promotion Commerce Essay

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This study investigates the impact of compensation and promotion of new employees on the motivation of older employees. Personal survey was used for the data collection from the employees working in the manufacturing and service industry of Karachi. Results from 250 respondents demonstrated that de-motivation prevailed among the older employees when new employees are recruited on better salaries and when promotions are not given on organizational tenure. The conclusion of the study was that while providing compensation and promotion to new employees, its effect on the work motivation of older employees should also be taken into consideration by the management.

It has been observed that a relatively higher compensation of an employee who is new to the organization negatively effects the motivation of the older employee who has been working in the organization since years (Kooiij, Lange, Jansen & Dikkers, 2008). To keep the employees satisfied and motivated towards their work and responsibilities, decisions related to compensation and promotion of the employees are of great importance for the organization (Gerhart & Trevor, 1996). According to Takahashi (2006), the design and implementation of compensation system can strongly effect the motivation of employees and the employee's perception of the compensation system ultimately influences their motivation.

From an organizational perspective, the future management of the organization is based upon the quality of promotion decisions taken today. The company will be able to maintain its competitive advantage if it allows the best people to be promoted who have the ability to make strategic decisions (Silvia, Quinetta & Francesco, 2006). From an employees' perspective, promotions offers both tangible and intangible rewards, which include recognition, compensation, status and achievement; therefore, promotion is a great source of motivation ad job satisfaction (Bagdadli, Roberson & Paoletti, 2006).

It has been observed, that managers who are facing longer job tenures at the same hierarchical level exhibit lower organizational commitment, job and career satisfaction and higher withdrawal intentions, turnover and absenteeism. Therefore, it is a challenge for organizations to keep employees committed and satisfied with their jobs (Bagdadli, Roberson & Paoletti, 2006).

1.2 Problem Statement

The objective of this study is to determine the effect of compensation and promotion of new employees on the motivation of old employees.

1.3 Hypotheses

Following are the proposed hypotheses of the study:

Hypothesis 1 - Recruitment of new employees on better salaries has an impact on the motivation of older employee.

Hypothesis 2 - Compensating the employees on performance rather than their organizational tenure has an impact on the motivation of the employees.

Hypothesis 3 - Equal compensation of new and the old employee for their services for the organization has an impact on the motivation of the employees.

Hypothesis 4 - Appropriate benefits provided to the employees according to their contributions and performance has an impact on the motivation of the employees.

Hypothesis 5 - The perception of an influence in the total compensation by staying in the organization for a longer period of time has an impact on the motivation of the employee.

Hypothesis 6 - Promotions given on the basis of performance rather than seniority influences the motivation of the employee.

Hypothesis 7 - People receiving promotions who deserve them has an impact on the motivation of employees.

Hypothesis 8 - The impact of working under a supervisor who is new to the organization on the motivation of the employees.

Hypothesis 9 - Promotions given on the basis of performance rather than the working tenure has an impact on the motivation of employees.

Hypothesis 10 - The impact of providing promotion possibilities stimulating to work hard on the motivation of employees.

Hypothesis 11 - Assigning a new supervisor on the basis of performance and not seniority/tenure influences the motivation of employees.

1.4 Outline of the study

The paper is organized in five sections. The first section is the introduction of the research. It provides the overview of the study and the hypotheses which are to be tested for the research. The second section presents the literature review. The third section tells about the research methods used in the study. The fourth section provides the results and outcomes of the research. And finally, the fifth section provides discussions, implications and conclusion of the research.

1.5 Definitions

The independent variables studied in this research include compensation and promotion. Compensation is further divided into sub-variables: fixed pay, flexible pay and benefits (Igalens & Roussel, 1999).

Fixed pay includes salaries which are agreed upon and fixed regular payments by an employer to an employee given monthly for his work. Flexible is a lump sum bonus which is not included in the main salary. Flexible pay shall be rewarded to employees for their extra ordinary performance that may include rewarding a variety of outcomes and behaviors (Agila & Abiola, 2004). Employee benefits include all non-monetary compensations provided to employees in addition to their salary. These benefits include healthcare coverage, pension, retirement plans and other specialized benefits. The purpose of these benefits is to increase the job security of employees (Igalens & Roussel, 1999).

Promotion is the reward given to employee in which the employee attains a higher position, which requires higher qualifications, skills, experience and involves more responsibilities at a higher pay rate (Bernhardt, 1995).

The dependent variable to be studied in this research is motivation. Motivation is directing a person's behavior towards the goal achievement. There are two main kinds of motivation: intrinsic and extrinsic. Intrinsic motivation is internal. It occurs when people do something for their own pleasure or desire. Whereas, extrinsic motivation occurs when external factors compel the person to do something (Herpen, Praag & Cools, 2006).

LITERATURE REVIEW

Since long many researchers have been emphasized that incentives in monetary terms have a remarkable effect on the performance of the employee, however other kinds of incentives which includes monetary, non-monetary tangible and non- monetary intangible incentives also play an important role (Condly, Clark & Stolovitch, 2003). All the incentive programs have some or the other impact on employees performance because in order to gain more, they compete to do the best (Quinn & Rivoli, 2003). The two incentives that drive employees to participate in the career competition are wage increase or compensation and promotion (Takahashi, 2006).

This study intends to investigate the relative strengths of the effects of compensation and promotion incentives on employees' motivation. In other words, promotion acts as a long-term incentive for those with long and stable employment relationships with their organizations, while compensation acts as a short-term incentive when employment relationships are unstable and uncertain (Ajila & Abiola, 2004). Rapid advancement in gaining higher positions, a high level of compensation, and engagement in interesting and challenging work, contribute to the improvement of workers' motivation and job satisfaction (Adams & Hicks, 2000).

In order to develop skills and abilities specific to the company, it is significant from an organizational perspective to retain employees for a long period and promote them in accordance with their company-specific skills and abilities (Gayle, Golan & Miller, 2009).

Promotion:

Bandiera, Brankay and Rasul define promotion as the upward movements in the organization hierarchy. These upward movements are constrained in the organizations, as higher level positions are limited in number due to the pyrimadical structure of traditional organizations (Bagdadli, Roberson & Paoletti, 2006). Employees consider it attractive to be able to obtain desirable positions through internal advancement. Promotion acts as an incentive mechanism, only if the employees value the higher positions (Cadsby, Song & Tapon, 2006). According to Neckermann and Kosfeld (2008), public demonstrations of appreciation serve as a better means to increase productivity than salary raises. Therefore, it is clear that career advancement influences the workers' behaviors and attitudes, such as motivation and organizational commitment, particularly in the case of stable employment (Takahashi, 2006). Opportunities of career advancement are a relevant and critical part of organizations' incentives and reward systems (Quinn & Rivoli, 2003). In the context of long-term employment, it is reasonable that the speed of advancement is slowed down because slow promotion causes employees to stay in the promotion competition for a long time and maintains a high level of motivation (Ajila & Abiola, 2004).

Compensation:

Today, employees demand a very unique kind of compensation and benefits because the family trends, values, education and life style are very much different as compared to before. Nowadays employees are very open, they challenge and object on many things, they plan for long term therefore demand compensation accordingly (Schiemann, 1987). It is observed that employees are most satisfied by the compensation such as saving plans; profit sharing etc because they are more focused on the long term benefits than the short-term ones (Quinn & Rivoli, 2003). If the tangible incentive which includes cash etc are cautiously inspected and put into practice then they can increase the motivation level and the work performance of the employees (Stolovitch, Clark & Condly, 2002). The type of incentive with the highest value eventually guides to increased motivation thus leading to greatest performance outcomes (Gayle, Golan & Miller, 2009).

Needs of the employees get advanced as the time passes, this has a great impact on the organization and it's employees. At the same time government policies are also changing therefore an employer also has to plan the compensation policy in accordance to it because they ultimately effect the motivation of the employee (Schiemann, 1987).

The conceptualization of work motivation:

Motivation has been used as a dependent variable in this study. Various theories have put forward to explain motivation. Atkinson (1964), for example, defines motivation as the contemporary influence on direction, vigor, and persistence of action; while Vroom (1964) defines it as a process governing the choice made by an individual among alternative forms of voluntary activity. Pinder (1998) describes work motivation as a set of energetic forces that originate both within as well as beyond an individual's being that initiate work-related behavior and determine its form, direction, intensity and duration.

As a dependent variable, motivation has been defined as "intention to behave". Motivated behavior consists of any or all of the following behavioral elements: initiation, direction, persistence, intensity and termination (Kooij, Lange, Jansen & Dikkers, 2008).

Relationship between Promotion and Motivation:

From an employee's point of view, promotions offer individual tangible and intangible rewards - e.g., status, power, compensation, challenging work, responsibility, etc. - and are hence a powerful source of motivation and satisfaction (Bagdadli, Roberson & Paoletti, 2006). Researchers have considered the impact of promotion on attitudes and behaviors using several proxies for actual promotions. These studies concluded that promoted employees demonstrate a higher level of commitment and lower intent to leave than do the non-promoted employees (Gayle, Golan & Miller, 2009). Thus, failure to be promoted was associated with a decrease in organizational commitment and increased absenteeism (Ajila & Abiola, 2004).

Fairness in Promotion Decisions:

Bagdadli, Roberson and Paoletti (2006) highlighted an important relationship between non-promotion and feelings of inequity, which suggests that employees perceptions of justice may help to explain the negative consequences resulting from non-promotion decisions. Employees are likely to have positive perceptions of their organization and organizational justice when they receive rewards, such as promotions, which subsequently translates into higher levels of organizational attachment (Neckermann & Kosfeld, 2008)

Relationship between Compensation and Motivation:

Many management studies have been conducted to measure the relationship between compensation plans and intrinsic motivation. Intrinsic motivation has been defined when a person obtains a sense of achievement and personal growth from his or her work (DelVecchio & Wagner, 2009). The design, implementation and an employee's perception of a performance measurement and compensation system can strongly effect the motivation of employees. Employees' performance varies according to the compensation given to them therefore it is the duty of the employers that if they are compensating the employees, they should also keep a very strict track of their employees' performance because if the employee is not motivated to work hard due to compensation and benefits given to them, it just incurs cost to the employers giving them no return (Bandiera, Barankay & Rasul, 2009). Studies have found that there is no relationship between intrinsic motivation and compensation methods. Whereas, other groups of studies have suggested mixed conclusions (DelVecchio & Wagner, 2009).

There are many costly benefits given to the employees which do not have as positive impact on employees as they should; therefore in order to attain maximum performance level, employers need to do correct the evaluation of the benefits given to employees and their outcomes in return. (Neckermann & Kosfeld, 2008)

Conceptual Model

The conceptual model used in this study has been derived from the model used by Herpen, Praag and Cools (2003). It shows the relationship between the promotion compensation given to employees and the effect of them on the motivational level of individuals. The model shows the components of compensation system; fixed pay, flexible pay and benefits, which will be taken into consideration in the research.

Compensation

Promotion

Fixed pay

Flexible pay

Benefits

Motivation

(Herpen, Praag & Cools, 2006)

The respondents were selected from the manufacturing and service industry of Karachi. Managerial Level employees working in the organization for 1 or less than 1 year were considered as 'new employees' for the research and the employees who have been working for the organization for more than 1 year were considered as 'old employees'. Since the total number of employees working in the manufacturing and service industry of Karachi was not known, therefore Convenience based sampling technique which is a non-probability based sampling technique was used (Igalens & Roussel, 1999). The companies were chosen on the basis of personal contacts and references. The employees who were present at the time of visit were considered as the respondents for the survey, from the most senior to the most junior employee. The sample size of the study was 250.

Personal Survey was used fort the data collection from the employees working in the manufacturing and service industry of Karachi (Gerhart & Trevor, 1996). The respondents were visited during the office hours, for which prior appointments were taken. The researcher introduced the idea of the study to develop the respondents' interest. Finally, the instrument was handed over to the respondents and the researcher explained any point which the respondent was unable to understand. Self administered Questionnaire was used as the instrument to conduct the survey (Herpen, Praag & Cools, 2003).

RESEARCH METHODS

Sample and Context

A total of 250 employees were surveyed of several national and multinational concerns operating in Karachi, Pakistan. Employees working in the organization for two or less than two years were considered as 'new employees' for the study and the employees who have been working for the organization for more than two years were considered as 'old employees'. Since the total number of employees working in the national and multinational concerns operating in Karachi was not known, convenience based sampling technique which is a non-probability based sampling technique was used (Igalens and Roussel, 1999). The companies were chosen at random, giving preference to the ones which could be accessed easily through personal contacts and references.

Self-administered questionnaires were distributed during the working hours, for which prior appointments were taken and respondents were asked to fill in and return the completed questionnaires to the researchers after a few hours (Herpen, Praag and Cools, 2003). In order to develop the respondents' interest and to make sure that he/she understands the questionnaire, the researchers made sure that they introduce the idea of the study and briefed them a bit about the research before handing over the instrument.

Measures

The self-administered questionnaire contained three parts; first dealt with compensation, second with promotion and third had some control variables to measure.

1. Compensation

Performance Vs. Organizational Tenure

Three items were used to assess to what degree organizational tenure was used as a basis of compensating the employees. Sample items include, "My organization compensates the employees on their performance rather than their organizational tenure", "I can influence my total compensation by staying in this organization for a longer period of time" and "The benefits provided to the employees are appropriate according to their contributions and performance and not just their working years". Responses were measured on a 5-point scale ranging from 'strongly agree' to 'strongly disagree'.

Incongruity

Two items were used to asses whether there was an incongruity practiced by the organization between the old and the new employee. Sample items include, "My organization equally compensates the new and the old employees for their services" and "My organization always recruits new employees on better salaries as compared to the old ones". These responses were also measured on a 5-point scale ranging from 'strongly agree' to 'strongly disagree'.

Effect on motivation

In order to measure whether each of the above variables positively or negatively affected the respondent, a 5-point scale ranging from 'highly motivated' to 'highly demotivated' was used; where 'highly motivated' was coded as "5" and 'highly demotivated' as "1".

2. Promotion

Performance Vs. Organizational Tenure

Three items were used to assess to whether organizational tenure or the employee's performance was used as a basis of promotional decisions. Sample items include, "In my organization promotions are given on the basis of performance rather than seniority", "My organization basis promotion of the employees on their performance rather than their working tenure" and "The company assigns new supervisor based on performance and not tenure/seniority". Responses were measured on a 5-point scale ranging from 'strongly agree' to 'strongly disagree'.

Promotion Possibility

One item was used to assess whether there was an opportunity for an employee to get promoted and come to the upper-level. These responses were also measured on a 5-point scale ranging from 'strongly agree' to 'strongly disagree'.

3. Control Variables

Six control variables were measured: age, gender, education, organizational tenure, overall working tenure and designation. Previous researches have shown demographic variables to be important predicators of at least one of the dependent variables in the studies (Kooij et al., 2007). Respondents were asked to indicate their age using five categories: "25 years or below", "26-35yrs", " 36-45 yrs", "46 yrs and above". To assess organizational tenure, respondents were asked to indicate how many years they had worked for the organization they are currently working in using five categories: "Less than 1 yr", "1-2 yrs", "3-4 yrs", "5-6 yrs" and "more than 6 yrs". Similarly, the overall working tenure was assessed using these categories: "Less than 2 yrs", "2-4yrs", "5-7yrs", "8-10yrs" and "More than 10 yrs". Since, the promotion possibility of the respondent had to be assessed as well, respondents were asked to indicate the level of designation using 4 of these categories: "Employee without subordinates", "Supervisor", "Middle-level manager" and "Top-level manager".

RESULTS

4.1 Findings and Interpretation of the results

The relationship between independent variables; compensation and promotion, and dependent variable; motivation was examined using correlation as the statistical technique.

Compensation and motivation

Hypotheses 1, 2, 3, 4 and 5 were tested in order to analyze the relationship between compensation of new employees and motivation of older employees. Hypothesis 1 was "Recruitment of new employees on better salaries has an impact on the motivation of older employee." According to the data and responses received from the respondents, there is a negative and significant relationship between compensation of new employees and motivation of old employees.

Correlations

My organization always recruits new employees on better salaries compared to older ones.

My organization always recruits new employees on better salaries compared to older ones.

Spearman's rho

My organization always recruits new employees on better salaries compared to older ones.

Correlation Coefficient

1.000

-.210**

Sig. (2-tailed)

.

.001

N

250

250

My organization always recruits new employees on better salaries compared to older ones.

Correlation Coefficient

-.210**

1.000

Sig. (2-tailed)

.001

.

N

250

250

**. Correlation is significant at the 0.01 level (2-tailed).

Hypothesis 2 was "Compensating the employees on performance rather than their organizational tenure has an impact on the motivation of the employees." According to the data and responses received from the respondents, there is a positive and significant relationship between compensating the new employees on the basis of performance and the motivation of older employees.

Correlations

My organization compensates the employees on their performance rather than their organization tenure.

My organization compensates the employees on their performance rather than their organization tenure.

Spearman's rho

My organization compensates the employees on their performance rather than their organization tenure.

Correlation Coefficient

1.000

.477**

Sig. (2-tailed)

.

.000

N

250

250

My organization compensates the employees on their performance rather than their organization tenure.

Correlation Coefficient

.477**

1.000

Sig. (2-tailed)

.000

.

N

250

250

**. Correlation is significant at the 0.01 level (2-tailed).

Hypothesis 3 was "Equal compensation of new and the old employee for their services for the organization has an impact on the motivation of the employees." According to the analysis, there is no impact on the motivation of older employees when both the new and old employees are equally compensated.

Correlations

My organization equally compensates the new and old employees for their services.

My organization equally compensates the new and old employees for their services.

Spearman's rho

My organization equally compensates the new and old employees for their services.

Correlation Coefficient

1.000

.096

Sig. (2-tailed)

.

.132

N

250

250

My organization equally compensates the new and old employees for their services.

Correlation Coefficient

.096

1.000

Sig. (2-tailed)

.132

.

N

250

250

Hypothesis 4 was "Appropriate benefits provided to the employees according to their contributions and performance has an impact on the motivation of the employees." According to the analysis, there is a positive and significant relationship between motivation of older employees and the appropriate benefits provided to the employees according to their contributions and performance.

Correlations

The benefits provided to the employees are appropriate according to their contributions and performance not just their working years.

The benefits provided to the employees are appropriate according to their contributions and performance not just their working years.

Spearman's rho

The benefits provided to the employees are appropriate according to their contributions and performance not just their working years.

Correlation Coefficient

1.000

.643**

Sig. (2-tailed)

.

.000

N

250

250

The benefits provided to the employees are appropriate according to their contributions and performance not just their working years.

Correlation Coefficient

.643**

1.000

Sig. (2-tailed)

.000

.

N

250

250

**. Correlation is significant at the 0.01 level (2-tailed).

Hypothesis 5 was "The perception of an influence in the total compensation by staying in the organization for a longer period of time has an impact on the motivation of the employee." According to the results, there is a positive and significant relationship between the motivation of older employees and their perception that their total compensation can be influenced by staying longer in an organization.

Correlations

I can influence my total compensation by staying in this organization for a longer period of time.

I can influence my total compensation by staying in this organization for a longer period of time.

Spearman's rho

I can influence my total compensation by staying in this organization for a longer period of time.

Correlation Coefficient

1.000

.689**

Sig. (2-tailed)

.

.000

N

249

249

I can influence my total compensation by staying in this organization for a longer period of time.

Correlation Coefficient

.689**

1.000

Sig. (2-tailed)

.000

.

N

249

249

**. Correlation is significant at the 0.01 level (2-tailed).

Promotion and motivation

Hypotheses 6, 7, 8, 9, 10 and 11 were tested to analyze the impact of promotion of new employees on the motivation of older employees. Hypothesis 6 was "Promotions given on the basis of performance rather than seniority influences the motivation of the employee." According to the results, there is a negative and significant impact on the motivation of older employees when promotions are given on the basis of performance rather than seniority.

Correlations

In my organization, promotions are given on the basis of performanve rather than seniority.

In my organization, promotions are given on the basis of performanve rather than seniority.

Spearman's rho

In my organization, promotions are given on the basis of performanve rather than seniority.

Correlation Coefficient

1.000

-.322**

Sig. (2-tailed)

.

.000

N

250

250

In my organization, promotions are given on the basis of performanve rather than seniority.

Correlation Coefficient

-.322**

1.000

Sig. (2-tailed)

.000

.

N

250

250

**. Correlation is significant at the 0.01 level (2-tailed).

Hypothesis 7 was "People receiving promotions who deserve them has an impact on the motivation of employees." According to the analysis, there is a positive and significant effect on the motivation of old employees when organization gives promotions to employees who deserve them.

Correlations

People who receive promotions in my company deserve them.

People who receive promotions in my company deserve them.

Spearman's rho

People who receive promotions in my company deserve them.

Correlation Coefficient

1.000

.824**

Sig. (2-tailed)

.

.000

N

250

250

People who receive promotions in my company deserve them.

Correlation Coefficient

.824**

1.000

Sig. (2-tailed)

.000

.

N

250

250

**. Correlation is significant at the 0.01 level (2-tailed).

Hypothesis 8 was "The impact of working under a supervisor who is new to the organization on the motivation of the employees." According to the analysis, there is a positive and significant impact on the motivation of employees when working under a supervisor who is new to the organization.

Correlations

I might feel comfortabel working under a supervisor who is new to the organization.

I might feel comfortabel working under a supervisor who is new to the organization.

Spearman's rho

I might feel comfortabel working under a supervisor who is new to the organization.

Correlation Coefficient

1.000

.772**

Sig. (2-tailed)

.

.000

N

250

250

I might feel comfortabel working under a supervisor who is new to the organization.

Correlation Coefficient

.772**

1.000

Sig. (2-tailed)

.000

.

N

250

250

**. Correlation is significant at the 0.01 level (2-tailed).

Hypothesis 9 was "Promotions given on the basis of performance rather than the working tenure has an impact on the motivation of employees." According to the results, there is a negative and significant between the promotions given on the basis of performance and the motivation of older employees.

Correlations

My organization bases promotion of the employees on performance rather than working tenure.

My organization bases promotion of the employees on performance rather than working tenure.

Spearman's rho

My organization bases promotion of the employees on performance rather than working tenure.

Correlation Coefficient

1.000

-.274**

Sig. (2-tailed)

.

.000

N

249

249

My organization bases promotion of the employees on performance rather than working tenure.

Correlation Coefficient

-.274**

1.000

Sig. (2-tailed)

.000

.

N

249

250

**. Correlation is significant at the 0.01 level (2-tailed).

Hypothesis 10 was "The impact of providing promotion possibilities stimulating to work hard on the motivation of employees." According to the analysis, there is a positive and significant influence on the motivation of older employees when organizations provide them with enough promotion possibilities which stimulate them to work hard.

Correlations

There are enough promotion possibilities to stimulate me to work hard.

There are enough promotion possibilities to stimulate me to work hard.

Spearman's rho

There are enough promotion possibilities to stimulate me to work hard.

Correlation Coefficient

1.000

.770**

Sig. (2-tailed)

.

.000

N

250

250

There are enough promotion possibilities to stimulate me to work hard.

Correlation Coefficient

.770**

1.000

Sig. (2-tailed)

.000

.

N

250

250

**. Correlation is significant at the 0.01 level (2-tailed).

Hypothesis 11 was "Assigning a new supervisor on the basis of performance and not seniority/tenure influences the motivation of employees." According to the analysis, there is a positive and significant relationship between assigning new supervisor on the basis of performance and the motivation of older employees.

Correlations

The company assigns new supervisor based on performance and not tenure/seniority.

The company assigns new supervisor based on performance and not tenure/seniority.

Spearman's rho

The company assigns new supervisor based on performance and not tenure/seniority.

Correlation Coefficient

1.000

.671**

Sig. (2-tailed)

.

.000

N

249

249

The company assigns new supervisor based on performance and not tenure/seniority.

Correlation Coefficient

.671**

1.000

Sig. (2-tailed)

.000

.

N

249

249

**. Correlation is significant at the 0.01 level (2-tailed).

4.2 Hypotheses Assessment Summary

Hypotheses

Relationship

Significance

H1 - Recruitment of new employees on better salaries has an impact on the motivation of older employee.

Negative

Significant

H2 - Compensating the employees on performance rather than their organizational tenure has an impact on the motivation of the employees.

Positive

Significant

H3 - Equal compensation of new and the old employee for their services for the organization has an impact on the motivation of the employees.

No relation

Not significant

H4 - Appropriate benefits provided to the employees according to their contributions and performance has an impact on the motivation of the employees.

Positive

Significant

H5 - The perception of an influence in the total compensation by staying in the organization for a longer period of time has an impact on the motivation of the employee.

Positive

Significant

H6 - Promotions given on the basis of performance rather than seniority influences the motivation of the employee.

Negative

Significant

H7 - People receiving promotions who deserve them has an impact on the motivation of employees.

Positive

Significant

H8 - The impact of working under a supervisor who is new to the organization on the motivation of the employees.

Positive

Significant

H9 - Promotions given on the basis of performance rather than the working tenure has an impact on the motivation of employees.

Negative

Significant

H10 - The impact of providing promotion possibilities stimulating to work hard on the motivation of employees.

Positive

Significant

H11 - Assigning a new supervisor on the basis of performance and not seniority/tenure influences the motivation of employees.

Positive

Significant

DISCUSSIONS, CONCLUSION, IMPLICATIONS AND FUTURE RESEARCH

5.1 Conclusion

The results of this study found that both promotion and wages were important stimuli to encourage employees to work hard. It is also indicated that the pure form of the seniority promotion system characterized by uniform advancement can greatly increase the motivation of the older employee working in the organization since years. Promotion inequality between the old and the new employee is not observed in the early career stages of workers. The gaps in the speed of promotion become apparent in the later stages, in particular, with regard to the promotion of middle managers and at higher levels i.e when the employee gets older with respect to the number of years spent in the current organization.

5.2 Discussions

This paper investigated the effectiveness of two incentive schemes - promotion and compensation. Which of the two incentives exerts a stronger influence on motivation? While investigating the relationship between the compensation and promotion system for new employees on motivation of the older ones, it is informative to look at the more direct consequences of motivation. Work satisfaction is significantly negatively affected by the unjust practices of the monetary compensation and the ambiguity and uncontrollability of promotion opportunities. Turnover intent has a significant negative relationship with the perception of the fairness of monetary compensation and the transparency of promotion opportunities.

5.3 Implications and Recommendations

The study have some limitations. The first one was that there were limited time and resources. We also had the limitation that we are unable to identify the practical boundaries of this study and the possibility of generalizing the results. The third limitation is related to the research methodology. In our methodology we were not able to combine the questionnaire with hard data that illustrate the actual level of effort displayed by the employees. Some might argue that we implicitly assumed that motivation is a beneficial parameter that should be maximized. In reality, maximizing the principal's utility will not necessarily lead to a maximization of employee motivation. The costs of improving the compensation system should be weighed with the benefits of motivated personnel.

5.4 Future Research

Much work remains to be done. An important possible contribution is to increase the understanding of the mutual relations between extrinsic, intrinsic motivation and total motivation. This paper has shown the existence of a positive relationship between the characteristics of a compensation system and both types of motivation, but has not dealt with the interaction of the two types of motivation with respect to total motivation. The impact of a compensation system on the performance of employees depends for a large part on the importance of extrinsic motivation for total motivation. Further research might also lead to an improved understanding of the optimal balance between improving the monetary compensation system and promotion opportunities.

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Exams can be one of the most stressful experiences you’ll ever have! Revision is key, and we’re here to help. With custom created revision notes and exam answers, you’ll never feel underprepared again.