ch8.pdf

Chapter 8: Recognizing Employee Contributions with Pay University of Arkansas College of Business, Department of Management Dr. Elizabeth Miller Employer and Employee Perspectives on Pay Pay from Employer’s View: Impacts employee attitudes and behaviors: Motivational tool for aligning employees’ int...

Chapter 8: Recognizing Employee Contributions with Pay University of Arkansas College of Business, Department of Management Dr. Elizabeth Miller Employer and Employee Perspectives on Pay Pay from Employer’s View: Impacts employee attitudes and behaviors: Motivational tool for aligning employees’ interests with broader organization. Significant organizational cost. Critical part of business strategy. Pay from Employee’s View: Policies regarding wages, salaries, and other earnings affect overall income and standard of living. Both level of pay and fairness compared with others’ pay are important. A sign of status and success. People evaluate the fairness of their situations by comparing them with those of other people. People compare their own ratio of perceived outcomes (pay, benefits, working conditions) to perceived inputs (effort, ability, experience) to the ratio of a comparison other. Equity Theory and Fairness Equity Theory and Fairness A person (p) compares their own ratio of perceived outcomes O (pay, benefits, working conditions) to perceived inputs I (effort, ability, experience) to the ratio of a comparison other (o). Op Oo ,or = ? Ip Io If p’s ratio (Op I p ) is smaller than the comparison other’s ratio (Oo Io ), then underreward inequity results. If p’s ratio is larger, then overreward inequity results. Motivation and Expectancy Theory How do we motivate workers? Expectancy Theory Review Equity Theory: Sense of fairness – how we feel We compare to an ‘other’ We change the balance based on how we feel to make it fair From our subjective take on “fairness” Expectancy Theory: Motivation is a function of: Expectancy: link between behavior and outcome Instrumentality: link between behavior and pay Valence: value of the reward Pay for Performance Intro to Pay for Performance Arkansas Merit Pay program Gainsharing