The purpose of the academic
article, “Effects of Pay and Productivity Comparisons in the Workplace on
Employee Attitudes: An Experimental Investigation”, is to compare the effects
of equity theory on workforce productivity. The authors conducted a social
experiment to test their hypothesis that input and output based inequality has
relevant impact on work attitudes and performance. The procedure for testing
used 323 undergraduate students, and reviewed comments after they were
presented with scenarios with different levels of equality in pay and
compensation between internal employees, and employees working for other
companies in similar fields. Their hypothesis was supported with their
findings. While both input (productivity), and outcome (pay) had a relevant
impact on worker’s attitudes, the perceived inequality in pay was more of a
contributing factor than the amount of effort others worked for the same pay. Also,
pay inequality was better tolerated between workers from different companies in
similar fields than for internal employee comparisons.
Managers must find a balance
between employee compensation for retention, improved attitude, and
productivity; and maintain labor costs at acceptable levels to achieve optimal
effectiveness. It can be easy for compensation inequalities to occur in the
workplace. Management promotes and rewards employees based on perceived
performance. It is a good management strategy to reward top performers. In
theory, rewarding top performers with better pay or incentives reinforces the
desired values and culture that management is attempting to create. To avoid
internal equality problems; employee expectations must be clearly communicated,
and measurable goals set equally for each position. Differences in pay for
retention purposes based on an employee’s education should be avoided. Employee’s
are either qualified for the position due to education/experience, or they are
not qualified for the position. This should provide a much smaller pay range
between employees holding comparable positions within the company, and create
less opportunity for compensation inequalities. If employees feel they are not
being treated fairly for their performance, their best option is to leave the
unfair situation and quit.
Managers who properly define
expectations and job duties will have an easier time comparing labor costs with
similar functions in other companies. Although labor costs do affect the
end-result cost of a company’s product or service, it should be viewed more as
an investment for employee productivity and retention. Employees comparing
their performance to pay with other companies within the same industry will not
be as loyal if they perceive a pay inequality. The cost to hire and train new
employees can easily outweigh the cost of proper pay research for a given
position. By providing fair compensation for productivity, managers provide the
best strategy for supplying a productive and effective labor force.
References
Ted H. Shore, Judy Strauss (2012). Effects of Pay and
Productivity Comparisons in the Workplace on Employee Attitudes: An
Experimental Investigation. International Journal
of Management; June 2012,Vol. 29 No. 2 Part 2, p677-686, 11p.
Craig,
ReplyDeleteThis is an interesting article because no matter who you will speak to there is always a story of pay inequality in some field of work. I believe that when there is a pay inequality it does harm the productivity of the employee, the team or group in the same internal field, and the product and/or the service. I have ran across the problem of internal inequality and it was for the exact reason of not communicating expecatations and setting goals for the individual (which is the key word) position, and once it was actively installed into the company it was too far gone.
It is true if the employee feels very strongly about the issue it would be best to leave the situation, but sometimes it's very difficult (i.e. economy, transportation) and duanting.
The first sentence in your last paragraph is a good solution if the manager is not experiencing pay inequality, but if they are it's going to be a vicious cycle.
Craig I agree with you on your article about compensation of wage inequality. If people are getting underpaid for the same job performance it would only be sensible to leave and find a company who will give you what you are qualified for.So many people who have dedicated their lives to their work in turn hoping it will be recognized and rewarded never comes through.I believe successful organizations realize this and have compensated according to qualifications.
ReplyDeleteEmployee productivity may be hard to measure, but it has a direct bearing on a company's profits. An employer fills his staff with productivity in mind and can get a handle on a worker's capabilities during the initial job interview. However, there are several factors on the job that help maximize what an employee does on the job. While employee compensation affects productivity, some factors may boost output without costing the company anything, such as: validation, the right tools, solid management, co-workers, off the Job.
ReplyDeleteI believe this article discusses important points for managers to take into consideration. For instances, managers should find a balance between employee compensation for retention, improved attitude, and productivity. Also, managers should clearly communicate expectations and set measurable goals for each position. If managers keep these factors in mind, they will be able to achieve greater efficiency in the workplace.
ReplyDeleteI enjoyed the article, but there is one point that sounds easier on paper than in real world. Finding a balance between employee compensation for retention is not easy to do. If you pay someone more for a job than the other, then the one getting paid less will either stop caring for their job or, as the article states, quit.
ReplyDelete