What is the impact of organizational Comittment on compensation management?
The impact of organizational commitment on compensation management is multifaceted, influencing both the design and effectiveness of compensation strategies within organizations. Organizational commitment shapes compensation management through its influence on the alignment between organizational strategies and compensation systems, the conveyance of organizational values to both current and potential employees, and the management of agency costs associated with incentive contracts. Organizational strategies, both at the corporate and business unit levels, significantly predict the design of pay packages, pay levels relative to the market, and pay administration policies, suggesting that the effectiveness of compensation systems is partly a function of the fit between pay strategies and organizational strategies. This alignment is crucial for conveying an organization's values and practices, as compensation systems send important messages to potential hires about the organization's culture, whether individualistic or collectivist, based on the basis of bonuses. Moreover, organizational commitment influences the effectiveness of performance-contingent compensation, which is widely accepted for rewarding managers but lacks rigorous empirical tests of its effectiveness. The design of compensation and incentive contracting practices, including the dynamics surrounding executive pay-setting policies, managerial risk-taking behavior, and performance measurement issues, are complex topics that require attention to the theoretical linkages between pay strategies and corporate behaviors. Additionally, the disparity in cash pay between in-house and outsourced call centers, while not resulting in significant differences in workforce performance, highlights the role of compensation management in influencing employee behavior and organizational outcomes. Compensation strategies also play a critical role in promoting organizational learning capability, influencing employees' commitment to learning and shaping their understanding of the organization's purpose. Finally, an individual's identity with the firm can reduce the agency costs associated with incentive contracts, as managers who identify with the firm are less likely to engage in opportunistic earnings manipulation. In summary, organizational commitment significantly impacts compensation management by ensuring the alignment of compensation strategies with organizational strategies, conveying organizational values, and managing agency costs, thereby influencing both employee behavior and organizational performance.
Answers from top 4 papers
Papers (4) | Insight |
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349 Citations | Organizational strategies significantly influence pay package design, pay level, and administration policies, highlighting the importance of aligning compensation with organizational goals for effectiveness. |
8 Citations | The paper emphasizes aligning reward structures with organizational culture for effective schools, highlighting the need for coherence between compensation management and organizational directions to enhance workforce behaviors. |
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