Compensation Packages And Employee Motivation

The Importance of Compensation Packages

Discuss about the Research on Corporate Philanthropy.

Salaries to the workers are generally the biggest expenses for the company. However, the productive employees may not get motivated with the fixed salary as they may prefer to get the extra payment with additional productivity. The main reason that does not motivates the employees to work more productively is that as per the salary system the employee gets fixed salary irrespective of his productivity (Pepper and Gore 2015). Further, the fixed salary does not motivate the worker to work for more hours for additional payment and therefore earning additional amount is challenging. Moreover, the employee with fixed salary has little motivation to go beyond and above as he or she will not get any additional benefit for that.

Compensation strategy is the important part of business strategy that changes with the business requirements and organizational needs. Generally the job that requires higher standard of education, higher skills and experience require higher level of compensation. Various components of the employee compensation package are –

• Job analysis – it is the systematic approach of defining the description, job role, responsibilities, requirements and finding out the required education level, knowledge, skills, experience and required training for the particular post. It also states the worth of the job that is the contribution and measurable effectiveness of the job for the company. Further, the job analysis assists in analysing resources and formulating the strategies for accomplishing the goals and objectives of the business (Mitnick 2013).
• Pay structure – once the job analysis is completed the company is required to decide regarding the pay structure. The pay structure refers to setting up procedure for paying off the job in the company. The procedure deals with the external as well as internal analysis for estimating the compensation package for the particular job profile. External qualities as well as the internal quality are most popular among the pay structures.
• Salary survey – after the determination of the pay structure the final step is to carry on the salary survey. It is the research carried out for analyzing the standards of the industry for setting up the strategy of compensation. Any organization is not supposed to provide the compensation that is lower or very higher as compared to the industry standards. Therefore, the company carries on the salary survey themselves or may purchase the report from well known research organization (Bosse and Phillips 2016).

Different components of the compensation package motivate the works to be productive as the workers get recognition and compensation as per their knowledge, skills, experience and education level. Therefore, the workers do not feel deprived and are motivated for more productivity.

Employee’s attitude towards risk plays important role on the compensation package of the employee.  Generally, the agency theory regarding the performance based payments does not take into consideration the role of risk. The compensation structure only focuses on the performance based payments and therefore overlooks the major role played by risk factor. If the risk taking approach of the employee is high he shall be paid more (Madison et al. 2016). On the contrary, the employees with low risk taking approach can be paid at lower rates. Under the balanced risk taking incentive all kinds of risks are considered for determining the amount of compensation for the employees.

The relationship among intrinsic and extrinsic forms of the motivation is providing specific rewards to employees which in turn influence them for better performance. It further encourages them to share the common objectives and decision making process of the company. Therefore, the relation among these motivations is assuring the mutual benefit of employees and the company. However, intrinsic motivation identification is difficult as compared to extrinsic factors.

Limitations of performance based compensation packages are –

• Quality – if the employees are paid based on the performance they will only focus on quantity rather than quality which in turn may lead to deterioration of quality. For instance, if a sales person is more concerned with making more unit of sales to get additional payment he may miss out the important details like assuring that the product is in stock or providing the product as per requirement of the customers. Owing to this the customer may receive wrong product or may have to wait long for the desired product (Mitnick 2013).
• Lack of the teamwork – the employees who are busy with achieving the personal goals will be less involved with the teamwork. Further, they might not provide assistance to the co-workers as they feel that it will waste their valuable time which in turn will have an impact on the productivity. In few instances, conflicts take place among the employees owing to lack of mutual cooperation or perception that 1 employee is affecting other employee’s performance and will prevent him from achieving his or her objectives.
• Inefficient motivation – if the employee feels that the he is not getting the incentives as per his performance it will de-motivate him to achieve the desired level of production. Employees may also dislike the employer for not paying him desired level of payment. Owing to this, they may get motivated for performing at the minimum required level of production (Raelin and Bondy 2013).

Limitations of Performance-Based Compensation Packages

The executive compensation committee includes independent directors and is appointed by board of directors. The compensation committee board is responsible towards the board as well as towards the shareholders for performing their duties like determining and approving the compensation package of the executives. Various decisive aspects are taken into consideration while forming the executive compensation committee. One important aspect is the size that includes 3 to 5 employees. further, it requires proper selection of committee members. The appointment of executive compensation committee is beneficial as it helps in –

• Developing the compensation philosophy for the organization
• Approving the compensation plan under which the directors and executives are allowed to participate after getting the approval from the shareholders and the board.
• Approving or recommending compensation of CEO to the board
• It acts as the liaison among the board and CEO regarding all the issues related to human resource and all compensation (Mitnick 2015).

As per the agency theory the accounts shall be prepared to present the true, fair and balanced view for the company. It shall state whether the company has followed the governments’ codes and regulations while preparing the accounts. Further, it is considered as the best practice for providing particular disclosures regarding the board, status of going concern and reviews regarding the internal control of the company (Misangyi and Acharya 2014). The financial statement must include complete set of the financial statements like –

• Statement of the financial position
• Statement of the comprehensive income
• Statement of the changes in equity
• Statement of the cash flows
• Accounting policies and the explanatory notes related to that.

The above mentioned statements shall be prepared by the Board of Directors. The statements shall also be reviewed by the management and the management shall also prepare any other statements and reports that may provide assistance to the users.

As per the agency theory the audit fulfils the fundamental purpose of promoting the confidence and reinforcing the trust with regard to financial information. The relationship among principal and agent as stated under the agency theory is crucial for understanding the way in which the audit is developed. Audit of the accounts is required as the audit plays important role in fulfilling the interest of the public with regard to the strengthening various aspects. These aspects include enhancing corporate prosperity, stating the value and number of the transactions that are prepared and expanding the diversity. Further, the regulations also have an impact on the audit role. Regulators act on behalf of the principle for assuring that the interests are protected and more than one regulatory principle may exist there, for instance, company board regulators as well as the auditor’s regulators (Westphal and Zajac 2013). The audit is the value to various stakeholders for engendering the confidence and trust and various other purposes that do not fit under the simple agency theory.

The term governance is defined as the system through which the organization is directed, accounted and controlled. It is the formation of policies and continuous observation of the implementation of those policies through the members of governing body of the organization. It requires the mechanism for balancing the powers of the members. Its primary duty is to enhance the viability and prosperity of the company (Aguilera et al. 2015).

Governance in Non-profit Organizations

The non-profit organizations arise under the economy for assuring the provision for socially desirable services and goods. The appropriate microeconomic framework to analyse the governance of the non-profit organizations is the framework of principle-agent theory. The reason behind this is that the relationship of principle and agent exists when one party contracts with other party for performing some services on behalf of him. It includes delegation of some authority associated with decision making to agent (Grimes et al. 2013). However, the agency theory alone is not considered appropriate for studying the governance of the non-profit organization. It must be combined with the stewardship theory and stakeholder theory to study the governance for non-profit organization. The stakeholder theory states the importance of the framework with various principles and the stewardship theory states the situation under which the agents share the interests of the principle or is motivated to act under the best interest of principle (Van Puyvelde et al. 2012).

The supplementary or alternate theory that can be used for more appropriate study of governance under the non-profit organization is the stakeholder theory. The stakeholder theory focuses on the explicit management of the company that includes interface, external and internal affairs of the company. The employees and managers are regarded as the internal stakeholders and the competitors, customers, the creditors are considered as the external stakeholders and the board of directors are considered as the interface stakeholders as they are the connection between the environment and the organization (Gautier and Pache 2015). The stakeholders are allowed the voice with regard to managerial, operational and strategic issues. Through various governance mechanisms of the stakeholders the company can establish the approaches towards innovation and planning.

Mixed method research is one of the best method for the case study and both the elected research work are case study on the auditing expectation from the perspective of the different region (Palinkaset al. 2015). Considering the two researches it can be seen that both of the study has utilised the literary resources in order to trace the relation between the auditing expectations from the theoretical perspective and utilising the empirical sources, it has tried to explain the research objective with the qualitative and quantitative data.

As per the research method of the Masoud total 775 questionnaires has been completed, and out of them 400 were completed during the fall and the second batch of 375 surveys were done end of the academic year among the four group (Masoud 2017). Out of all the students, there were no student who are studying in auditing course. All the surveys were collected from the private and public universities which are located in the Jordan. Considering the case of the Salifuand Mahama it can be seen that the researcher has considered all the users of financial statements in Ghana (Salifu and Mahama 2015). Random and convenient sampling method were utilised in order to selecting the user group in order to represent the users of the financial statements. Three respondent group who are bankers, students of Ghana Chartered Accountants and auditors were chosen in order to study the audit expectation gap in Ghana.

Comparing Two Case Studies on Auditing Expectations

Coming to the selection of the accurate participant selection, both the studies have selected right sampling method from their research perspective. First one was aimed to trace the audit expectation gap of the Jordanian universities students who were studying the accounting in undergraduate level and the second was expected to search the audit expectation gap among in the case of the Ghana. Selected methodologies of both the studies were correct and received desired outcome.

Considering the case of the Masoud, it can be seen that the 775 questionnaires has been completed.Out of them 400 were completed during the fall and the second batch of 375 surveys were done end of the academic year among the four group. When it comes to the Salifu and Mahama, this research work has considered 150 respondents in total among which there were bankers, auditors and the students of the Ghana Chartered Accountants. Considering both the case of the studies it can be seen that Masoud’s research has chosen sufficient amount of the respondents and respondents have been chosen from the different institutes making the data reliable. When it comes to the Salifu and Mahama, then the researcher has failed to chosen adequate number of respondents. On the other hand they have chosen respondents only from the Ghana Chartered Accountants leading to lack in the diversity and the acceptability of the data.

As per the Masoud, it can be seen that the qualitative data has been analysed with the use of the SPSS and the output from the analysis it can be seen that the exhibit has been well enough to construct the desired finding. On the other hand, when it comes to Salifu and Mahama, then it can be seen that, this research has also showcased proper outcome depending upon the findings. However, the research lacks in the case of the analytical presentation of the data because all the findings has been showcased with the help of the basic statistical presentation rather than utilising premium statistical tools like SPSS.

The qualitative research work of both the studies has showcased almost identical outcome, however, they have been found with the different method. One has utilised the statistical software like SPSS making it one of the reliable finding and when it comes to the Salifu and Mahama, then it lacks in the case of the statistical analysis of the qualitative data. Basic statistical process has been utilised in order to trace the research aim (Salifu and Mahama 2015).

Masoud in the research during the second stage has maintained the duties where the misunderstanding regarding the auditing expectation gap remains higher. The research highlights that, second group has preferably more knowledge regarding the auditing expectation compared to the first group who are in their first year of the study. In addition to this, it has also been found that the second group of the respondents believe that education of audit reduce the auditing expectation gap among the students.

Considering the research work of the Masoud, it can be seen that, total 775 questionnaires has been utilised in two phase for the study and out of them 400 have been done during the fall and the next batch has been completed during the end of the academic year. This research work has utilised the four groups of the respondents among which there was accounting students who are not related with the auditing course, students of year one and three who were further segregated depending upon their preference of elective subject. Data were collected from the different source which was mainly private and public universities with the close ended question (Morse 2016). It has aided the research to find the desired data within short span of time. Statements of the respondents, especially in the case of the third year students, it can be seen that the statements of the same has been designed to address the four different factors that ate duties, ethicaland legal structure, responsibility, reliability and auditor report in order to make the survey ideal one for the research.

When it comes to the research work of the Salifu and Mahama, then it can be seen that the study has slected 150 respondents, out of which, four groups were created depending upon the nature of their work. For instance, there were auditors, ICAG students and bankers and then 50 respondents were elected randomly. As per the researchers, only 150 respondents were chosen in order to reduce the travelling cost lower (Salifu and Mahama 2015).

From the comparative analysis of both the studies, it can be seen that the research work of the Masoud is more rigorous owing to its reliability, structure and efficiency. It has more number of respondents, and the collected data is more reliable as well as diversified.

Masoud has utilised the software like SPSS in order to trace the desired objective and it has portrayed the finding of the questionnaire in a right order. There has been statistical representation of the same in the report and when it comes to the Salifu and Mahama, then the study has failed to provide the findings of the same with great details due to the lack utilising premium software like SPSS. Thus, from the comparative analysis of both the research, it can be seen that the study of the (Ioannidis 2014) Masoud has portrayed the finding of the questionnaire is more rigorous, however, the other one has also been effective enough to portray the desired aim.

Considering the Masoud’s research work, it can be seen that the study has failed to address the expectation of the auditing profession and additionally it has overlooked the accounting and auditing education programs of the various institutions other than the chosen institutes making it a gap in the study. This has made the study poor in order to trace the desired objective of the research because lack of the diversity in the sample has reduced the wide inference of the same in broader situation (Smith 2015).

As the study of the Salifu and Mahama highlights, it can be seen that only 135 reviews out of 150 were utilised in order to trace the auditing perception gap (Salifu and Mahama 2015). In order to reduce the cost of the research, the researcher has elected only the ICAG students, auditors and the banking staffs in order to trace the auditing expectation gap. This has made the research poor from various perspectives. First of all, due to the lack of the respondents, there is a possibility that it can affect the findings of the research adversely and in addition to this it has also limited the scope of the further research utilising the findings of the Salifu and Mahama due to lack of wide acceptability.

Reference

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