Organizational Performance: Motivation and Its Impacts

Introduction

Introduction

This chapter contains the background of motivation and its impacts on the organizational performance. It also provides the summary definitions and base theory, the background of the host organization, the rationale for the research area, the research objectives and investigations hypothesis. It concludes with the outlined methodology and the plan of the dissertation.

Background to the study

The centrality of employee input in an organization’s overall performance can only be ignored at the peril of an organization’s long-term survival. The significance of employee performance in the contemporary business environment is determined by the worker’s contribution (Ola & Trond, 2015, p. 37). While it is possible to acquire top-notch technologies to improve operational effectiveness and efficiency, it is relatively complex when dealing with the human resource. Despite the complexity, developing an efficient workforce cannot be ignored. Different concepts and theories on human resource management have been formulated to assist organizations to develop a robust workforce (Brown, 2002).

Many business organizations are increasingly applying employee satisfaction through the employment of technique of empowerment. Empowerment is the process of giving the employees authority so that they can be more relevant to the business organization by participating in the decision-making process. By introducing empowerment, there will be no flow of control from the top echelons of the company downwards.

Empowered employees will make decisions on their own since they do have their voice on what to do, when to do and how to do (Carter, 2009). It can further be noted that businesses perceive remuneration as an element that can promote an organization’s superiority with reference to the competition rather than cost (Adiguzel et al., 2010, p. 290). This trend is most prevalent within the private sector. Many classical researchers contend that organizations in the private sector are gradually aligning pay schemes to the employee or organizational performance (Lucifora & Origo, 2015, p. 610; Britton, Samantha, Chadwick, & Terry, 1999, p. 27).

Barcelo (2000) suggested that “the present and immediate influence on the vigour, direction and persistence of action can be termed as motivation” (p. 24). It can be noted that business managers are striving to establish and maintain an atmosphere that is more favourable to the performance of individual employees who are striving together in groups towards attainment of the pre-determined goals (Kinni, 1994, p. 14). In contrast, compensation can be offered to workers as per the following methodologies: the customary or traditional approach; implicit bargaining; human relations approach; internalized motivation; and competition (Robson, 2002, p. 62).

Whether higher compensation leads to better performance is a very contentious issue that has attracted both proposing and opposing opinions from different spheres of human resource management. Considerable research has gone towards the study of the link between employee performance and its relationship, or lack from that point forward, with the amount of pay the employees receive. This dissertation proposal investigates whether an organization’s overall performance is a factor of the individual employee performance. The thesis considers the integration of compensation systems one of the fundamental strategic issues in the contemporary business environment.

Small illustrative payment may compete with high worker turnover and non-appearance and none of them is productive to the inevitable destiny of the company. In this way, in the 1950s, occupation, expansion started to grow up in noteworthy associations. Be that as it may, one can assert that partner high pay with execution represents a danger of workers losing their occupation positions in the event of inability to accomplish the normal execution.

This case may antagonistically influence the degree to which the representatives relate to the firm, regardless of the past studies. Consequently, the popularity of performance-related pay has increased considerably. The best way to define the performance-related system is to include “a system that awards employees who have worked their normal working lives with money” (Adiguzel et al., 2010, p. 284).

Problem Statement

Most organizations have over-relied on pay-for-performance approaches to their strategic human resource management practices. Results from past studies affirm that “institutions extensively relied on compensation systems in an effort to improve the organizational performance by positively influencing their employees” (Torre, Giangreco, & Maes, 2014, p. 48). Consequently, different pay structures have been formulated to assess their contribution to employee performance. Integration of dispersed pay structures in an organization’s compensation system may culminate in adverse effects. Other studies show that “the contribution of sparse pay structures to employee performance might be insignificant” (Torre et al., 2014, p. 55).

While many people have developed the perception that more pay can lead to better performance, this issue is more complicated than meets the eye. Employee performance is a mix of many factors, which do not necessarily end with a better payment. Other studies show that “even though the issue of the significance of relative and absolute pay has been extensively researched, numerous gaps remain unexplored” (Torre et al., 2014, p. 77).

Lawler (2000) further supports this view by emphasising that “the pay-for-performance approaches are not always effective in producing the desired results” (p. 76). Therefore, in the course of formulating employee compensation systems, the dissertation suggests that it is imperative for organization’s management teams to evaluate the correlation between the employees pay level and their performance.

Research Purpose and Rationale

This paper aims at studying whether paying employees more leads to more performance. The proposal will deploy the case study of King Hamad University Hospital to understand these issues. Further, it will incorporate the existing literature that has discussed employee performance and factors that determine such performance in an organization. Incorporating the current literature will lead to a better appreciation of critical issues that relate to the subject that the case study will reveal. The rationale for conducting this study has arisen to understand the relationship between pay level and the employee motivation.

Currently, organizations increasingly appreciate human capital as a source of sustainable competitive advantage. Thus, the need to develop and retain a strong human capital base has increased considerably. However, it is imperative for organizations’ management teams to appreciate the contribution of their employee compensation systems to worker performance. Such consideration will provide the organization’s management team with insight on how to adjust their employee compensation systems.

Research Objectives

This proposal intends to achieve some number of goals, which include:

  • To evaluate the relationship between pay and employee performance, and
  • To assess the impact of high employee pay on employee motivation and productivity.

Research Question

The above research objectives will be assessed by taking into consideration the following research question.

  • What is the impact of the level of pay for the employee performance?

Research Hypothesis

The proposal is based on the following null (H0) and alternate (H1) research hypotheses to achieve the research objective.

  • H0: High employee pay directly correlates with higher employee performance.
  • H1: There is no correlation between high pay and high employee performers.

Literature Review

Introduction

This section highlights the key ideas and arguments that have been presented in the existing literature on the issue of performance management in organizations. Among the many factors that may be revealed in the literature concerning performance management and the role of compensation will be discussed intensely. The section will also incorporate substantial research that relates to King Hamad University Hospital to its employee performance management issues.

The concept of employee remuneration

Employees who have engaged in productivity for so long and are more involved in organizational growth are known as motivated employees. Pride, Hughes, and Kapoor (2011) found out that “employee remunerations can be described as the inclination of an individual to exert high magnitude of efforts” (p. 255). Employees are able to exercise a large magnitude of energy when their capability and the job match is in balance. Also, they can do this when due recognition is made for their attainments and achievements and when prospect for growth are available to those employees who desire for that (Wentland, 2009).

Low morale among the employees is a sign of an organizational disease that signifies a lack of motivation and demands a high attentive treatment and cure. Hence, for any business organization to accomplish its objectives and goals, high-spirited employees are the need of the hour. Employee remunerations have become an ingredient fact to make them give their best.

The profit and oriented non-profit organizations are increasingly being concerned with the employee motivation to improve their performance (Brown, 2002). Many of the organizations are adopting “a flat organizational structure” (Patel, Messersmith, & Lepak, 2013, p. 1437). Consequently, firms are considering alternative approaches to sustain their employee level of motivation. This plan has led to the adoption of payment systems in their employee compensation schemes.

However, a conclusive theory or approach to human resource management has not been established to guarantee better employee performance. One of the payment systems that are commonly used by organizations entails the integration of wages and salaries. Many past studies have found assert that “wage implies the price of labour” (Adiguzel, Yuksel, & Tekin, 2010, p. 290).

The incorporation of wages and salaries in employee compensation processes has led to the integration of diverse wage management practices. One of the most notable methods entails the increase in wage levels. Firms are linking pay to performance to remain competitive through improved employee productivity (Finney, 2008). However, in the course of designing the pay-for-performance schemes, it is imperative for organizations take into account the relevant factors that affect performance.

A study including more than 8,000 workers who were chosen from Japanese and American assembling firms demonstrated that representatives who got high pay put more exertion in their employments. Such officials are more inclined to stop their working environment. A study on the execution of the English, German, and Italian football groups demonstrates that high wage levels correspond with the group performance (Cooper & Schindle, 2006, p. 37). If workers seem to be highly paid, they will be incentivised to perform at an abnormal state to keep up their wages and offset the inputs and the yields. The employees decrease the danger of losing their generously compensated occupations due to poor execution (Collins, 2001, p. 88).

A few plans are more far reaching overall business associations attempting to improve the compensations of the representatives. The vital official pay activities will focus on what the agents accept to be noteworthy. Giving workforce more choice making force and responsibility enlarges their circles of control over the assignments for which they are considered responsible and productively prepares them to achieve those employments.

At the beginning, convictions of unsettling influences, creating from being held responsible for some activity for which a worker does not have the sources to perform are debilitated. Here, worker vitality is “derailed self-sparing to upgrade errand accomplishment” (Parker, 2001, p. 201). At the point when the power to settle on the choices in the association is squeezed, the specialists who are sufficiently experienced in administration are offered with the opportunity to create new plans.

The power to settle on choices among representatives extends the business to have more adaptable workers. Likewise, it abuses all the more keenly the learning of its workforces and upgrades the swapping of data and thoughts among the offices and the representatives. Frequently, these plans improve workers’ stances toward the client and the business while boosting fearlessness. Firms are linking pay to performance to remain competitive through improved employee productivity (Finney, 2008). However, in the course of designing the pay-for-performance schemes, it is imperative for organizations take into account the relevant factors that affect performance.

King Hamad University Hospital is one of the biggest hospitals in Bahrain that have integrated the concept of pay as a way of motivating its workforce for high performance. For example, on March 26, 2015, King Hamad University Hospital announced its decision to pay the incoming Chief Finance Officer [CFO], Ruth Porat, US$70 million by 2016. The pay package comprised a US$650,000 annual base salary.

The pay package also included a special one-time bonus amounting to US$5 million. However, in the event of the incoming CFO terminating the contract before completing one year within the firm, he or she will be required to repay all the advanced special bonuses. Apart from the salary and bonuses, the payment scheme for the CFO further comprised equity grants. The above aspect illustrates the extent to which King Hamad University Hospital associates high pay to increase employee performance.

As said over, the announcement had represented a portion of the theories about the worker pay. Diverse researchers hold distinctive perspectives and hypotheses. The progression of necessities, as hypothesized by Maslow, shows that the director obliges considering the prerequisites of the workforces and satisfying them to persuade them. Many business organizations are increasingly applying employee satisfaction through the employment of technique of empowerment.

Empowerment is the process of giving the employees authority so that they can be more relevant to the business organization by participating in the decision-making process. The classical scholars’ idea of accomplishment of representative fulfilment examines the qualities of high accomplishment roused individuals, and it demonstrates that the capacity of accomplishment arranged can be found out (Flint, 2012).

Employee Empowerment

Many past studies on the impact of pay on employee and organizational productivity have shown that “pay contributes to productivity gains” (Lucifora & Origo, 2015, p. 211). The contribution of the payment schemes to the employee and organizational performance varies, depending on whether the pay is individual or collective performance-relate. Moreover, the previous researchers emphasise “the returns to performance pay are larger for ethnic minorities, particularly in the case of women” (Lucifora & Origo, 2015, p. 607). Employees are able to exercise a large magnitude of energy when their capability and the job match is in balance.

Also, they can do this when due recognition is made for their attainments and achievements and when prospect for growth are available to those employees who desire for that (Wentland, 2009; Gratton & Jones, 2004). The Early research considers that had been done as in front of the calendar as the 1950s have demonstrated that extremely enhanced and separated occupations completed in lower specialist yield and certainty (Hardester, 2010).

The likelihood of experiencing a high rate of wilful occupation turnover is high. The classical researchers emphasize that “the increment in intentional representative turnover may unfavourably influence the appeal of an association in the work market” (Dahesh, Nasab, & Ling, 2012, p. 147). In this way, the adequacy and proficiency with which an association grows long haul aggressiveness regarding human capital may be affected.

Notwithstanding the above test, over depending on the pay to execution frameworks may unfavourably influence an association’s long haul survival. This perspective emerges from the way that the business will be subject to monetary changes, for example, expansion. Amid a financial downturn, an association may not support pay increases. Burns and Bush (2000) characterize such sensation as “pay pressure” (p. 38).

In addition, the presence of little wage differentials amid times of financial downturn may adversely influence the superior workers’ state of mind (Sims, 2002, p. 72). For instance, workers may add to a ‘why trouble’ mentality. Russell and Taylor-Iii (2008) are from the perspective that “connecting pay to execution may confuse the instalment plan that an association receives” (p. 84). For instance, by persistently expanding the great entertainers’ pay, it is feasible for the organization to achieve the top reach. This case implies that making extra pay increases, regardless of the workers winning it, will be considerably troublesome.

Subsequently, the pay-to-performance framework is not economical. For the most part, the ordinary workers may advance through the pay scale because of their span of administration in an association (Robbins, 2003). The general impact is that the pay-to-execution framework may be rendered insignificant because of the intensifying impact. Under such circumstances, top entertainers should seriously mull over looking for openings for work somewhere else.

Numerous business associations are progressively applying representative fulfilment through the job of the strategy of strengthening. Strengthening is the procedure of giving the representative power with the goal that they can be more relevant to the business association by taking part in the choice making process. By presenting strengthening, there will be no stream of control from the top echelons of the enterprise downwards. Engaged representatives will settle on choice naturally, since they do have their particular voice in what to do, when to do and how to do (Bell, 2005).

For cultivating worker pay, small organizations can offer an impeccable feel since workers have the capacity to witness the results of their commitments in another strategy than in Goliath associations. Low morale among the employees is a sign of an organizational disease that signifies a lack of motivation and demands a high attentive treatment and cure. Hence, for any business organization to accomplish its objectives and goals, high-spirited employees are the need of the hour (Hair, Bush, & Ortinan, 2006).

They thrive in surroundings where they can make a fragile refinement, and where a larger part of representatives in an organization are fit and pushing together to propel the business. Fittingly organized acknowledgment and financial prize projects are vast, yet not constrained in this mix (Gitman, 2000). One other approach to accomplish worker inspiration has been to investigate modules to a man’s employment as the essential components in improving execution.

Diverse researchers hold distinctive perspectives and hypotheses. The progression of necessities, as hypothesized by Maslow, shows that the director obliges considering the prerequisites of the workforces and satisfying them to persuade them. Many business organizations are increasingly applying employee satisfaction through the employment of technique of empowerment. The power to settle on choices among representatives extends the business to have more adaptable workers. Likewise, it abuses all the more keenly the learning of its workforces and upgrades the swapping of data and thoughts among the offices and the representatives.

In spite of the statement that high pay advances worker execution, representatives in lucrative occupation positions fear the danger of losing their employment and pay premiums. Many researchers attest that “this system is basically predominant in associations that have embraced individual execution related pay frameworks” (Harteis, 2012, p. 100). Under such circumstances, representatives comprehend the obvious results that are connected with poor execution.

Organizations logically see wage as a component that can advance an association’s prevalence with reference over rivalry instead of expense. This pattern is most common inside of the private division. Bennett and Rundle-Thiele (2002) fight that “associations in the private part are steadily adjusting pay plans to representative or authoritative performance” (p. 199). Thus, the prevalence of execution related pay has expanded extensively.

The performance described honours specialists who have worked with their ordinary working levels with cash (Ashtiani et al., 2011, p. 284). Numerous examination studies have found that the boss capable sparks of labourers are non-financial in nature. Monetary motivators are insufficient helpers partially since prospects frequently surpass results and imbalance between salaried people may part as opposed to uniting the work powers. Perceived non-fiscal hopeful helpers support group quality and incorporate gratefulness, movement and responsibility (Gallos, 2008).

Business administrators, which distinguish the fewest wins of work powers empower majority rule environments and approach workforces with deference and decency and see to it that their work strengths are amazingly persuaded. One association’s manager meditated to line up with thirty intense non-monetary impetuses that cost nothing or little to execute. The astoundingly successfully spurring strengths like time off from work and letters of applause improved individual feeling of pride and fulfilment (Blanchard & Cathy, 2002). Therefore, a method that fulfils natural, self-completing own needs and blends financial prize frameworks may be the best worker stimulator (Gitman & McDaniel, 2009).

On the off chance that the organization could incorporate the individual needs with the hierarchical objectives, the representatives would accomplish the self-regard needs or even the self-completion needs, subsequently, the inspiration would act naturally maintaining. These days, Theory Y has an impact on the approach plan for the workforce and shapes the thoughts of pay for the working execution. In any case, Theory X and Theory Y are occasionally utilized since they speak to the great circumstances. Practically speaking, directors and representatives fall under some place between the posts of the.

Farris, Neil, and Pfeifer (2010) had the perspective that “a few components if happened in the workplace would prompt no fulfilment, yet not disappointment” (p. 144). It is to be noticed that cleanliness components don’t bring about a more prominent size of inspiration, however for them the discontent would emerge. These elements contain the foundation, working environments, administration and organization strategy, professional stability, compensation, social relations, status, and superintendence (Ellingson & McFarland, 2011, p. 14). Frequently, these plans improve workers’ stances toward the client and the business while boosting fearlessness.

Firms are linking pay to performance to remain competitive through improved employee productivity (Finney, 2008). However, in the course of designing the pay-for-performance schemes, it is imperative for organizations take into account the relevant factors that affect performance.Empowerment is the process of giving the employees authority so that they can be more relevant to the business organization by participating in the decision-making process.

Employee remuneration theories

The early researchers who wrote about employee pay over a hundred year ago developed a new concept of motivating the employees, and he termed it as scientific management (Griffin & Moorhead, 2011). Their doctrines were based on the concept that the employees were economically encouraged and were allowed to work to earn as many wages as they can. Their primary assumption was that economic gain was the chief motivator that encouraged employees to perform well in their duty.

The other assumption was that work was innately obnoxious for the majority of the workforce and the money that the employees earned was more significant than the nature of the job. They can be said to be the father of the motivation theories, but their theory has a drawback as it considers only monetary benefits and has ignored other motivational factors.

The classical economists’ scientific management theory was supplanted by the human relations approach in the late 1930s. The human relationship theory is based on the assumption that the employees desire to feel important and useful and have strong social needs. These requirements are more significant than fiscal money in motivating the employees. Low morale among the employees is a sign of an organizational disease that signifies a lack of motivation and demands a high attentive treatment and cure. Hence, for any business organization to accomplish its objectives and goals, high-spirited employees are the need of the hour (Hair, Bush, & Ortinan, 2006).

The mirage of importance and involvement were anticipated to please employee’s social requirements. For instance, a manager might permit an employee group to engage in making a business decision despite the fact that he had previously decided what the decision would be. Thus, the emblematic gesture of appearing to permit participation was anticipated to stimulate motivation, despite the fact that no actual participation took place (Griffin & Moorhead, 2011).

One of the speculations that clarify the selection of the execution related pay is the competition hypothesis. As indicated by the hypothesis, people continued to get prizes in their working environment, for example, advancement and pay increases (Adetule, 2011; Aquinas, 2006). Empowered employees will make decisions on their own since they do have their own voice in what to do. Thus, incorporating compensation variables among representatives in distinctive levels of administration assumes a vital part in propelling them to put more endeavours in their employment parts and obligations. Hence, the association’s execution is enhanced (Avery, 2004).

In this manner, the hypothesis emphasizes that wage disparity is straightforwardly connected to hierarchical and individual performance (Berman & Evans, 2006). The second hypothesis that backings the pay way to deal with execution is the reasonable pay hypothesis. The theory suggests that workers contrast their pay levels and those of their colleagues to figure out if they are genuinely compensated (Claudia, 2012, p. 140). This method clarifies why associations ought to survey the inner and outside value in forming the execution related pay plans (Clawson, 2011).

One of the theories that explain the adoption of the performance-related pay is the tournament theory. According to the theory, individuals compete so as to access prizes in their workplace, such as promotion and pay increments (Arthur, 2008; Baldwin, 2003). Consequently, integrating wage factors among employees at different levels of management plays an essential role in motivating them to put more efforts in their job roles and responsibilities.

Many past scholars have found that “the organization’s performance is improved considerably in the long run” (Hamann & Ren, 2013, p. 213). Therefore, the theory accentuates that “wage inequality is directly correlated to organizational and individual performance” (Gittleman & Pierce, 2015, p. 36). Ordinary motivational methods join personality sort and fragile offer against the hard offer. Sensitive offer methods have steady applications, approvals, eager cases, and direction. On the other hand, the other results revealed that “hard offer methods have an overshadowing exchange position and weight” (Clark, Gregory, & Robert, 1993, p. 147).

For informative specialists, motivation has a particular thought as an aftereffect of the essential part it has in understudy data. In any case, the careful sort of motivation that is assessed in the conferred scene of preparing contracts subjectively with the most ordinary kinds of motivation considered by investigators in diverse regions. The general impact is that the pay-to-execution framework may be rendered insignificant because of the intensifying impact.

Under such circumstances, top entertainers should seriously mull over looking for openings for work somewhere else. In a rundown, each administrator of an association knows the significance of representative compensations; consequently, enhancing the worker inspiration could help organizations increase performance and productivity. Thus, the importance of the worker remuneration is given much thought. The report examines the most proficient method to increase the representativeness inspiration to improve association’s execution.

The second theory that supports the paid approach to performance is the fair wage theory. The theory proposes that employees compare their salary or pay levels with those of their co-workers or the prevailing market rates to determine whether they are fairly remunerated (Price, 2007). This strategy explains why organizations should assess the internal and external equity in formulating the performance-related pay schemes (Pynes, 2013).

This behaviour arises from the fact that employees have expectations on wage levels and job positions (Holbeche, 2012). If they perceive that they are compensated unfairly, they are likely to reduce their effort in executing the assigned job tasks. Moreover, the development of the perception of being underpaid is likely to contribute to negative workplace behaviour amongst employees. Examples of such actions include absenteeism, sabotage, lack of cooperation, and cohesion amongst employees. This aspect might significantly reduce the overall organizational performance.

The third theory that forms the basis for pay as a strategy to motivate employees entails the efficiency wage theory. The theory holds that paying employees higher salaries and wages improves an organization’s competitiveness in the labour market. This improves the likelihood of attracting an experienced and talented workforce (Torre et al., 2014, p. 55). Furthermore, the theory proposes that high pay acts as an incentive in promoting employee performance.

A study involving over 8,000 employees who were selected from Japanese and American manufacturing firms showed that employees who received higher pay put more effort in their jobs. Such employees are more likely to quit their workplace. Higher wage levels are positively correlated with the respective team performance (Bryman & Bell, 2003, p. 122). If the employees are paid higher salary, they will be incentivised to perform at a higher level to maintain their salary and reduce the risk of losing their highly paid jobs (Torre et al., 2014, p. 88).

Despite the assertion that high pay promotes employee performance, employees in high paying job positions fear the risk of losing their job and wage premiums. It is true to affirm that “this strategy is mainly prevalent in organizations that have adopted individual performance-related pay systems” (Torre et al., 2014, p. 68). Under such circumstances, employees understand the apparent con