Compensation according to Dessler (2011) refers to all forms of pay going to employees and arising from their employment. For managers to improve organization’s productivity, they must adopt compensation policy that employees will perceive as being fair and commensurate with their skills and expectations. This call for the compensation philosophy to be adopted by managers of organizations, since a consistent philosophy provides a strong foundation for both the organization and the employees. Without a philosophy, leaders often find themselves unsure of what to offer as a starting salary for a new employee. This can lead to offering too high a total compensation package for a new employee in relation to existing employees, or being unable to successfully hire because the total compensation offer is too low to be competitive. The difference in performance is often related to the compensation philosophy adopted by organizational managers. Performance differences and organizational success have been attributed to the compensation policy adopted by the organization. According to Mathis and Jackson (2006), the two basic compensation philosophies lie on opposite end of a continuum. At one end of the continuum is the entitlement philosophy, at the other is the performance – oriented philosophy. The choice of managers of the organizations between the two basic compensation philosophies determine their ability to attract and retain valuable employee which will in turn lead to organizational success. This quote from compensation specialist Gross (2011), global leader for Mercer Performance Measurement, and Rewards Consulting, illustrates the importance of performance – oriented philosophy (Pay - for – performance strategy). “Companies are looking for ways to pay for performance, and segmenting their workforce helps them identify their most valuable contributors. Rewarding top performers is essential for the ongoing success of the company”. A Pay - for – Performance standard serves to raise productivity and lower labour
Compensation according to Dessler (2011) refers to all forms of pay going to employees and arising from their employment. For managers to improve organization’s productivity, they must adopt compensation policy that employees will perceive as being fair and commensurate with their skills and expectations. This call for the compensation philosophy to be adopted by managers of organizations, since a consistent philosophy provides a strong foundation for both the organization and the employees. Without a philosophy, leaders often find themselves unsure of what to offer as a starting salary for a new employee. This can lead to offering too high a total compensation package for a new employee in relation to existing employees, or being unable to successfully hire because the total compensation offer is too low to be competitive. The difference in performance is often related to the compensation philosophy adopted by organizational managers. Performance differences and organizational success have been attributed to the compensation policy adopted by the organization. According to Mathis and Jackson (2006), the two basic compensation philosophies lie on opposite end of a continuum. At one end of the continuum is the entitlement philosophy, at the other is the performance – oriented philosophy. The choice of managers of the organizations between the two basic compensation philosophies determine their ability to attract and retain valuable employee which will in turn lead to organizational success. This quote from compensation specialist Gross (2011), global leader for Mercer Performance Measurement, and Rewards Consulting, illustrates the importance of performance – oriented philosophy (Pay - for – performance strategy). “Companies are looking for ways to pay for performance, and segmenting their workforce helps them identify their most valuable contributors. Rewarding top performers is essential for the ongoing success of the company”. A Pay - for – Performance standard serves to raise productivity and lower labour