Behavioral Wage Theories - Essay Example

Behavioral wage theories Customer Inserts His/her Name Customer Inserts Name of University (April 6, 2016) Contents Contents 2 Introduction 3 The need-fulfillment theory 3 The expectancy theory 4 The reinforcement theory 5 The justice theory 6 How the theories influence compensation 7 Conclusion 8 Reference List 9 Introduction Behavior refers to the natural reaction to oneself and/or the environment. On the other hand, motivation refers to the process of influencing other people to do work on behalf of a person or a business organization with a promise of reward or gain. Compensation or remuneration normally has a behavioral aspect that addresses the need for having goals fulfilled. The four main behavioral wage theories include the need fulfillment theory, the expectancy theory, the reinforcement theory and the justice theory. This paper briefly explains the four main behavioral wage theories and suggests ways in which the theories influence compensation in organizations. The need-fulfillment theory The need-fulfillment theory was developed by Abraham Maslow. He came up with a hierarchy of needs that apply for any person, ordered from basic needs to self-actualization needs. According to Maslow, every individual has a hierarchy of needs that are satisfied in a given order with the most basic needs being satisfied first (McLeod, 2014). Maslow also believed that as every individual goes up in the needs hierarchy, the perceived value of the preceding needs decreases. The hierarchy of needs, as developed by Maslow, starting from the lowest in the hierarchy to the highest in the hierarchy is as follows: “basic need (food, shelter, clothing), safety need (emotional and physical safety - health insurance, pension), social need (affection and belongingness to society), Self-esteem need (power, achievement, status, etc.), and self- actualization (personal growth, realization of potential) (Essay, 2015, p. 1).” Despite results from some studies showing that the fulfillment of needs does not necessarily result in well-being (Moss, 2011); needs fulfillment motivates employees and increases their output, which in turn results in better organizational performance. To show how needs fulfillment results in motivation, the work of Maslow was extended by Hertzberg, who divided needs-fulfillment-based motivation into two categories including extrinsic and intrinsic factors. According to Hertzberg, extrinsic remuneration includes factors that are meant to reduce the level of employee dissatisfaction with their jobs. These factors include supervision, organizational regulations, administration, inter-personal relations, coordination, salary structure, etc. On the other hand, intrinsic remuneration includes motivators that are related to the content of the job. Such motivators include identification, work enrichment, success, responsibility, etc (Essay, 2015). The expectancy theory The expectancy theory was developed by Victor Vroom, who used the process theory in developing it with the instruments of valence, expectancy and instrumentality. On valence, Vroom theorized that there is always the need to give rewards that are desirable to employees result. For example, in an organization with old and young people, the former are likely to attach high value to value benefits as compared to the latter. Unmarried employees who do not have children will not have as much need as their counterparts with families in relation to benefits like leave travel allowance, health benefits, education for children, etcetera (Essay, 2015). With regard to instrumentality, Vroom theorized that when promotion is made attractive enough in organizations, it will have a positive effect on performance with people being inspired to work hard to earn that promotion (Essay, 2015). With regard to expectancy, Vroom argued that the degree of chances that happen on an input or activity will lead to given first-level results. While instrumentality seeks to find the basis of second-level results in first-level results, and thus valence and expectancy lead to motivation of the employees (“Theories of Compensation”, 2016). From the concept/theory developed by Vroom, it can be stated that in exchange to the promotion that an organization gives its employees; the particular organization gets manpower and better performance (Essay, 2015). The reinforcement theory This theory was based on Pavlov Ivan’s work on behavioral conditioning as well as the work on operant conditioning that was later accomplished by B. F. Skinner. This theory is based on the fact that “behavior is a function of its consequences” (Chapter 4, 2008, pp. 18-19). Imagine a situation in which an employee stays late at night and drafts a report, even though no one asked him to complete the report. Upon forwarding the report to the manager, the manager is happy that the report was completed on time and thus she takes the employee out to lunch. According to the reinforcement theory, the consequences of the actions of the employee are favorable and thus the employee is likely to follow the same path in the future. On the other hand, if the manager chooses to ignore the sacrifice made by the employee and say and do nothing about the gesture by the employee, it is more likely that the employee will not make similar sacrifices in the future (Glass, 2016). In addition to positive reinforcement, there can be instances of negative reinforcement in which punishment is administered (Stotz, n.d.), hence the reinforcement theory is sometimes said to use a stick-and-carrot approach to motivation (“MBA in a Day”, 2008). Despite the fact that the reinforcement theory is simple, it is one area that many organizations have been unable to reap benefits from. Many times, employees make sacrifices which are later on met with ignorance or worse still, criticism. In addition, it is common in organizations to find people being rewarded for negative behavior. For instance, problematic employees may get promotions in order for them to be transferred to other workstations and become somebody else’s problem. In addition, a company may always be stressing the value of quality when in public but the same company may choose to reward employees who manage to make deliveries on time, regardless of the number of defective products in the deliveries. If such a case happens, then the employees are likely to attach more importance to hurrying the process of delivering products than to quality (Chapter 4, 2008). The justice theory The justice theory seeks to address the issue of justice in compensation. The theory brings out a number of dimensions including the fact that the way compensation is distributed among the workers of a given firm can be used to determine whether that firm justifiably allocates wages to employees. Thus justice calls for such wages to be distributed with consideration to the ethical role that the firm ought to play in achieving just wage distribution (Freundlich, 2004). Another dimension is the fact that for compensation to be just, the agreement between an employee and employer must not be coerced or fraudulent. To prove that compensation should be just, governments have developed various legal instruments meant to ensure that employers develop just packages for their employees. These include the Equal Pay Act and minimum wage laws. Another aspect of the justice theory is that “Not every loss that a person suffers entitles that person to compensation, and not every loss that a person causes creates an obligation to compensate the loser” (Nickel, 1976, p. 381). Oftentimes, injustice occurs in organizations when employees are made to pay for losses they cause their employers. Since not every aspect of on-the-job loss caused by an employee can be legislated, employees are normally left at the mercy of their employers, who sometimes unjustifiably charge them for losses they cause. The last dimension is that justice in compensation leads to protection of just distributions, together with the rights encompassing them. Simply put, justice involves letting people have the things they are entitled to, deserve, or ought to have. Compensation therefore serves justice by ensuring that no actions hinder people from getting possession of those things. Compensation also undoes past injustices and corrects the situation by letting people have the things that were held from them in the past (Nickel, 1976). How the theories influence compensation The behavioral wage theories discussed above have far-reaching influence on compensation. The needs-fulfilling theory particularly dictates that organizations have to develop pay packages that enable their employees to fulfill their needs; otherwise the employees will not be adequately motivated to serve the organizations effectively. Thus the pay packages for employees should be designed in such a way that they can access their basic needs and other needs. Employees need to be paid adequate packages for not only their food, shelter and clothing, but also for their higher hierarchy needs like esteem and self-actualization. In addition, the expectancy theory dictates that posts should have adequate compensation such that employees will find them desirable and thus they will work hard for promotions. The reinforcement theory links performance with rewards. Thus employers are expected develop compensation packages that are commensurate with the workload that their employees are given. Under the justice in compensation theory, employers are expected to know that not every loss caused to them by their employees should be compensated. Companies are also expected to develop just packages, determined by prevailing rates, with a view to protect just distributions. Conclusion From the discussion above, it is clear that behavioral theories influence compensation. The needs fulfillment theory is based on the Maslow’s hierarchy of needs and thus employees need to be paid to meet their needs. The expectancy theory is based on making results, outcomes and rewards desirable for employees so that they work hard to get the desirable rewards. The reinforcement theory seeks to link performance with rewards and thus places high expectations on the rewards for performing employees. The justice theory is based on the principle that compensation should be just, and that compensation decisions should be moral. This implies that moral principles will force organizations to review their compensation packages in order to be just. Reference List Chapter 14: Motivating Employees. (2008). Retrieved from http://www.saylor.org/site/wp-content/uploads/2011/06/BUS208-5.3.pdf Essay: Economic and Behavioral Theories in Compensation Economics. (2015).Retrieved from https://www.ukessays.com/essays/economics/economic-and-behavioural-theories-in-compensation-economics-essay.php Freundlich, L. (2014). Fair Compensation for Your Employees. Retrieved from http://tsne.org/blog/fair-compensation-your-employees Glass, M. (2016). How can managers use reinforcement theory to motivate employees. Retrieved from http://smallbusiness.chron.com/can-managers-use-reinforcement-theory-motivate-employees-18559.html MBA in a Day. (2008). Equity Theory., Reinforcement Theory. Retrieved from http://mbainaday.blogspot.co.ke/2008/11/equity-theory-reinforcement-theory.html McLeod, S. (2014). Maslow’s Hierarchy of Needs. Retrieved from http://www.simplypsychology.org/maslow.html Moriarty, J. (2016). Justice in Compensation. Retrieved from http://www.bentley.edu/impact/articles/justice-compensation Moss, S. (2011). Need fulfillment. Retrieved from http://www.psych-it.com.au/Psychlopedia/article.asp?id=415 Nickel, J. (1976). Justice in Compensation. William and Mary Law Review, Vol. 18, no. 2, Retrieved from http://scholarship.law.wm.edu/cgi/viewcontent.cgi?article=2439&context=wmlr Stotz, R. (n.d.). Content and Process Theories of Motivation. Retrieved from http://c.ymcdn.com/sites/www.incentivemarketing.org/resource/resmgr/imported/Sec%201.4.pdf Theories of Compensation. (2016). Retrieved from http://hrmpractice.com/theories-of-compensation/ Read More