Academic journal article Journal of Economic and Social Development

Psychological Context of Managerial Staff Compensation – Polish Experiences

Academic journal article Journal of Economic and Social Development

Psychological Context of Managerial Staff Compensation – Polish Experiences

Article excerpt

Introduction

Studies concerned with the relationship between senior and middle managers' salaries and such variables as the company's effectiveness, its value or long-term sustainability make up a large part of economics [1, 2, 3]. There are also numerous scientific studies devoted to economic and legal aspects of structuring management contracts [4] and the connection between managers' salaries and financial slumps of companies which they manage [5, 6].

The psychological context of the remuneration system, a key factor in managers' involvement, motivation and loyalty, is an area which has been explored far less. Although it is oft proposed that managerial staff should possess a high level of motivation stemming from self-motivation and strong sense of mission studies indicate [7] that managers consider financial motivators to be very important and that salaries are a crucial element in their assessment whether a particular organization is an attractive employer [8].

Through analysis the article aims to identify managerial staff's opinion regarding the psychological aspects of the remuneration system including: fairness, justice, adequacy and transparency. To achieve this goal the author used a questionnaire which was administered to 120 representatives of middle and senior staff working within the corporate sector functioning in Poland.

Literature review

As far back as the 1960s it has been well-known that in assessing a salary an employee considers not only its nominal value or its purchasing power but also whether it is honest, adequate and just [9, 10]. This stems from the fact that the assessment of the attractiveness of salaries is very subjective. It is difficult to gain a measure of a salary using such descriptions as 'large', 'fair' or 'big enough' [11]. An amount of money which one employee considers as large may be seen as very small by another with those assessments changing over time. A salary that at one time may be perceived by a worker as attractive and satisfying some time later can be assessed as unattractive.

It is necessary, therefore, to consider including the psychological context of remuneration, especially the implementation of the principles put forth within the numerous works of behavioral and cognitive psychology into the process of remuneration management.

The contribution of L. Yao, L. Weihuana and L. Hao [12] to the study of psychological conditioning of the assessment of compensation is significant. These authors have shown that the psychological effectiveness of compensation is contingent on the assessment of five variables: salary level, quality of the remuneration policy, the process of salary management, rules of salary distribution and variable components of remuneration (prizes and bonuses). The works of J. Colquitt [13] are similar. He, in turn, has proven that satisfaction with a salary is dependent on the sense of fairness analyzed within several planes: process fairness, allocation fairness, interaction fairness and information fairness or equal access to information regarding the principles used to structure salaries. Fairness is assessed by employees through the comparison of the results of their work and the rewards gained for them. Every situation in which an employee gauges his salary to be inadequate in respect to his results as well as when he believes that other employees' salaries are inappropriate in regard to their work results causes a reduction in the satisfaction he feels concerning his salary.

Through compensation the organization sends the employee a very important signal which communicates how valuable he is to his employer. The amount of that compensation in comparison to salaries of other people working within the same organization in positions with similar level of difficulty and responsibility is especially important. A salary taken as certain type of feedback becomes a tool through which the employee can build self-esteem. …

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