Four Main Behavioural Wage Theories - Essay Example

Running Head: Describe the Four Main Behavioural Wage Theories Student’s Name: Instructor: Course Code and Name: Institution: Date the Assignment is due: Question Describe briefly the four main behavioural wage theories (Need-fulfilment, Expectancy, Reinforcement, and Justice Theories) and then explain how these might influence compensation policies in modern organisations. Introduction This essay attempts to describe the concepts underscored by four main behavioural wage theories and then to contextualize these theories on contemporary organisation’s compensation policies. Each theory is reviewed before its impact on compensation policies is analysed and a viable conclusion drawn. But to begin with, the essay introduction tries to place the behavioural theorists’ conception into perspective so as to create a foundation on which the behavioural wage theories are derived. Behavioral scientists usually downplay the value of money as an employee’s motivator (McKersie & Walton, 1991). Behaviorists generally prefer to emphasize exclusively on the importance of the measure of challenging the job is, the targeted goals and the importance of participative decision-making. They also emphasize on the value of employee feedback, the importance of cohesive teams at the work place and several other non-monetary motivating factors (McKersie & Walton, 1991). Nonetheless, money is still a pertinent element of employee motivation since it is the prime requirement in activating almost all the other motivating factors even those emphasized by behaviorists. Being a medium of exchange, the amount of money an employee is paid is still a pertinent determiner of how motivated the employees are. While nobody will work only for many of the other motivation factors, people may work only for the money if circumstances require it (Bewley, 1999). Wages are not the number one motivator, but the wages must remain in the motivating factors collection. Let us review each of these wage theories to see how they play out in the organisation context. Theory One: Need-Fulfilment The first of the four theories under consideration is focused on the needs of employees. The most prominent of these theories are Maslow’s needs hierarchy, the two-factor theory, the ERG theory and McClelland’s needs theory. Te basic idea spanning in these theories is that when an individual employee has pressing needs in his or her personal life, needs that are yet unsatisfied but can be satisfied by performance of the job and the resultant compensation, then that individual will be in motivated. Maslow identified a hierarchy of personal needs that start at the basal level with physiological needs (sex, hunger, shelter, thirst and the other basic bodily needs), safety needs (security/protection from any physical or emotional harm), social needs (affection, acceptance, belongingness and friendship), esteem needs (self-respect, achievement and autonomy internally while status, attention and recognition are external) and finally at the top of the pyramid, self-actualization needs (to be what one can be, growth, attaining potential and self-fulfilment) (Locke, 1980). McClelland on his part proposed that every individual has three fundamental personal needs existing in ranging balances. The balance of the needs is what determines how motivated the individual is and he or she attempts to motivate others. These three needs can be listed as the need for achievement (Seeking achievement, seeking attainment of goals and going for advancement), the need for affiliation (friendship, interaction and being liked) and the need for power(seeking authority, status, prestige and influence over others as well as making a social impact) (Locke, 1980). These needs theories underscore the fact that presence of needs in an individual’s life always motivates them to work harder and better as a way of seeking the fulfilment of those needs. Without needs it seems, nobody will be willing to work. An employer must thus attempt to facilitate the attainment of these needs in the work place not just with monetary compensation but also with all the assortment of social needs (Krueger & Summers, 1988). Money for instance only forms part of the basal level of needs and once these are attained, the individual progress on to social needs until self actualisation is attained (Krueger & Summers, 1988). Theory Two: Expectancy Developed by Victor Vroom, the expectancy theory presupposes that an individual always acts depending on several expectations. For one, the individual will only act if his or her effort is expected to lead towards good job performance (Fischer, 1977). If the effort will not make a difference to performance, the individual will not act. Secondly, individuals act only when there is an expectation that the resultant good performance from their efforts will trigger a particular positive outcome (Fischer, 1977). Thirdly, an individual will only act if there is an expectation the promised outcome is beneficial and attractive to them (Fischer, 1977). These theory mainly focuses on 3 different relationships, that of effort and performance (the perceived probability that effort will generate performance), that of performance and reward (Degree to which performing to a particular echelon will generate a desired outcome) and finally the relationship of rewards and personal goals (organizational rewards will satisfy the individual’s prioritised personal needs and goals). As such, the expectancy theory focuses on the performance variables to explain employee productivity, turnover and absenteeism. The theory presupposes that an employee makes his or her decision to perform and produce based on the expected outcome of such effort, performance and production. Such decisions as resigning or accepting a job is not rushed into so that the employee can judge on expectations at either side of the decision (Yellen and Akerlof, 1986). The costs and benefits of each decision is what makes employees behave the way they do, especially in jobs with a greater level of freedom, self will and personal discretion. The practicality of the expectancy theory is what makes it such a widely accepted explanation of employee motivation. The argument here is that the tendency of an employee to act in a particular way is determined by the expectation that such an act will trigger a given outcome which is attractive to the individual employee. A good example of expectations is when an employee performs well so that the performance appraisal is positive since a positive appraisal always earns a bonus in wages (Gupta & Jenkins, 1995). In designing wage policies, companies must primarily ensure that the wage policies generate expectations in the employees such that a particular level of pay is only achieved if merited by a particular level of performance. Sales men in today’s organisations are usually paid based on their sales volumes, in most cases in terms of commissions (Krueger and Summers, 1988). This is a typical application of Vroom’s expectancy theory. Theory Three: Reinforcement Theories Skinner’s reinforcement theory carries a central premise that the outcomes/ consequences of employee behavior determine his or her likelihood of behaving in the same way again. If for instance an employee gave a contribution during a committee meeting and the people present responds positively to the contribution, then the employee is more likely to contribute during other meetings. However, if the people respond very negatively the likelihood of further contributions in that or other meetings is lessened. Skinner’s contention was that people only learn how to act and behave in organizations depending on the initial consequences of a particular behavior or action. This concept has come to be known as operant conditioning where an employee’s behaviour is determined by the reinforcement it receives or the lack of that reinforcement when it is first done. The consequences of behaviour thus determine future behaviour. As Shields (2007) says, the theory carries an impressive ability to predicting work quality, persistent effort, production levels, absenteeism, accident rates and tardiness. If something is encouraged when it first happens, chances are that it will be repeated in future. If it is discouraged or ignored, chances are it will not be repeated in future. Being a typical behaviouristic approach the reinforcement theory argues that behaviour is a consequence of reinforcement conditioning. As such, reinforcement theorists always see employee behaviour as an environmentally caused condition. In developing wage policies, most modern organisations try to phase particular wage levels to a particular type of behaviour or performance. Behaviour is recognised through performance appraisal and rewarded in a variety of ways so that it is reinforced and triggered to repeat. Wages should help reinforce good behaviour so that the same behaviour can be repeated (Yellen & Akerlof, 1986). Whenever good behaviour goes unnoticed and unreinforced, the same does not have a chance of being ensured in future. Theory Four: Justice Theory Justice theory usually focuses on the norms that trigger fair treatment of employees in an organisation. Also called the equity theory, it states that employees are naturally motivated to strive for fairness and equity (justice) in their engagements with others and with organizations. When employees perceive their positions and situations as inequitable, they experience emotional tension and dissatisfaction that delimits their motivation (Fischer, 1977). The psychological state of justice or injustice accrues when employees compare their wage ratios to the level of input they give and to the wages of other employees in the same organisation. Sometimes, employees compare their income/input ration to that of other employees in other organisations (Blanchflower & Oswald, 1996). This concept of justice is what prompts turnover rates to increase or decrease in the organisation. Here, the most important outcome is monetary rewards and benefits that are of personal value to the employee and which only results from working in that organization (Gupta & Jenkins, 1995). The inputs to which outcomes are compared include all efforts, contributions, experience, talents and time given to the organization. Only when the comparison ratio is equitable does the employee feel he or she is being treated justly. This has been an important parameter in determining wages in modern organisations where most organisations effect graded wage policies to allow standardised and comparable wages to be paid to particular job groups based on job descriptions and responsibilities. Such policies are only effected to instil a sense of justice in compensation of employees (Blanchflower & Oswald, 1996). If inputs vs. outcomes exceed that of other people, the employee feels underpaid and if the inputs vs. outcomes exceed that of other people, the employee feels guilty (Gupta & Jenkins, 1995). The idea is to craft a standardised comparable scale on which equal inputs are given equal outcomes. Conclusion ` The following four behavioral wage theories express the role that money in form of wages, play in motivating employees. The equity/justice theory, reinforcement theories and the expectancy theories all attest to the fact that the monetary value of wages is a cardinal motivator (Yellen & Akerlof, 1986). Nevertheless, money is just but a minute segment of the host of motivating factors. Money must be viewed just as a minute part of the puzzle when wage policies are being formulated since the contingent of employee performance motivators that can generate higher levels of production go further than awarding higher wages (Fischer, 1977). As Shields (2007) says, modern organizations must formulate wage policies that help reward performance on a merit basis such that employees can expect to benefit by performing well not just by monetary compensation but also with such social and personal development factors like promotion. The policies must also be able to commend and reinforce good performance while deterring unproductiveness. More so, the policies must be graded in a way that is comparably just on basis of inputs vs. outcomes. References Bewley, T. (1999) Why Wages Don't Fall During a Recession. New York: Harvard University Press. Blanchflower, D. & Oswald, A. (1996). The Wage Curve. New York: Massachusetts Institute of Technology. Fischer, S. (1977). “Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule.” Journal of Political Economy. Vol. 85 (1). pp. 191–205. Gupta, M. & Jenkins, G. (1995). “The Case of the Invisible Merit Raise: How People See Their Pay Raises,” Compensation & Benefits Review, May–June 1995, pp. 71–76. Krueger, A. a&Summers, L. (1988). “Efficiency Wages and the Inter-industry Wage Structure.” Econometrica. Vol. 56 (2). pp. 259–93. Langton, R. et al. (2010). Organizational Behaviour. Canada: Pearson Education Publishers. Locke, E. et al. (1980). “The Relative Effectiveness of Four Methods of Motivating Employee Performance,” in Duncan, D. Et al. (eds.). Changes in Working Life. (London: Wiley. pp. 363– 83. McKersie, R. & Walton, R. (1991) A behavioral theory of labor negotiations. New York: Cornell University Press. Shields, J. (2007). Managing Employee Performance and Reward - Concepts, Practices, Strategies. Cambridge: Cambridge University Press. Yellen, J. & Akerlof, G. (1986). Efficiency Wage Models of the Labor Market. Cambridge: University of Cambridge Press Syndicate. Read More