Question

We have been developing ideas of compensation and its effect on motivation for the organization. How can the organization best use compensation as a motivation tool and what theory development can you provide to support your response?

Answer 1

Compensation plan is the plan of reimbursement/payment to the employees for the services, they offer to the organization. The compensation plan is the financial return to the employees working at the organization.

Compensation plan is the top most plan of the organization which will be able develops the motivation among the employees and it is known as the self source of motivation for employees.

Employees work in the organization for the salary or money they got from the organization, so that they can run their livelihood. The very big purpose of employees to work in the organization is to earn money, so that they can use this money to run their life. This is supported by the compensation plan. Thus the compensation plan is the plan for payments to employees in such a way that it uses various factors which are essential to consider in wages for the employees.

Higher the wages/salary, higher will be the motivation of the employees. Thus wages/salary is directly proportional to the motivation level of the employees. The employee motivation can be managed with the help of compensation plan.

Organization can best use the compensation plan as tool for employee motivation as below

• Compensation plan is developed in such a way that it liked by employees and it develops the motivation level among the employees.
• Compensation plan to capture the key requirements of the employees, so that employee gets motivated.
• Compensation plan captures the performance objectives, so that employee feels motivated by earning higher money/wage by higher performance.
• Compensation can be modified such that it direct impacts the employee motivation.

Mayo Theory: It explains the employee motivation with the monetary benefits based on effective performance management in the organization.

This theory can be used in the organization for developing the motivation of the employees based on the monetary benefits and these monetary benefits can be achieved through compensation plan. Compensation plan modification and improvement results in better employee motivation as per Mayo Theory.