Compensation Impact on Organizational Effectiveness

Compensation impact on organizational effectiveness is one indication of the effectiveness of implementing a fair and just pay plan.

Equitable pay can help bring about a positive work attitude and behavior among employees. This will have positive impact on organizational effectiveness and performance.

Maximize the impact of compensation on the organization's effectiveness through implementation of a just and fair pay plan.

No one can deny the fact that most people seek employment and expect fair pay for the work they do.

There are very few people - possibly none - who are willing and readily do work for free. Those involved in charitable activities are possibly the exceptions. However, they are still paid allowances.

According to Barber and Bretz (2000), "pay is one of the most important job attributes to job seekers."

A survey has also found that salary is at the top of several things that motivate employees.

Prospective employees (job applicants) are interested to know their commencing pay and the pay structure indicating the minimum and maximum pay range. They also want to know the formula for calculating pay increases whether given annually or on the occurrence of certain events such as upon promotion or when additional responsibilities are given. Benefits which are non-cash compensation are also important to employees.

Profit-Oriented Organizations
Maslow's Theory of Needs indicates how fair compensation impacts on people and thus on organizational effectiveness. Pay, that is, money, motivates people based on their needs at the lower levels.

Fairness in compensation systems is important. Employees must not only feel that they are compensated fairly but that they - as well as others - must perceive that the compensation is fair in the circumstances.

Money is one of the things that motivate workers. But it has its limit in maintaining employee motivation.

Money - that is, salaries and wages - has different effect on different people. Even if this is so, every employee will perform the necessary required work for as long as he or she is fairly compensated.

Motivated people perform well. In this way they have impact on the productivity, and thus, profitability, of organizations.

Compensation impact on organizational effectiveness in charitable organizations

You may want to know the compensation impact on organizational effectiveness in charitable organizations.

You can say that people who involve themselves in charitable works have different motivation in life. They are motivated more by the good resulting from their contribution than by monetary gains. They feel happy that they have participated in activities for the general good and want to continue as long as they possibly can.

Their good feeling and joy in giving help freely is a form of "compensation." These people will feel that they have not used their time, energy and talent in vain.

However, charitable organizations have full-time employees. Surely, pay is an important motivation for them.

Compensation and Job Satisfaction
There are surveys that indicate compensation affects job satisfaction. It has impact on employee attitude and behavior.

When employees are dissatisfied,
1. The quality of their work will become worse
2. They tend to be late or do things other than their core tasks, and
3. The level of absenteeism and turnover is higher.

These have negative impacts on organizational performance. An organization can lose its capability but only to the degree that negative attitude and behavior are shared by the majority of employees. Delivery of products or services of the required quality and number on time will suffer a setback.

Rampant absenteeism and high turnover, for example, can spell disaster for organizations.

You may have noticed that there are other factors involved. Take for example, the real possibility that fairness in compensation is perceived differently by different people. There are also external forces that influence employees' understanding of what constitutes fairness. Employee unions can sway members' thinking.

Union officials who managed to negotiate a poor pay level for members can have negative impact on employees satisfaction with their pay.

Employees who are satisfied with their union's action tend to be satisfied with their pay. They tend to perform better. However, if the union's performance and the negotiated pay is not satisfactory, employees tend to perform poorly. Some surveys had been conducted on this.

You can conclude that compensation impact on organizational effectiveness is playing a role here.

Employee performance has a corresponding effect on the organization's performance.

It is important to remember that different outcomes may result in different organizations.

Strategic Compensation
Since compensation impact on organizational effectiveness is a reality, it is only logical that you optimize its potential by giving your people fair and just compensation for works well done or to motivate employees to perform better.

Again, many factors come into play including union membership, understanding and perception of what constitutes "fair and just" compensation, present conditions, and so on.

A fair compensation framework has the potential of making employees more satisfied. Since pay is one of the important attributes of work, employees will perform well for a fair pay.

This, in turn, impacts on organizational performance and effectiveness.

If you manage to strike a good balance between pay and work, among other things, you will surely achieve some degree of compensation impact on organizational effectiveness.

At the end of the day, it boils down to how effective your organization's compensation management is.

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