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Having read and analyzed three articles on compensation influence within organizations, which are Effect of compensation strategy on corporate performance: Evidence from Nigerian firms, Managerial compensation based on organizational performance: A time series analysis of the effects of merit pay, and Compensation practices: Signals of your organizations climate and culture, the conclusion about great impact of compensation was made. As it is confirmed by the researchers, different types of compensation can influence not only workers performance but even climate and culture of an organization.
According to Kehinde (2012), employees derive benefit from getting compensations as well as employers derive benefit from giving them. Actually, this process is interdependent. Company management is interested in giving different compensations to employees in order to get feedback from them in terms of employee attitudes, skills, behaviors, and organization performance (Kehinde, 2012, p. 37). In their turn, employees regard compensations as means of standard of living, status, and security (Kehinde, 2012, p. 37). In general, Kehinde describes working process within an organization in the following way, In any profit-oriented organization, employment relationship is seen as an exchange process where employees provide inputs in terms of skills and expertise in return for various compensations from the employer (Kehinde, 2012, p. 37). However, in spite of the fact that compensations play a great role in employment relationship, a lot of researchers doubt whether compensations have any influence on the employees performance. Deeper analysis of the chosen articles will cover this issue.
Pearce, Stevenson, and Perry (1985) and Kehinde (2012) paid great attention to the researches of other scientists before carrying out their own analysis of links between compensations and employees performance. In their articles, numerous types of compensations and points of view of different researchers considering their influence on the performance were presented. Among most frequent compensations, Kehinde emphasizes financial incentive, health care, pensions, promotions, bonus-based incentives, profit sharing, payouts and others. As to the researchers thoughts considering the issue of compensation benefits for performance, there was no the only answer for it. Some researchers confirmed that providing compensations in order to increase performance is inadequate because performance cannot be validly and inclusively measured, and large pay rewards cannot be given to the best performers (Pearce, Stevenson & Perry, 1985, p. 263). Moreover, some of them mentioned that compensations were counterproductive. They proved their words by the following examples. They said that merit-pay systems made people concentrate on one task, trying to do it as soon as possible and neglecting some important aspects of working process. Secondly, they confirmed that money rewards negatively affected employees interest to work. The last reason was that people come to see themselves as being controlled by a reward (Kehinde, 2012, p. 39). However, some of the researchers argued that compensation can greatly influence employees performance. Basing on the analysis of numerous studies, carried out by different researchers, it becomes evident that most of them have one belief in common compensations, especially financial incentives, should not be used for increasing performance within a company.
Trying to prove or deny points of view of other scientists, Pearce, Stevenson, Perry, and Kehinde carried out their own researches. After gathering and analyzing data, Pearce, Stevenson, and Perry confirmed that providing workers with money compensations did not show almost any changes in performance improvement, and, it is more likely that performance does not depend on compensations. In its turn, Kehindes research showed that compensation implementation benefits general productivity of a company. Thus, basing on these analyzed articles, the conclusion about ambiguity of the issue of compensations influence on the companys performance can be made.
However, compensations within a company can influence not only overall performance but its culture and climate. According to online journal Where Great Workplaces Start (2010), it is confirmed that company executives should thoroughly plan the schemes of compensation providing. It is emphasized that it is necessary to determine pay positions in the market, conduct market reviews, provide increases and pay effectiveness, and pay for performance in order to create healthy atmosphere within a company.
One more research, which covered interesting hypothesis considering the issue of compensations influence, was carried out by Ling Li and Michael E. Rollof (2008). During their research, they found out that people usually choose to work on organizations which use compensation system. Although organizational culture of such companies is more reward-oriented, aggressive, and less decisive, people still regard them superior to those which are based on the seniority-based compensation system.
Taking into account the researches of Kehinde; Pearce, Stevenson, and Perry; Ling Li and Michael E. Rollof, results of which were represented in their scientific articles, one can make a conclusion that compensations have influence within companies. Although this question provokes some debates among researchers, they can confirm some evident impacts. First of all, compensations influence performance. The only question is whether this influence is beneficial or negative. Perhaps, it depends on the companys policy or on every person individually. Secondly, merit-pay system has an impact on the culture of a company. Some researchers confirm that companies, which use this system, are organized in more aggressive way. In their turn, other scientists propose ways of improving climate within a company by means of providing well-planned compensation schemes. In any case, compensations have their influence on the company. Depending on what kind of influence it is, positive or negative, the company executives should take measures in order to make this influence beneficial, or get rid of it for better company performance.