Question

Primary Question: Is there a relationship between compensation and higher levels of employee performance? Please explain "yes" or "no" providing 3 reasons to support your position. Secondary Question: How does organizational market position influence compensation philosophy?

Answer 1

Yes, there is a relationship between compensation and higher levels of employee performance and it stems from the fact that the fundamental desires of any individual revolve around the concept of a hierarchy of needs given by Maslow which explains the fundamental forces of motivation for any individual. We can say that compensation, like any other form of reward or recognition, can be considered as a great motivator to the employees that are having their fundamental needs satisfied. On top of that, it also provides a sense of competition and therefore, ends up increasing the factor of productivity for an individual.

When we consider the market position of an organization, we can say that it determines the type of compensation, the criteria for performance evaluation as well as the general acceptance. We need to be able to understand that employees view the competency of the organization in the terms of their market value and therefore, the system of compensation is generally set according to the industry in order to determine the factors that govern it.

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