Critique Compensation: How Theory Can Influence Employee Performance?

Compensation Theory Research Institution Affiliation Date Compensation Theory Research Many firms that are operating in a competitive environment have always adopted the various compensation strategies in an attempt to achieve employee satisfaction. Compensation strategies only refer to how employers try to ensure that they compensate all their employees for jobs they have done. The term compensation plan has been commonly described as the pay market that a given organization has adopted, and it is developed by the top managers and thus it the process of designing a compensation strategy is one of the managerial roles CITATION Bar03 \l 1033 (Gerhart & Rynes, 2003.). Compensation strategies have been impacted by various theories, and as a compensation professional, I will examine the various compensation theories outlining how each method can motivate employees. In the course of my discussion, I am going to discuss specific types of compensations providing detailed examples of how different compensation theory can influence employee's performance. There are many theories that try to explain compensation procedures. These theories include the economic theory and the behavioral theory. The economic argument is very much determined by factors that revolve around finances and money. These theory has further been divided into subcategories which are more specific about how a given economic factor influences the compensation of the human resource in any organization CITATION Irw96 \l 1033 (Sarason, 1996.). These subdivisions can somehow be referred as branches of the central theory, and to some extent, they can also be applied as theories. Among the significant division in the economic theory include the subsistence theory and the wage-fund theory. These two theories have their origin form great men in history who were either authors or economists. The subsistence theory states that if workers are paid more than their current wages, the number of labor provided will increase due to satisfaction. Increase in energy provided means that the organization will reproduce more using similar resources which will intern cover the compensation costs. Also, further research and practice of this theory showed that decrease in compensation rates below the subsistence level would reduce the number of employees and demotivate employees and thus they will be less productive CITATION Bar03 \l 1033 (Gerhart & Rynes, 2003.). The decline in productivity would be recorded due to disruptions by employees in an attempt to increase their compensation packages. Employees who are paid substantial compensation packages are motivated as they feel they are part of the organization. The other economic theory influencing the compensation package offered to employees is the wage-fund theory. This...