IMPACT OF WAGES ON EMPLOYEE SATISFACTION

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<p>TERM PAPEROn</p> <p>Research methodology</p> <p>Topic- IMPACT OF WAGES ON EMPLOYEE SATISFACTION Submitted to:Mr.Vishwas Chakranarayan</p> <p>Submitted by:Name FARAZ ALAM Roll no: - RS (1901) B-35 Registration no: - 10906032</p> <p>MBA 193(LSM)</p> <p>ACKNOWLEDGEMENT</p> <p>I feel immense pleasure to give the credit of my term paper not only to one individual as this work is integrated effort of all those who are concerned with it. I want to owe my thanks to all those individuals who guided me to move on the track. This report entitled IMPACT OF WAGES ON EMPLOYEE SATISFACTION I sincerely express my gratitude and lot of thanks to MR. VISHWAS</p> <p>CHAKRANARAYAN for helping me in completing my Term paper and give me ideas for doing my job and making it a great success. I would like to express my deep sense of gratitude to staff of LOVELY SCHOOL OF MANAGEMENT who introduced me to the subject and under whose guidance I am able to complete my project</p> <p>CONTENTS:-</p> <p>1) INTRODUCTION TO THE TOPIC 2) OBJECTIVES OF THE STUDY 3) LITERATURE REVIEW 4) HYPOTHESIS FORMULATION 5) RESEARCH METHODOLOGY 6) NATURE OF SAMPLING 7) STEPS IN SAMPLING DESIGN 8) TOOL OF THE STUDY- QUESTIONNAIRE 9) SELECTING A MEASUREMENT SCALE 10) ANALYSIS OF DATA AND RESULTS 11) CONCLUSIONS 12) BIBLIOGRAPHY</p> <p>IntroductionIMPACT OF WAGES ON EMPLOYEE SATISFACTIONThe efficiency wage theory predicts that higher levels of wages lead to higher levels of productivity by employees. Expanding this to an efficiency compensation theory as in Meyer et al. (2001) implies that a well-constructed compensation package will enhance productivity through attraction of higher levels of talent, increased effort, and reduced turnover. In general, relative to companies with less-satisfactory compensation packages, employees who are well-satisfied with their compensation package (and work environment) should be expected to generate greater levels of productivity. The result for shareholders, therefore, should be relatively higher levels of return. The purpose of my study is to determine whether satisfied employeesthat is, employees who indicate (collectively) that their company is an excellent one to work for, lead to increased wealth for shareholders. Employee satisfaction may arise from a number of sources including a high level of wages, excellent company provided benefits (e.g., educational offerings/reimbursements, health care, on-site childcare, counseling ser-vices, etc.), opportunities for withincompany mobility, and an innovative or creative work environment. Each of these offerings is costly to the firm, however. Indeed, prior research has indicated that while some policies may enhance shareholder wealth, others, at best, may not benefit shareholders, and, in some instances may reduce share-holder wealth. For example, Levine (1992) and Wadhwani and Wall (1992) find a positive correlation between wages and productivity, implying greater levels of wages lead to enhanced productivity. Jones and Murrell (2001) find that firms named to Working Mother magazines list of Americas Most Family-Friendly Companies for the first time have a positive and significant mean abnormal return during the announcement period. The Working Mother criterions for inclusion are relative wages, advancement opportunities for women, on-site childcare, and other family-friendly benefits. Thus, market participants infer that these companies employees are more productive than those in other firms. Perry-Smith and Blum (2000) find that companies with greater levels of</p> <p>family-friendly policies exhibit higher levels of product quality, increases in market share, and increases in profits. On the other hand, Meyer, et al. (2001) find that, while policies such as leave of absence to care for family members and adoption benefits increase profitability, more common benefits such as on-site childcare and job sharing negatively affect profits. Also, Filbeck (2001) finds a significantly negative mean abnormal return to the announcement of inclusion on Mother Jones magazines 20 Better Places to Work. This list includes companies that are environment -friendly, provide innovative benefits, and have satisfied employees. Filbeck (2001) also finds that these firms do not perform significantly better than a matched sample of firms in the calendar year following the announcement.1 To further investigate the relation between employee satisfaction and shareholder wealth, we examine the announcement effect and post-announcement returns of a group of companies named to Fortune magazines 100 Best Companies to Work For list for the years 1998-2000. Firms named to the 1998 list are examined by Chan, Gee and Steiner (2000) over the year prior to the list announcement. Using a variety of performance measures, they find that firms on the list have better relative performance prior to the list announcement. In our study, we find no evidence of abnormal returns surrounding the announcement of inclusion on the list. Overall, during the year fol-lowing inclusion on the list, firms outperform matched firms on average. Interestingly, however, this result holds only for those firms named to the 1999 list. In fact, further examination shows that only those firms that appear on both the 1998 and the 1999 list exhibit superior stock returns for the eleven months following release of the 1999 list. Interventions aimed at altering employee satisfaction with compensation systems take many forms. In particular, job evaluation has become a popular method for determining organizational compensation levels. The goal of this procedure is to develop an internally consistent job hierarchy in order to achieve a pay structure acceptable to both management and labor. One of the most common methods of conducting job evaluation involves determining a set of compensable factors, numerically scaling them, assigning weights in terms of their relative importance, and then applying them to a set of jobs based on a job analysis. This process has been termed the point method of job evaluation. A key, but often implicit, goal of this method is to enhance employee perceptions of pay satisfaction and pay fairness. However, we could find no empirical studies documenting this effect in the research literature. To address this deficiency, the present study examines, in a quasi-experimental field study, the extent to which participation in the job</p> <p>evaluation process during a compensation system implementation influences pay satisfaction. To provide an understanding of why participation may influence pay satisfaction, we briefly review the job evaluation and fairness and participation literatures.</p> <p>Job EvaluationJob evaluation is a generic term for a set of procedures that attempt to measure the organizational value or worth of a job for the purpose of scientifically establishing wage and salary rates (Doverspike, Carlisi, Barrett, &amp; Alexander, 1983, p. 476). While others define job evaluation in slightly different ways, all focus on systematic procedures that establish differences among jobs for the purpose of determining pay (e.g., Hahn &amp; Dipboye, 1988; Hornsby, Smith, &amp; Gupta, 1994; McCormick, 1979; Milkovich &amp; Cogill, 1984; Schwab, 1985). In addition to providing a measure of organizational worth, job evaluation is also designed to gain agreement about a wage structure (Milkovich &amp; Cogill, 1984). That is, another focus of job evaluation is to rationalize and gain acceptability for the manner in which wages are distributed (Munson, 1963, p. 60). One key index of the acceptability of a job evaluation system is pay satisfaction. As Carey (1977) notes, if pay is to satisfy employeesand that is what salary administration is all aboutthen each pay rate must be established with at least some consideration for the views of the people in and around the job (p. 32). As an outcome of the job evaluation process, however, pay satisfaction has long been neglected in organizational research, with most of the recent attention focused on pay satisfaction dimensionality and not its determinants (e.g., Judge &amp; Welbourne , 1994). Few studies have examined pay satisfaction as a result of pay intervention and change programs (Hene- man, 1985). This gap in the literature is unfortunate since understanding the determinants of pay satisfaction may lead to improved compensation system design and implementation (Gerhart &amp; Milkovich, 1992).</p> <p>Fairness and ParticipationBecause compensation decisions are particularly salient and important to employees, the process by which they are made is likely to influence employee satisfaction. A number of different strategies have been developed to minimize the negative consequences that often accompany hierarchical decision making. One class of techniques utilize participative decision making where employees become involved by participating in the decision making process (Neuman, Edwards, &amp; Raju, 1989). The psychological dynamics</p> <p>that underlie these interventions can be understood within a procedural justice framework. This perspective focuses on the procedures or processes used to make decisions and their relative fairness (Folger &amp; Greenberg, 1985; Greenberg, 1987, 1990a). It thus concerns how decisions are made. While different criteria of procedural justice have been discussed (see Greenberg, 1990a, for an overview), all conceptualizations include aspects of participation and involvement. These two elements are critical to perceptions of fairness, particularly when allocation decisions are made (Barrett-Howard &amp; Tyler, 1986). The potential importance of procedural fairness for compensation systems was noted by Folger and Greenberg (1985), although they focused only on systems that either provide information (open pay systems) or choice (cafeteria-style benefit plans). That is, they did not discuss instances where individuals were actually involved in the process of changing a compensation system. Milkovich and Newman (1993), however, suggest that the manner in which a pay decision is made may be as important as the actual decision. Support for this comes from research showing that perceptions of procedural justice contribute significantly to pay satisfaction (Folger &amp; Konovsky, 1989). It appears that the opportunity to express ones opinion, regardless of actual influence over the decisions made, enhances perceptions of procedural justice (Tyler, Rasinski, &amp; Spodick, 1985), and involvement in the process seems to satisfy the desire to have ones opinion considered. As a result, including important stakeholders in the job evaluation process may increase perceptions of fairness and pay satisfaction because it allows them to have a voice in the design of the pay plan, even if they ultimately have little direct control over the final pay levels assigned.</p> <p>Objectives of the studyThe objectives of the study are as follows 1) To know the impact of wages paid to employees by their organizations on their satisfaction level. 2) There is a need to understand how the workers react to the companys program and policies of the organization.</p> <p>3) The need of the organaization to know what are the various requirement and expectation of the workers and various problems that the workers face in working place . 4) The need of the organization to know the extent of dependability of employees on monetary and non-monetary benefits.</p> <p>5) One of the primary reasons for evaluating employee satisfaction is to identify problems and try to resolve them before they impact on organization operations.</p> <p>Literature Review</p> <p>JOB SATISFACTIONJob satisfaction describes how content an individual is with his or her job. The happier people are within their job, the more satisfied they are said to be. Job satisfaction is not the same as motivation, although it is clearly linked. Job design aims to enhance job satisfaction and performance; methods include job rotation, job enlargement and job enrichment. Other influences on satisfaction include the management style and culture, employee involvement, empowerment and autonomous work groups. Job satisfaction is a very important attribute which is frequently measured by organizations. The most common way of measurement is the use of rating scales where employees report their reactions to their jobs. Questions relate to rate of pay, work responsibilities, variety of tasks, promotional opportunities the work itself and co-workers. Some questioners ask yes or no questions while others ask to rate satisfaction on 1-5 scale (where 1 represents "not at all satisfied" and 5 represents "extremely satisfied").The concept of job satisfaction traditionally has been of great interest to social scientists concerned with the problems of work in an industrial society. A number of consequences have been shown to result from job satisfaction/dissatisfaction. Despite the large number of studies that have dealt with these issues, however, there has been little accumulation of knowledge.</p> <p>DEFINITIONJob satisfaction has been defined as a pleasurable emotional state resulting from the appraisal of ones job; an affective reaction to ones job; and an attitude towards ones job. Job Satisfaction is the favorableness or un-favorableness with which the employee views his work. It expresses the amount of agreement between ones expectation of the job and the rewards that the job provides. Job Satisfaction is a part of life satisfaction. The nature of ones environment of job is an important part of life as Job Satisfaction influences ones general life satisfaction. Job Satisfaction, thus, is the result of various attitudes possessed by an employee. In a narrow sense, these attitudes are related to the job under condition with such specific</p> <p>factors such as wages. Supervisors of employment, conditions of work, social relation on the job, prompt settlement of grievances and fair treatment by employer. However, more comprehensive approach requires that many factors are to be included before a complete understanding of job satisfaction can be obtained. Such factors as employees age, health temperature, desire and level of aspiration should be considered. Further his family relationship, Social status, recreational outlets, activity in the organizations etc. contribute ultimately to job satisfaction.</p> <p>WHAT WORKERS NEED IN JOB SATISFACTION?Major specifics of what workers need in job satisfaction include self-esteem and identity. A significant portion of job satisfaction often comes just from the sheer fact of being employed. The compensation provided by the organization should be adequate so that employees are satisfied and motivated and finally it will reflect on the performance of their work. If work creates positive features about being employed, unemployment almost invariably lowers self-worth. Genuine job satisfaction comes from a feeling of security whereby one's performance is judged objectively by the quality of work performance rather than artificial criteria such as be...</p>