The Several Factors In Employee Satisfaction Commerce Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Employee satisfaction is made up of several factors, but they can be related to five levels of need first described by a psychologist in the 1960s, Abraham Maslow. Maslow said that each person has the same needs and that we all spend each day satisfying one or more of those needs. In the current business world as the quality manpower is scarce and people have more options to consider the payment scheme can be an efficient tool to motivate the employees and retain them. Companies are now able to align their business objective and the payment scheme to get the best output.

As it is understood that every employee can exhibit success in some business area, and these potentials generate the key to the acknowledgment the company can give employees. Employees with excellent attendance should be appreciated for the dedication the employee has made over time to time. Again for another worker who is especially good at customer service should also be rewarded on that trait. This is because the attention to these employee successes will eventually pay off with accelerated employee self- esteem and retention. It is important to make sure that no one can ever say that they left the company as no one cared for the work s/he has been doing. (Hayes, David; Nine Meier, Jack; Woodbury, Debbie, 2001)

'Reward Management is the process of developing and implementing strategies, policies and systems which help the organisation achieve its objectives by obtaining and keeping the people it needs by increasing their commitment and motivation.' (Armstrong and Murlis; 1998)

The factors affecting employee performance and motivation are energy, empowerment and enablement, the needs that operate within the individual and the goals they hope to achieve. The companies are now minimising the expenditure on wages and salaries on the other hand attracting and retaining the right employees by motivating and directing the effort, encouraging the effective behaviour through underpinning and facilitating the organizational changes. Rather than increasing the salary the reward system is now customised and divided into different categories to tag the employees as many ways as possible so that the employees feel safe and engage their best effort to achieve the potential goal. 'Expectancy theory explains that the strength of an employee's motivation depends on the value of rewards available to individuals for achieving goals.' (Lyman W. Porter, Edward E. Lawler, 1968)

During the twentieth century the pay systems have been of frequent interest as there has been little agreement about their potential or actual role. Whilst the concept of a job is founded on a two-way commitment- the promise of pay in return for work performed, there are diverse views about the significance and composition of pay. The globalisation of business, moreover, raises questions about management across frontiers. (White, Geoff, 2000).

The hypothetical underpinnings of achievement motivation, including both ''intrinsic'' and ''extrinsic'' motives, have two essential components: an assumed energizing or motivating mechanism that directs a person toward goals and a set of internalized conditions or standards (whether created by oneself or by others) that represent personal fulfilment or achievement. (Roeckelein, Jon E, 1998)

There are important qualifications that must be raised in relation to the work of the 'New Pay' theories. First it might be argued, the 'good for business' case should be questioned for the same reasons that a unitarist approach to HRM is challenged- namely that there are different interests at play within the business organisation and they cannot all be subsumed so easily in pursuit of business goals.

Second, it is clear that 'strategic pay' may involve complex and sometimes contradictory objectives. A balance must be found between recognition and reward for the performance of the individual, for the group (and between different groups) and for the business as a whole. Payment for the person' which is emphasised by the 'New Pay' puts a premium on rewarding individual performance precisely because individual performance is seen as 'directly controllable' (Lawler 1990:203).

Since the 'New Pay' is concerned with aligning pay structures with business objectives, attention must also be given to group and corporate performance and to the ways in which these different dimensions of performance may be rewarded. Schuster and Zingheim (1992) suggest that group variable pay may be appropriate to reward pre-determined team, business unit or organisational goals, but they have less to say on the ways in which the interests of the business, the team and the individual might be balanced.

Organisational or group performance is harder to influence than individual performance and so proposes that a larger amount of 'at risk' compensation should attach to group or corporate performance (Lawler 1990:203). It is understood that finding the right compensation mix is a complex process and one that may not easily be understood by those whom it is intended to motivate. It is not surprising that critics point to the need for 'pay literacy' as a prerequisite for effective reward management (Stevens 1996: 25). Moreover these complex systems have still to relate to the underpinning terms of the individual employment contract. Here is a critical problem for the 'New Pay', since it is clear that the fundamentals of pay systems are not readily amen-able to regular change or adjustment. In terms of the operation of 'New Pay' ideas, there is clearly a risk that they will become too sophisticated to be effective and too complex to be easily changed.

'Employee commitment' is one of the central tenets of HRM since it offers the possibility of something more in the employment relationship than the simple wage-effort bargain (Walton 1985). 'New Pay' approaches- concerned with pay for the person rather than pay for the job- seem to enhance managerial discretion to reward compliant behaviour patterns or the appearance of commitment. L.Dickens (1998) has identified the dangers inherent in HRM, with the potential for a 'gender model of commitment' and points to the risks of gender stereotyping by managers. Collective pay determination and job evaluation were established according to principles of 'fair' treatment, yet they have not delivered equal pay for women. Yet it could be argued that pay for performance offers the potential for more equitable treatment of women because their individual role and contribution will be rewarded. There is none the less a risk that the processes through which performance-based pay is determined- including individual objective setting and appraisal, will work to the disadvantage of women. The ways in which skills are perceived and valued underpin pay systems and no one pay system will deliver equal pay (Rubery 1995; L.Dickens 1998). The meaning and significance of the psychological contract are relevant to the question of commitment too, since the unspoken assumptions of the worker and of the employer may have as much bearing on performance as the explicit terms of the employment contract. Schein (1988) drew on theories concerned with social contracts to identify the 'psychological contract' that exists between employer and employee. The psychological contract includes expectations about pay and working conditions, about the benefits and the security of the job in question. It is not so much a matter of legal rights- although these may help to shape expectations -as the expectation of fair and equitable treatment. It is important that these considerations were emerging at a time when 'lifetime employment' was said to be a thing of the past (Handy 1994). Cappelli (1995) has shown the lowering of morale brought about in the USA by growing workplace insecurities. Research in the UK in 1995 suggested that low trust by employees in the organisation was linked to the experience of redundancy (Kessler and Undy 1996). The growing contingent workforce may identify less with the organisation and its business objectives.

Types of motivations:

Employee Stock Ownership Plan (ESOP): It is a clear contribution employee benefit scheme allowing employees to own the stock in the company they work for. It is equity based late reward plan covering several features which made ESOPs unique compared to others. By law, ESOP is a requirement to invest in the securities of the sponsoring employer. It operates through a trust, setup by the company accepting tax deductible contributions are distributed to individual employee accounts within the trust which may vary according to pre-established formulas based on service, position or salary. Employees can cash out their share while leaving the job and they receive the portion at either termination disability, death or retirement.

Valuation plays a critical role in the successful implementation, administration, and termination of an ESOP. Further, in many ESOP-owned companies, ESOP shares may represent a large portion of the retirement account of company employees. Care should be taken to ensure that ESOP valuations are performed by a highly qualified firm and that the valuation analysis and report do not contain any of the above-referenced "seven deadly sins" of ESOP valuation.

Profit Sharing: Among so many options the most familiar practice by the companies to contribute a fraction of pre-tax profits to a pool to distribute among appropriate employees. This is called profit sharing where the amount distributed to each employee will be weighted in accordance with the rank or scale so that employees with higher base salaries receive a slightly higher amount of the shared pool of profits. This scheme helps the company to get a group of motivate employees to work together focusing on a common goal and helps employees concentrate on profitability where the costs of implementing the plan will vary along with the company's revenues. Apart from that this scheme enhances commitment to organizational goals. Still the pay for each employee moves up or down together disregarding individual differences for merit or performance. For smaller companies, these plans may result in drastic swings in earnings for employees which the employees may find difficult to manage their personal finances. (HRDM, 1999)

Merit Pay: Merit pay is another encouragement plan implemented on an organizational wide basis to provide all employees an equal opportunity for consideration, disregarding the financial source. Depending on the availability of fund and other constrains merit increase scheme is introduced when funds are designated for that purpose by the management. This sort of pay helps the employers to differentiate the pay to the high performers. Indirectly it helps the employer to get some high performers helping the organization to accelerate the performance.

Gain Sharing: Another way of involvement and participation of people is gain sharing where the management seeks higher level of performance allowing the employees to gain share along with the improved performance. In this way the organizations can work in a team approach with the competition in the employee performance. In a typical gain sharing plan, organizations use a pre-determined formula to measure performance and share the savings with the employees. The performance is compared with the baseline or standard performance to identify the amount of the gain. This plan generally allows the employees to enjoy the bonus on a monthly or quarterly basis. Gain sharing measures cover the operational parameters for instance productivity, spending, quality, customer service which varies with the employee's performance.

This sort of method are applied to most of the business requiring the increased employee involvement and is originates in service, manufacturing, health care and the public sector and NGO. Gain sharing encourages more positive attitudes to the organization helping other performance with the positive change, increasing the level of teamwork, involvement, cooperation with an increased feeling of ownership and accountability and fosters the culture of continuous improvement. Still the plan has some drawbacks as this measure is narrower that the organization-wide profit forcing the employer to pay the bonus even though the profit is low. This method requires a participative management style where it needs to share the information relate to performance measure. Employees may challenge management decisions may badly impact a gain and organizational stress is increased as everyone having a financial stake in the organization's success. Gain sharing is more appropriate for an environment requiring teamwork and collaboration rather than individual entrepreneurship. This technique is applicable where the company performance can be easily quantified and highly dependent on openness and trust. The tool for increased employee involvement may considerably enhance the long-term effectiveness but requires commitment of the management and constant communications. The managers and executives need to be educated to develop a clear understanding about the gain sharing philosophy for success.

Pay rise considering factors:

The companies to consider bunch of factors while increasing performing the pay rise. The company should have a predefined policy considering the influencing Factors such as Legal considerations, union membership, competitive strategy, and equity. For some companies it ties compensation to the amount of production the worker produces, and is popular as an incentive plan.

The employers should be convinced with a consistent and predictable workflow by the employee where the employee able to exert some control over the rate of production. Primarily, disregarding the quality the employer may design simple, straightforward, respective tasks and are more appropriate to operations.

While Pricing Managerial and Professional Jobs the employer may considers attracting and keeping the existing and potential employees. Still it is harder to quantify evaluation and the amount paid on the basis on the ability and this is more complex and stress incentive over evaluation. On the other hand the top executives compensated by base pay plus guaranteed bonus along with short term and long term incentives and perks.

The considering factors to determine the pay is company size and performance, board sets CEO pay where shareholders may affect pay as SEC requires disclosure of all CEO pay and the complexity of the job. Depending on the performance appraisal the employer may raise the pay to compensate the performance for a particular employee. Again the employer may consider other factors for instance the average performance of the total employees. It is not wise to suddenly increase the payment of an employee only depending on the performance disregarding psychology of the others.

Pay can be used as a powerful communicator for direction and value when change is underway.

Strategic pay is more appropriate for today's challenging business world as organization and its leaders constantly look for productivity, teamwork, performance and improve outcomes. Employers must link the rewards to business objectives to obtain the competitive advantage through people. Depending on the situation the employer may adapt its pay tool among numerous sample pay strategies.

The traditional way of compensation is no longer applicable to motivate the employees and doesn't serve the organizational purpose. Companies may adapt The New Pay to create critical tools for total compensation strategy and pay programs to add value to the company and ensure organizational success. (Jay R. Schuster, Patricia K. Zingheim, 1996)


People have long been considered expenses, while stock, supplies, buildings and inventory are viewed on the balance sheet as assets. Smart employers are now beginning to realize that people are the assets. The other things are less important to the success of the organization. Pay, if used smartly can help an organization to obtain its goal and objective.