The Four Main Behavioural Wage Theories - Coursework Example

Describe briefly the four main behavioural wage theories and then explain how these might influence compensation policies in modern organisations. Introduction People work in order to obtain a number of goals. One of the most obvious and central goals that gets associated with work is that of earning money in terms of compensation or wages (French et al., 2011). The money people earn by working is important for their sustenance, recreation as well as growth as an individual. Research shows that employees across different jobs and positions rate payment and benefits among the top five work values (Martin, 2005). Given the significance of the role of wages in human endeavour, theorists have tried to develop comprehensive and useful theories of how wages may be decided. Theories that have been deemed useful have also been borrowed from other fields of study like psychology and sociology. These theories have then been successfully applied to develop a model of wages that would optimise the earnings of the worker as well as that of the employer. Employers are also invested in paying their employees as well as required, as they hope to encourage employees to continue to work efficiently and regularly. Compensation and rewards are known to affect the frequency and quality of the chosen behaviour (French et al., 2011). Compensation or payment is given as a reward for services rendered in the past and as a means of demonstrating satisfaction. Depending on the theoretical perspective taken, it can also offer as an incentive to perform consistently or better in the future (Benabou & Triole, 2003). Theories of wage and motivation A number of different schools of thought have considered the manner in which wages affect human choices, behaviour and motivation. In recent years, the utility of a theory in terms of improving the work experience for both the employer and the employee has been of particular interest to people in both research and application (Benabou & Triole, 2003). Some of the behavioural theories that are popularly used to explain the importance of wages are (Herzberg, 2003): Need-fulfilment theory: All humans have needs that motivate them towards behaviour that would allow then to fulfil these needs (Martin, 2005). A number of theorists have tried to explain human needs and how behaviour is chosen that may help satisfy the said need. One of the most famous need-fulfilment theories was given by Maslow in 1943(in French et al., 2011) which proposed that human needs are ordered from the most basic to the most complex, and people move through this hierarchy throughout their lives. The categories of needs described by Maslow are arranged in a pyramid, and include physiological needs like hunger and thirst which are the most basic, followed by safety needs which is then followed by the need for affiliation. The next set of needs include the need for self-esteem and efficacy which is finally followed by the need to self-actualise (Martin, 2005). According to Maslow, an individual would have to satisfy a more basic need before proceeding to a more complex one. Other theorists have also given variations of the need fulfilment theory. This includes Herzberg’s (1959; in French et al., 2011) two factor theory in which the needs are divided into extrinsic and intrinsic motivations based whether the motivation was sustained by external or internal factors. Another important need fulfilment theory was Alderfer’s (1972; in French et al., 2011) ERG theory, which divides needs into those associated with Existence, Relatedness and growth. Reinforcement theory: The reinforcement theory is based on Skinners principles of learning that suggest that providing a positive response to behaviour is likely to encourage frequent display of that behaviour, while providing negative feedback reduces the display of the said behaviour (French et al., 2011). The process of encouraging a preferred behaviour is called Positive reinforcement, while providing negative feedback is called punishment. Skinner also describes negative reinforcement, which involves the removal of discomfort when a desired behaviour is displayed and extinction which involves the gradual reduction in a desired behaviour when the incentive is removed (Judge, 2009). While the reinforcement theory was initially proposed as a theory of general human behaviour, it has been applied with reasonable success to organisational goals. The process of reinforcement involves initially recognising the presence of stimuli, identifying it, and providing a set of behavioural responses that are each tailored to different stimuli. After this the individual experiences feedback in terms of positive or negative consequences, which in turn mould future behaviour. Reinforcement can occur with a number of different consequences like money, job-security, job-satisfaction and even praise (French et al., 2011). Expectancy theory: The expectancy theory given by Vroom (1964; in French et al., 2011) combines elements of reinforcement with the process of goal-setting. The expectancy theory evaluates three aspects of a situation before providing a response – whether the effort required can be performed, whether performing the task will lead to any results or required end-goals, and whether the goals that can be reached are desired or not (Martin, 2005). Thus, when an individual can reach one of many goals by exerting the same amount of effort and investing resources into the same performance, then goals may be chosen according to how valuable they are to the individual (Judge, 2009). This theory can help calculate the extent to which a given reward or feedback can affect the employees motivation levels. Thus, only when the Expectancy (assurance that the individual can perform the behaviour), Instrumentality (leading to a set outcome) and the valance (importance of the outcome) of behaviour are high, will that behaviour produce high motivation (Martin, 2005). This means that behaviour will only be executed if the individual is fully motivated to do so. It also means that a manager may need different things to motivate different employees. Thus, the Expectancy theory recommends that one needs to pay attention to employees needs before choosing a motivator. Justice theory: The justice theory suggests that people are motivated to produce a point at which they feel equilibrium such that they are being treated fairly for the work they are doing. Justice in the workplace has two elements – procedural justice and distributive justice (Judge, 2009). Procedural justice emphasises the means to an outcomes and requires that all the methods and mechanisms that are used in reaching a goal are fairly used. Distributive justice on the other hand is concerned about the fairness of the outcome. It includes elements of the Equity theory, which suggest that people actively try to adjust their efforts to ensure fairness on an intra-personal as well as an inter-personal level (Judge, 2009). People are motivated to compare their efforts to the outcomes, and to adjust either aspect to fit the other. Thus, when someone believes that they are taking more effort as compared to the obtained result, they will adjust their efforts downwards, and vice versa. But when the individual perceives justice, they do not change their patterns of behaviour (Martin, 2005). Using the theory Understanding these theories can help a manager on many levels. In particular, these theories can be used to understand and modify strategies used to enhance employee motivation and thus, employee production (Herzberg, 2003). One of the important strategies used is to influence employees by influencing their wages. Some effective areas of work that may be influenced by modifying wage include: Choosing the appropriate means of compensation: If the manager knows the needs that the employee is trying to fulfil, compensation can be arranged to fit these said needs. Some employees are not motivated by money, but may be motivated by social interaction (need for affiliation) or prestige (need for esteem) (Judge, 2009). Thus, it would be more useful to offer such an employee a better post or designation that allows them to fulfil these needs as compared to offering them a better pay package. Finding new talent: Similarly, new employees can be recruited by providing them with opportunities to fulfil their needs. As per the expectancy theory, it would be important to help these employees verify that the goals that they will reach are important to them, that the behaviours required by the job would help them reach a particular goal that is important to them, and that they would actually get the opportunity to pursue the said goal (Judge, 2009). Improve performance: By offering valued work goals to employees, it is possible for a manager to encourage them to work more efficiently (Martin, 2005). This could be done by offering them perks, an incentive or a commission based earning strategy. This would ensure that the employee is encouraged by their goal (to earn more) to work better. Rewarding valuable behaviour: Sometimes it is not possible to anticipate the quality of the efforts taken by an employee. Yet, it is important to encourage incidents where employees take initiative, and take adequate or additional efforts to complete a task. At such times, rewarding the employee in recognition of their efforts would reinforce the desired behaviour (Judge, 2009). Using punishment: similar to rewards, it is possible to use punishment or negative reinforcement to eliminate certain behaviours from the workplace. Managers may cut a portion of the employee’s salary when they make a mistake (Martin, 2005). Alternately, the employee can be made to spend extra time without remuneration at work. Ensuring justice: Employees value their efforts, and would be unhappy to see someone else gain more for the same amount of work. Alternately, they would also be unhappy to take a lot of effort and not gain anything out of it. Thus, it is necessary that a manager takes into account such events; ad tries to provide everyone with an equal ground (Judge, 2009). Legal regulations: While being fair to employees, the manager also needs to ensure that all employees work by the book so that so no one employee gets an unfair advantage when working on a task. Industry guidelines: Managers and organisations should also ensure that all employees work using the same kind of equipment, the same guidelines and follow the same method where there is a particular pattern laid out. This is particularly important when the work is risky and when the lives of other employees are also to be considered (Herzberg, 2003). These are some strategies that a manager may use when attempting to develop compensation policies that can also help motivate employees to perform at their best. This is not an exhaustive list, but rather, these are suggestions that may be used to encourage desired behaviours in employees. Conclusion Compensation is one of the significant concerns of employees. Many different schools of thought – including behaviourism – have tried to understand how people respond to compensation in an attempt to understand how employees perceive wages, and what they want out of these wages. Theories like the need-fulfilment theory, Expectancy theory, Justice Theory and reinforcement may be used to develop compensation plans that best serve both the employee as well as the organisation. References Benabou, R., & Triole, J. (2003). Intrinsic and Extrinsic Motivation. Review of Economic Studies, 489-520. Judge, S. R. (2009). Organizational Behavior. Upper Saddle River, NJ: Pearson Education Inc. Herzberg, F. (2003). One More Time, How Do You Motivate Employees? Harvard Business Review, 53-62. Martin, J. (2005). Organizational behaviour and management, (3rd ed.). London: Thomas Learning. French, R. et al. (2011). Organizational Behaviour (2nd ed.). West Sussex, UK: John Wiley. Read More