Compensation and Employement Motivation

Compensation and motivation are two things which go hand in hand in business management. Motivation is important in any field, whether it is a business, armed services or even in sports. On the other hand compensation is an effective lever used world wide to inspire and motivate an individual. It orbits around a common principle of taking extra than the current market standard and giving a performance of hindered and ten percent. It is seen that without motivation an individual cannot perform at its best even if the circumstances are constructive, favorable and conducive (Greer, 2003). In today’s world many organizations operate in very competitive and cutthroat conditions as paramount performance is being demanded by them. They have to recruit those individuals who are best of the best and can take organization to a new pedestal. The concept of performance based payment system is also associated with it. If we take a leaf from history, we come to know that there performance based system was there at the time of industrial revolution in eighteen century in Britain. Then it was fine tuned and was made individual performance based system. The point behind bringing this piece of information is to tell the reader that there has been a lot of work done on this system before and it is something which is not alien in the field of human resource management as it has been practiced years ago. In this paper, compensation and motivation are described in individual at first and then followed by a conclusion in the end (Greer, 2003).


In an organization, one of the most important a manger or a human resource manager has to look after is the compensation plans and how they are going to be implemented. From right left and center, management is bombarded with different advices over what should be the mode of payment but most of the time it is wrong. Compensation itself remains very much influx. Companies have to decide whether to have stock options or bonuses as for compensation and they are not defined or constrained to the higher level only, they run from the top of hierarchy to the end of it. In deciding he compensations, human resource managers have to clearly distinguish between the labor costs and the labor rates. Cutting the labor rates would not cut down the labor costs.

If the enterprise is efficiently and efficiently run, it can increase its productivity for example and organization that produces one ton of steel every day needed only thirty men to operate it whereas on the other hand another steel mill that produces same one ton of steel every day has to recruit sixty men to perform the job. So as I have said, all the thing boils down to the productivity. If a firm is more productive, less labour will be required and cost on labour can be reduced significantly. Another thing which needed to be taken care of is the type of person a human resource executive is recruiting for the company. For example if he replaces a person who is taking $2000 a month with a person who is taking $500 a month then he might be replacing an individual much more experienced with an individual who may be a novice (Brown, 2008). This will have a negative effect on the productivity as it would be lowered down (Mathis, 2007). Labor costs would have been put under control by the human resource manager but it would be a futile effort as deteriorating quality of productivity will compel him or her to recruit more individuals which would hence increase the labor costs, while still keeping the labour rates at $500. So the nuthshell of this argument was to see whether you have require best prodcuctivity or lower labor rates. Yes it is quite true that accountants and executives of a firm are quite concerned about the costs too, particularly labour costs in general but every thing have to be crafted with utmost dexterity and agility that there must not be a compromise on productivity. Another thing human resource manager must keep in mind is that he or she should devise the compensation plans by benchmarking the industry standards (Mathis, 2007). It should be competitive and must meet the expectations of the worker. To delineate my argument further I would like to explain it with an example such as of textile industry. If labor is getting wage for $300 per month over there , it might not be necessary that a person employed in the shoe manufacturing industry must be getting the same wage too because the way of doing things might be different so a manger must keep this thing also in check. If a standard wage rate is applied all across the industry, it can hurt employees and can lower down their morale which can lower down the productivity ultimately leading towards losses (Bratton, 1999).

Employee Motivation

As I have said earlier, compensation and motivation are different things but are linked together. If a company delineates every thing to its employees and pays them a handsome package, an employee would naturally be motivated to do hard work and to produce its best. Yes things can go wrong or in other words deviation might be there if the work environment is not amiable and conducive (Brown, 2008). Basic question which arises over here is that how a company can motivate its people well? Answer lies in some basic and easy steps which need to be followed.

Paying an individual well might motivate him to work harder but it might not help him to give his best shot on the field or might not retain him for a long time in the organization. To retain an employee and to keep him inspired, motivated and enthused, an employee must be empowered (Bratton, 1999). This is the only way in which employee feels the ownership of business and can take on decision on trusting its gut feeling which can boost its morale by enhancing decision making power. How it can be done? Well an employee can be motivated if you clearly define him the objective to achieve. In this way he can understand well what is required and can focus on a single thing instead of running bizarre and coming up with nothing leading to a bad performance.

Secondly, most of the employees also loose interest in the job because they feel a bit unskilled in their respective positions to perform a job so they must be given refresher courses so they can increase their ability to take daunting tasks and can perform well which can add stars to their appraisal feedback. Thirdly, to motivate an employee, one has to familiarize him or her with the culture surrounding it. Without it one would retain his or her hermit like position in the company which can hurt an organization the most. Being creative and active is what is required in an organization which results in high and outclasses performance making individual stand out of the league (Pfeffer, 1998).

Apart from this all, it is always advised to the human resource manager that he or she must sit down and discuss the job description with the employee. In this way the human resource manager gets to know about the employee well and can also delineate what is required by him. In this way a partner profile is being made in which critical behaviors, attitudes and skills are defined by the employee to the employer. The employee on the other hand can tell the manager of how he would like the things to be handled and what he will do at what wage rate. It creates a common understanding between the company and the employee which creates a good rapport between each other and hence can play a vital role in employee to be motivated (Cappelli, 2008).


Summing up the whole debate, I would like to reiterate it again that there has been a hidden or latent relationship between the compensation and employee motivation. Yes sometimes, compensation is not always the main thing as job security, environment and company’s culture also plays a part in keeping an employee motivated. There are many examples which clearly tells us that compensation is not the only thing left to be watched, people have left lucrative jobs just because of the fact that they have not been well adjusted in the environment. This happens in most of the organizations especially in multi national companies where cross cultural issues come in notice. If this happens much more stress is to be laid on the motivation side instead of making compensation more lucrative. Adjusting and assimilating an employee well into a system and retaining him for the rest and making him perform at his or her best for the rest of the life should be the main goal of an executive running the company.


Bratton, J (1999). Human resource management: Theory and practice. McMillan press Limited.

Brown, D (2008, september,01). Measuring The Effectiveness Of Pay And Rewards: The Achilles. Compensation and Benefits Review, 40, Retrieved November 28,2008, from

Cappelli, P (2008, March). Talent Management for the twenty-first century. Harvard Business Review, Reprint: R0803E, 107-117.

Greer, C (2003). Strategic human resource management. Upper Saddle River, New Jersey: Prentice-Hall, Inc.

Mathis, R (2007). Human resource management. Upper Saddle River, New Jersey: South-Western College Publication.

Pfeffer, J (1998, May). Six dangerous myths about pay. Harvard Business Review, Product no. 6773, 109-119.

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