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HRM 3490 (10)
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A Behavioural Framework for Compensation

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Human Resources Management
HRM 3490
Ping Peng

Chapter 3 Types of Reward Problems Failure to Produce Desired Behaviour  When a reward system has no impact on behaviour. Production of Desired Behaviour and Undesirable Consequences  When the reward system does indeed generate the desired behaviour, but there are also unanticipated negative consequences. Sears service technicians did generate increased sales, but cheated customers.  When a reward system generates the rewarded behaviours, with no obvious negative consequences, but also serves to suppress other desirable behaviours that are not measured or rewarded. Auto retailer – sales staff paid only on the basis of individual sales. Didn’t want to train new staff - competition Production of Reward Dissatisfaction  When employees believe that the rewards they receive are not consistent with the contributions they are making to the organization, or when they believe that the reward system is unfair.  Can result in a variety of negative consequences o Poor work performance o High turnover o Poor customer service o Employee dishonesty Three Key Employee Behaviours An effective reward system should promote desired behaviour. Membership Behaviour  Occurs when employees decide to join and remain with a firm. Task Behaviour  Occurs when employees perform the tasks that have been assigned to them. Organizational citizenship behaviour  Occurs when employees voluntarily undertake special behaviours beneficial to the organization that goes beyond simple membership and task behaviour. o Extra effort o High cooperation with others o High initiative o High innovativeness o Extra customer service o General willingness to make sacrifices for the good of the organization Three Key Employee Attitudes Job Satisfaction  The attitude one holds towards one’s job and workplace, either positive or negative  Leads to membership behaviour  Decreases: o Turnover o Absenteeism o Grievances o Reduces stress Work Motivation  The attitude one holds toward good job performance  The strength of employee’s desire to perform his or her duties well.  Leads to task behaviour Organizational Identification  A sense of shared goals, belongingness and desire to remain a member of the organization (organizational commitment).  Can have a positive effect on job satisfaction and work motivation  Leads to citizenship behaviour and contributes to membership and task behaviour  Leads to: o Positive group norms o Cooperative behaviour o Innovative behaviour o Increased job effort  Decrease: o Turnover o Absenteeism o Grievances Each of these attitudes can lead to behaviour which is beneficial to the organization in different ways. Classical organizations  Need only provide sufficient rewards to create some degree of membership behaviour. Human Relations Organizations  Rely on job satisfaction and positive work norms.  Must ensure they have equitable reward systems that generate job satisfaction and a substantial degree of commitment  Depend on high membership behaviour and adequate task behaviour. High Involvement Organizations  Need to generate all three job attitudes and behaviours.  Key attitude is organizational identification which generates organizational citizenship behaviour Causes and Consequences of Reward Dissatisfaction There are four main causes of reward dissatisfaction: Violation of Psychological Contract  When people decide whether to join a firm, they do so based on their expectations about the rewards they will receive and the contributions they will have to make – PSYCHOLOGICAL CONTRACT.  Problems with the psychological contract can occur for two main reasons: 1. There has not been accurate communication about the nature of the rewards provided and/or contributions required. These turn out to be different from the employee’s expectations 2. The employer unilaterally changes the “contract” in a way that the employee perceives as unfavourable  Causes distrust, decreased job satisfaction, reduced citizenship behaviour and decreased work performance.  Can lead to increased turnover, theft or sabotage Perceived Inequity Equity Theory  Employees make comparisons between the ratio of contributions they make to the firm and the rewards they receive, and the ratios of relevant others, mostly coworkers Relative Deprivation Employees experience dissatisfaction with pay when: Lack of Organizational Justice Distributive justice is the perception that overall reward outcomes are fair – equity theory. Has a stronger effect (dissatisfaction) Procedural justice is the perception that the process through which rewards are determined is fair. Procedural justice is achieved if the pay system is: o Consistent o Free of bias o Flexible o Accurate o Ethical o Representative Unless employees believe that both of these are fair, they will not feel that the reward system is fair. Consequences of Reward Dissatisfaction Attempt to Increase Rewards  Quit organization and take a more rewarding job  Demand higher extrinsic rewards, individually (asking for a raise) or collectively through a union  If no union exists, employees must attempt to form one  Some employees may resort to illicit means – stealing the firm’s property or money  Increase work performance, if they are quite certain it will lead to significantly increased rewards – promotions  Increasing intrinsic rewards – doing something they enjoy Attempt to Reduce Contributions  Formally request their job duties be reduced – unpaid overtime  Reduced effort or longer breaks  Reducing quality of customer service  Increased absenteeism Why do People Work?  If they have unsatisfied needs  If employment is seen as the best vehicle to satisfy those needs  If they are able and willing to do the things that the employment requires What factors determine whether an employee stays with the employer long term? Job Satisfaction:  Satisfaction with pay  Satisfaction with promotion  Satisfaction with supervisors  Satisfaction with co-workers  Satisfaction with job itself  Satisfaction with job security Organizational Commitment:  Affective commitment o Employees stay with the organization based on positive feelings toward the organiz
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