hi folks welcome to our third video in compensation management this video is going to focus on our third chapter a behavioral framework for compensation so some of the things we’re going to look at here are some of the main types of problems that some companies have with their reward systems we’re also going to look at some of the key employee behaviors that employers are looking for and it’s based on whether or not yeah you demonstrate those behaviors that they’re going to decide how to compensate you we’re also going to look at some of the key attitudes that employees need to have around their job and explain their roles in determining employee behavior and ultimately the reward system we’re also going to look at causes and consequences of reward dissatisfaction so here if employees aren’t satisfied with the reward package that they get from their company how do they react what do they do we’re also going to look here at how to generate the three key employee behaviors one is membership behavior task behavior and we’re also going to look at how to generate organizational citizenship behavior but we’re gonna we’re going to define those a bit later and look at the role that the managerial strategy plays in determining employee attitudes and behaviors that are required by companies so remember we looked at some of those contextual contextual and structural variables and linking the two of them were these managerial strategies in the previous chapter so we’re going to look at how a classical or what role a classical human relations and high involvement strategy plays in developing that reward system and we’re also going to look at some of the implications of the behavioral framework for designing an effective reward system now what I’m going to do is because there’s a lot of content a lot of slides to review here I’m gonna have these first four learning outcomes covered in the first video for this chapter and then the second video for this chapter will cover the remaining the remaining learning outcomes from number five to number nine so let’s begin well let’s look at the types of reward problems that we can have here first of all some reward reward systems might not produce the desired behaviors and there could be a lot of reasons for that sometimes you know we may be rewarding people appropriately but let’s say we set sales targets too high and people can’t achieve those targets I mean it’s great to say they can earn a whole whack of money but if they don’t achieve the targets if they’re too high then you know they’re not gonna be able to meet them so there’s things like that sometimes unrealistic goals if they’re set to hide it can’t be motivating for people right so because they know they’ll never get them so sometimes we have to make sure that the goals were setting and that we’re rewarding people on are realistic if they’re not then they fail to produce the desired behavior which is meeting them right some other problems that we may have with reward systems are they can produce desired behavior and undesirable consequences so I guess maybe one example of that they mentioned one in your textbook I think it’s Bausch and Lomb you may know them there are people who produce or who make glasses and contact lenses and what they did with some of their sales staff and they they set these target sales targets and they had to be met by certain days toward the end of the month so if employees saw that they weren’t meeting the targets they got a little antsy and what they do is toward the end of the month they’d be offering extremely well discounted good discounts to the to their customers in order to buy product from them and the interesting thing there was that a lot of the customers kind of got wise to it so what would happen then is that all the sales would be happening toward the end of the month so customers weren’t buying throughout the month so you can imagine the havoc that that would create in the shipping department because now all these orders have to go out at the same time every month because the customers are waiting to the end of the month when they know the salespeople are going to be more desperate to earn their Commission so sometimes companies have the best of intentions and they’re trying to motivate you to sell more but the fact that they set these specific dates toward the end of the month if they were going to determine whether or not their targets were Matt you know force people to panic to make those sales by that date and mostly on those dates just before they were being measured so again it can create a lot of other problems in other areas of the

organization so it’s a good example of producing a desired behavior because the sales were out but an undesirable consequence another type of problem you can have with your reward system as that it can produce what we call reward and dissatisfaction so again maybe people might feel that hey I work pretty hard here and I don’t think the company values my contribution enough because look at what the reward system is look what the benefits are look with that you know look at the pension is look at the take-home pay is you mean I’m not being paid enough so sometimes people feel for the effort they put in if they’re not getting paid enough or they’re not seeing the reward system as being equitable or maybe it’s unfairly distributed across employees in the organization that’s a source of reward to satisfaction so those are some of the problems that sometimes people might might see with the reward system so now if we look at the three key employee behaviors that employers are looking for employees to demonstrate they’re looking for employers to demonstrate what we call membership behavior that occurs when employees decide to join and remain with a firm now obviously we don’t want you to quit and stay as they say we want you to remain productive right so again when we look at membership behavior we want you to be giving your best effort throughout the time that you’re with us and continue to be a productive member of our company team right so hopefully if you’re making that kind of effort after you’ve joined us you will remain with the firm if you continue to demonstrate that effort they also want you to demonstrate a commitment to tasks and to demonstrate task behavior so that occurs when employees are actually doing the work that they were assigned to do and organizational citizenship behavior is also important for companies because they want to know that companies are going above and beyond the call of duty in order to make things work so handling maybe customer service problems that you might have with some of your customers in such a way that they appreciate that you’ve gone that extra mile for them to make sure that their order was correct or if you know they were short shipped an order say for example you followed up to make sure they got the rest of the order that kind of thing thinks that you just kind of do to make sure that you’ve got good relations for example with your customers so you’re voluntarily doing a lot of that stuff those specialty haters that go along way to meaning the company goals so that’s an example of organizational citizenship behavior so companies are looking for people to demonstrate all three of these behaviors and if they do the reward systems got a match you know the fact that people are joining and staying with the firm they’re performing the tasks and they’re demonstrating citizenship behavior now they’re also looking for key attitudes that they want their employees to demonstrate so it’s not just enough to be demonstrating the behaviors but we want to know that you have the key attitudes as well because if you don’t have the key attitudes the idea is that you probably won’t be demonstrating a lot of those organizational behaviors that are required the first attitude is being satisfied with the job all right being motivated okay and again we’re looking at people who are strongly motivated to achieve their duties of their job and to help make the company profitable and efficient and we also want to make sure that employees can identify with the company so we want to make sure that they demonstrate what we call organizational identification so what does that mean well we want to make sure that whatever the company goals and values are that you can believe in them and you feel committed to them right and you feel you can support them we want to make sure that you feel a sense of membership or belongingness meaning that you know what I not only believe that I can support those values but they’re actually kind of in line with what I see is important you know if you value your relationships with customers people say well III buy into that III would also find was the president CEO of that company I can see that that’s important so again you know there’s kind of a match between what you believe in and what the company believes in so you feel like you belong there you know and you have an intention to remain and remember a member of the organization but not just kind of stay with the company and do the minimum stay with the company and do the maximum right over and above the call of duty right to make sure that your customers and your team members and your

organizational overall is looked after and is well serviced by by the work that you do now how do rewards actually affect employee behavior well the idea here is that reward systems will affect the level to which you find yourself satisfied with the job you might like what you do but if you don’t feel you’re being compensated properly you’d be surprised at how how how soon your level of satisfaction with the job is going to decrease the idea that you would be able to identify with the organization identify with the organization and what it stands for okay and be motivated by the work by the company by the challenge that you get right the reward system has to make sure that it elicits all of these things from its employees the idea is that if it elicits job satisfaction identifications with what we do and you feel like you belong here there’s a great fit between you and us as the company are highly motivated the reward systems got to bring those things out and if it does it should it should bring about the membership behavior the citizenship behavior and the task behavior you should be doing your job well you should want to go above and beyond for for the customer for the team for the organization and you know you have a sense of belonging that this is where you should be and you’ll be a committed member of our team so again the reward system has to bring about these attitudes or intensify these attitudes in order for these behaviors to be demonstrated and so once these behaviors are demonstrated then we we need to make sure that we deliver as an organization on those rewards so again if we look at the attitudes and their consequences meeting or eliciting these attitudes has paid back for a company what research has shown us is there when job satisfaction is high work stress is decreased there’s decreased grievances or complaints by employees to their managers employees tend to show up if they’re happy with their job and and they feel they have good relationships with the employees the management there’s less turnover so they want to stay and they demonstrate positive group norms meaning that they become productive members of the team of the organization they work well with change and and they basically are well placed in the organization so they they can do good things for the company where there’s organizational identification meaning that you have a sense that your goals and values align with those of the organization and you feel you belong again you’re happier employees let fewer grievances less absenteeism decreased turnover not just only positive group norms but you tend to demonstrate more cooperative behavior you’re a lot more innovative and you put forward a higher level of effort to meet the job requirements and clearly if people are motivated again they increase job effort so the idea here is that there’s a lot of there’s a lot of positive impact that these attitudes if they’re brought about by a reward system well we’ll have for the company so obviously I think most people can see that a lot of these consequences while they’re positive they can also promote efficiencies and effectiveness within a company that will have an impact on the bottom line and decrease the cost of operating the business so what are some of the things that cause reward dissatisfaction well there’s four major ones so we’re kind of getting into more behavioral psychology here but it is important because HR professionals need to know what what kinds of things would make employees dissatisfied with the reward system that an organization is offering because you could be offering a really great system but if employees are perceiving it as not being effective are they dissatisfied with it you need to kind of get an idea of why that might be happening so you have to look at these four factors in order to determine whether or not your reward system is good or perhaps dissatisfying so now let’s look at this first one which it talks about the violation of the psychological contract well I think first of all we need to talk a little bit about what a psychological contract really is well what it means is people

have an expectation about the rewards that a company is that a that are offered by a company for a particular job and the contributions that are necessary to perform that job so in other words I know how much I’m going to be paid I know what the expectation is of the company I know exactly what I need to do in order to receive those rewards so it’s like accepting a particular salary and understanding what the job is before you walk in the door if you’re a new employee and knowing some of the goals and objectives that you need to achieve what you’re being paid for sometimes unfortunately companies turn the tables on us so anything that might have been promised to us in terms of bonuses or payment if they’re not forthcoming and they were promised to you you say hey can I really trust these guys so that’s what we mean by a violation of the psychological contract you thought you could take the company at their word and they would deliver and then in fact they didn’t right so those can promote a reward dissatisfaction we also talked a little bit about perceived inequity well what do we mean there well when we look at perceived inequity or speak about that we’re really looking at matching what we’re getting based in the effort we put into the job with the effort that others put into their work and how much they’re getting paid or what their reward system is so everybody kind of uses everybody else as a barometer I don’t particularly think that’s a good thing to do however if you feel when you look at your effort in an organization and you look at what you’re paid you might look at the next guy to and say what yeah that guys get not you know a 4 percent pay increase and Here I am I think I’m working twice as hard and I’m only getting 2% hey it’s not supposed to be like that right so you kind of try to to gauge what you’re getting and whether or not it’s fair based on what somebody else is getting you know we might turn around and say to ourselves well gee that’s not really the right way to do it doesn’t sound right that that employee should do that but they do and the fact that they do that creates some kind of dissonance or some kind of in there an employee’s mind saying jeah if I don’t think that’s quite fair then why would I be satisfied with what I’m getting it may be more than some others are getting but look at how much extra work I’m doing you know and some people are getting more than me and doing less so that could be a source of reward dissatisfaction for you no matter how great the reward is we also look at this concept of relative deprivation so I want to talk a little bit about that because that’s based on a theory by Faye Crosby and her theory was that employees will experience dissatisfaction with pay when there’s a discrepancy between the outcome they want and what they actually get so again that might be the psychological contract here right compromising the psychological contract comparing themselves what others get to what they get for the effort they expend again that’s your perceived inequity that we talked about but there’s these other four things that that dr. Crosby’s research has shown people will also be dissatisfied with their pay if the past experience led them to expect more than they now receive so in other words say for example somebody earned a certain level of pay or earned a certain reward based on their effort they would expect that if they worked harder and longer and achieved higher results that they would get even more right so again their past experience has shown them the harder I work the more I achieve the more I get right but if if they’re now are working hard or harder and they’re not getting as much as they thought they would get then sometimes they’re thinking well I thought I would get more because in the past harder work stronger effort achieving the results has also always led to more you know now maybe I’m getting less or I’m just getting the same as what I got before gee I’m not really happy with that right sometimes future expectancies for achieving better better outcomes are low so I’m not really positive that the company is going to be able to pay me more or more the rewards are going to be better next year or next quarter for me right so I don’t really know that I’m happy with that I thought I was hoping I’d get more but it’s not likely that I will in fact I may even get less right so you’re not expecting more you may be even expecting less some people feel that they’re entitled to more and if they don’t get what they think they’re entitled to they become dissatisfied and some people become dissatisfied with pay when they absolve themselves a personal

responsibility for the lack of better out so in other words well gee I didn’t have a better outcome because maybe somebody else in the organization didn’t deliver on their part of the project right they didn’t do their part or the customer changed their mind at the eleventh hour I can’t be responsible for it the customer decides to do or doesn’t do right so they don’t take any responsibility okay so they can become dissatisfied so in other words it’s it’s not their fault that the outcome wasn’t better right so it wasn’t their issue it wasn’t their fault so if the reward is lower and they believe it to be somebody else’s fault they become dissatisfied with it and it’s interesting because when we look at some of the work done by dr. Crosby one of the things that we find is that the highest of all of these six the ones that produce the highest level of dissatisfaction with their pay are the first two here right which really has to do more with the psychological contract and perceived inequities right when they compared their efforts to other people and number five people feeling that they’re entitled to more more than they actually got so this sense of inequity when we compare what we do the effort we expend and the reward we get to that of others the fact that employers may not deliver what they’re they said they were going to deliver and the fact that we feel we’re entitled to more those three of all of these six tend to have the biggest impact on people’s dissatisfaction with their pay now we’re also going to look here at the whole concept of organizational justice and the impact that it has on understanding how people judge the fairness of the company’s reward system so let’s just define some of these first of all distributive justice has more to do with the perception that the overall reward outcomes are fair so in other words there was a reward system that the company had in place and when I compared what I got giving the effort I put in to what others got I think that was there all right I think that the reward was distributed fairly so I think we were all fairly treated right procedural justice is the perception that the process through which the rewards been determined are fair so in other words how the company is measuring our performance and calculating the amount of the reward that we’re going to get we think that’s a fair process so in other words the company is looking at the right measurements they’re looking at the right data in order to sort of assess performance the goals and objectives are clear they’re fair you know if that’s how I’m going to be assessed I think that’s a fair process so one is again the procedural really looks at the process through which the rewards are determined and if that’s fair and the distributive means you know I think the outcome or how the reward was distributed the amount that everybody got was fair all right so again you have to make sure that the procedural and the distributive justice pieces are both in place because if not people won’t think that the reward system is fair so if we look specifically at procedural justice the Pay system must have certain attributes in order for employees to believe that procedurally okay that the process was fair they look to the Pay system being consistent so the procedures are applied uniformly to different jobs and time periods so in other words we feel that the process was applied fairly in other words whatever the reward system was going to be it was applied fairly to my job as as a human resources professional to the accounting department I think I think they got that right that the process they used was fair to determine how they’re going to compensate all these different job groups it was free of bias so again my manager didn’t you know treat me any less fairly than they treated somebody else they didn’t say oh you know I like you better than somebody else so I’m gonna pay you give you a better bigger increase or something it was really based more on results again the system was flexible so if I didn’t agree with how I felt I was compensated or that process I felt that I could appeal you know I could I could go to my company and I could speak to them about how I felt about the reward system or the procedural justice behind not that reward system they felt that maybe the data upon which we were basing the reward system was fair all right so it was accurate it was ethical meaning that the company

followed the moral ethical principles in terms of applying the procedures so in other words in other words here the company had guiding principles that they followed in order to make sure that the reward system that that they followed was consistently applied and their process was fair for determining what groups are going to get one what increase so there was nothing untoward or unethical about it and the last part its representative the pay system was representative so all the employees have the opportunity to to express to their management any concerns and they also not only feel that they have the right to do it and they can do it but they really feel that their management is listening to them and seriously considering some of the things that they say so it’s not just that they can appeal the pay system and there’s procedures in place for doing it but they also feel that management is listening to them so if we look here this diagram looks a little bit complicated but it’s it’s really not if we really think about some of the consequences of people being dissatisfied with their rewards they’re gonna do one of two things they’re gonna try and increase the rewards or they’re going to do less so again it’s this whole concept of well if I’m doing working this hard and the reward is not as big as I thought it was going to be I’m just going to cut back on my contribution a little bit right so that’s what we’re talking about here I’m not going to work heart but let’s start with the top here first if you’re dissatisfied you can always attempt to increase your rewards and you can do it in one of several ways you can decide to leave the company you can decide to acquire illicit rewards you can cheat right you can cheat the system right and which case don’t don’t expect to be remaining and remaining there you’re probably going to be dismissed you can demand a higher higher pay rate and if you don’t feel that the company is listening to your needs overall the employee needs for higher pay you can decide to unionize right you can increase your effort or performance level so you can say gee my my contribution isn’t big enough maybe what I need to do is you know just keep working harder alright and then maybe the rewards will come or you could demand improved job duties so you could say hey if the effort that I’m expending isn’t going to get me more on this job maybe I should be applying for other opportunities within the organization that might recognize the level of contribution I’m making and maybe they’ll reward me differently so maybe I’ve got to go for a higher level job a job in a different department I don’t know whatever it might be that’s going to help you increase your rewards so now if we look at these last three here demanding higher pair unionizing increasing your effort or performance level or demanding improved job duties which are going to put you in a position to get more pay if they lead to more rewards then hopefully it will reduce the reward dissatisfaction hopefully we reduce it to zero but if not if it reduces it somewhat but not totally then you’re back to square one right but if it doesn’t result in more rewards then you’ll likely quit and go somewhere where you feel you’re more appreciated now if you took the second road and said well I’m just going to reduce my contributions how could you do that you could request reduce job duties right and if you did get reduced job duties then would you would that reduce presumably or hopefully it would reduce your reward to satisfaction to zero I can’t say in this economy it would but in any way maybe it would and again maybe you’d be very satisfied or maybe you’d be still be somewhat dissatisfied now if you do stir job duties okay if if it didn’t work out if they didn’t reduce their job duties maybe it could all right you’d reduce your performance level we gotta be careful with that one if you decide to reduce your performance level and not not put out the effort companies are gonna see that they might dismiss you say hey you’re not working as hard as you used to what’s wrong well if you said you didn’t feel the reward system was fair they might say well if you don’t like it here maybe you got to go somewhere else right you might decide to play hooky right you might decide hey if they’re not appreciating my efforts I’m not getting the reward I I think I’m entitled to maybe you know some companies allow you to some companies and they have sick day plans where you can take so many days off a month you might decide hey I’m gonna take a day off a month whether I’m sick or not

won’t be just absent rate or you might decide you want to go find a less demanding job which you can do that means you’ll terminate right terminate from that job but you might decide to stay with the company say you might apply for a job at a lower level you can do that right you’ll may be making less money but maybe some people will say well at least that reward will match the effort that I’m prepared to put in so again it might reduce that dissonance of that perceived inequity between your your contribution and the reward you’re getting so again don’t forget with reduced effort or performance and increased absenteeism they could lead to dismissal so you have to be careful all right but the important thing here for HR people is what hey if I’m finding people aren’t putting in the effort that they used to what’s happening with them are they not happy with the reward system or maybe there might be something going on that’s precluding them from putting forth their best effort so even if you’re not an HR manager you know say you’re a line manager say you’re a sales manager see or the accounting manager right and you know and and you notice these things happening in your organization you know you can come back to this and say hey what’s wrong is that the reward system or is it something else maybe I should sit down have a talk with that employee you know or maybe that accounting manager or that sales manager might come to you as the HR professional and say where are some of the things I should consider how should I approach the employee what’s going on you know so again just things to be aware of that might help you understand employee behavior a little bit more if we look at some of the membership behavior statistics actually you know what I think what I’m gonna do is I’m going to stop I’m gonna start off with the slide in the second video series so hold that thought hold this like picture and we’re going to come back to it in a minute so this is going to be the end of our first part of the video series for this chapter and then we’re going to move on to the second part of the video series which is going to look more at it’ll look a little bit more at some of the theories of motivation and how that affects people’s view of the reward system