The Effect of compensation on employees

motivation:
In Narsee Monjee college of Commerce and
Economics (Mumbai University), academic staff
of BMS (Bachelor of Management Studies).
Shilpa Agarwal

Abstract
This study investigates the role of compensation and its components
such as payment, promotion, recognition, working condition and benefit
towards academic staffs work motivation in Narsee Monjee College of
Commerce & Economics (Mumbai University). The population of this
study was 43 academic staff of Narsee Monjee College of Commerce &
Economics (Mumbai University). In this study, both primary and
secondary sources of data were used. The primary data were gathered
through questionnaires from 43 respondents of Narsee Monjee College
of Commerce & Economics (BMS academic staff). An interview was
also conducted with human resource personnel. Journals, books,
internet, and other references were used as secondary sources of data.
Data was analyzed and the findings of this study indicated that there is a
relationship between compensation and its components and employee
work motivation.
Keywords: promotion, benefit, recognition, working condition, payment
and work motivation

Objective of the study

The aim of this study is to investigate the role of compensations toward

employee motivation in Narsee Monjee College of Commerce &
Economics academic staffs. The study specifically aims to examine if
there is a relationship between compensation and employee work
motivation,
factors contribute to employee work motivation and
the influence of compensation on employee motivation
to find the importance of Compensation management for academic
staff.

Introduction
Compensation is the total amount of the monetary and non-monetary
pay provided to an employee by an employer in return for work
performed as required.
Compensation is based on:

Market research about the worth of similar jobs in the marketplace,

employee contributions and accomplishments,

the availability of employees with like skills in the marketplace,

the desire of the employer to attract and retain a particular employee

for the value they are perceived to add to the employment relationship,
and
the profitability of the company or the funds available in a non-profit
or public sector setting, and thus, the ability of an employer to pay
market-rate compensation.

Compensation also includes payments such as bonuses, profit

sharing, overtime pay, recognition rewards and checks, and sales
commission. Compensation can also include non-monetary perks such as
a company-paid car, stock options in certain instances, company-paid
housing, and other non-monetary, but taxable, income items.

Motivation:
Internal and external factors that stimulate desire and energy in people to
be continually interested and committed to a job, role or subject, or to
make an effort to attain a goal.
Motivation results from the interaction of both conscious and
unconscious factors such as the
(1) intensity of desire or need,
(2) incentive or reward value of the goal, and
(3) expectations of the individual and of his or her peers.
These factors are the reasons one has for behaving a certain way.

Narsee Monjee College of Commerce & Economics is a leading college

affiliated to Mumbai University and is celebrating its Golden Jubilee
Year in 2014-2015. It was established in 1964 by Shri Vile Parle
Kelavani Mandal (SVKM), a professionally managed trust with a large
number of prestigious academic institutions, under its umbrella and
around 6200 students are enrolled in various courses and programs
offered by the college.
My research paper will find the relation between compensation and
employee motivation among the academic staff of BMS (Bachelor of
Management Studies course in Narsee Monjee college of Commerce and
Economics.
The reason of selecting this topic is that job turnover is one of the major
problems faced by companies and educational institutions where
compensation plays a critical role. Other factors like work culture,
organizational behavior and superior subordinate relationships are also
important as they affect the employees level of motivation.
Thus this study will help in generating the importance of compensation
management to motivate the employees and retain them.

Literature Review
Employee compensations refer to all forms of pay or reward going to
employees and arising from their employment. Rewards include direct
compensation, indirect compensation and non-financial reward.
Developing an effective and appropriate compensation system is an
important part of the human resource process. An effective and
appropriate compensation system can help, attract and retain competent
and talented individuals who can help the organization accomplish its
mission and goals. (Dessler, 2002). According to Ivencevich (1998),
compensation has been recognized as a major motivator of employees.
As the issue of motivation is concerned, employee compensation
systems have been found to be the most commonly adopted technique
among the organizations. Employee compensation offers a diversity of
rewards that may be monetary or non-monetary. According to Robins
(2003),Organization compensation can include many different types of
rewards and benefits such as salaries, incentive payments and other
benefit and services. If an employee believes he/she is underpaid, that
employee will likely reduce expended effort by working more slowly
and being absent (Byars and Rue, 1997).
Motivation is described as an inner force that derives individual to act
toward something (Evancevich, 2007).

The staffs of higher education institutions are a key resource. Academic

staffs, in particular, have a major role to play in achieving the objective
of the institutions. The performance of academic staff both as a teacher
and as a manager, determines, largely, the quality of student experience
of higher educations and has a significant impact on student learning and

thereby on the contribution that such institution can make to society.

Academic staffs manage this learning experience and are the main
interface with the students. Consequently, their motivation is crucial in
determining the quality of this interface. Exceptionally well-motivated
academic staffs can, with appropriate support, build a national and
international reputation for themselves and the institution in research,
publication and professional areas. Motivation is a key in the
establishment and development of quality in higher education. A well
designed and functional compensation system is an efficient way to
increase employee work motivation . Compensation leads to better
performance and keeps workers focused on their jobs. Lack of
appropriate compensation is one of the main reasons behind the
employee turnover. It is important to know that employee compensation
include all forms of pay and reward received by employees for the
performance of their job. Failure to design appropriate compensation
system will have unfavorable impact on productivity and job satisfaction
of employees and overall effectiveness of the organization.

This research investigated the role of compensation toward employee

motivation in Narsee Monjee College of Commerce & Economics
academic staffs. Hence, in order to motivate and retain effective and
committed staff member, the university must offer competitive level of
compensation and must recognize their achievements. The dedicated
staffs can maintain the competitive position of the university with other
universities. According to some academic staffs, the compensation
system of Narsee Monjee College of Commerce & Economics shows
that there is a problem in motivating employees, which results from lack
of identifying motivational factors and there is low motivation of
employees on the job.

Methodology
The process used to collect information and data for the purpose
of making business decisions. The methodology may
include publication research, interviews, surveys and
other research techniques, and could include both present
and historical information.

Survey
A descriptive survey involving questionnaire was the research design
adopted for this study. In this research project, both primary and
secondary sources of data were used. The primary data was collected
through questionnaires and interviews. Also, journals, internet, books
and other related references were used as secondary data. The population
of this study was Narsee Monjee College of Commerce and Economics
academic staff. The total population of the study is 43 academic staff of
BMS (Bachelor of Management Studies).

Analysis of the survey

The descriptive statistics such as frequency tables, pie charts were
applied to analyze data regarding the role of compensation towards
employee motivation and its components.

The below table shows various motivational factors taken into

consideration

Table 1

Motivation Factors
Payment
Promotion
Recognition
Work condition
Benefit

Demographic characteristics of respondents

The demographic characteristics of the respondents are shown below
(table 2) in terms of age, gender, length of service in this university and
highest level of education completed.
As indicated in table 2, the lesser half of the sample (17) or 39.53% was
male, while the remaining (26) or 60.46% was female respondents.

Table 2

Demographic
Variables

Frequency

1.Sex

Male
Female
Total

17
26
43

2.Age category

20-30
31-40
41-50
51-60
Total
1-2 years
2-6 years
7-9 years
>9 years
Total
Masters degree
Graduate
Doctoral degree
Total

08
15
11
09
43
04
09
21
07
43
18
12
13
43

3.Service of
respondents in the
university

4.Educational degree

Table 3 Summary of items that measure opinion of respondents

about of payment

Table 4 Summary of items that measure opinion of respondents

about promotion

Table 5 Summary of items that measure opinion of respondents

towards sub dimension of recognition and work motivation

Table 6 Summary of items that measure opinions of respondents

about getting credit and feedback on the work

Table 7 Summary of items that measure opinion of respondents

towards sub dimension of working condition and work motivation

Table 8 Summary of items that measure opinion of respondents

toward autonomy at work place and flexible working hours

Table 9 Summary of items that measure opinion of respondents

towards sub dimension of benefit and work motivation

Table 10 Summary of items that measure opinion of respondents

towards housing allowance, and recreational benefit and work
motivation

RESULTS OF THE STUDY

Respondents ranking order of motivational factors from most preferred
to the least. In this part, respondents were asked to rank the
compensation components such as payment, promotion, recognition,
working condition and benefit as they preferred to enhance their
motivation on the job. The well designed compensation system can
greatly enhance morale, improve overall performance and contribute to
the organization. According to the ranking order of respondents,
recognition appears to take precedence over the other motivational
factors. It reveals that recognition in the form of appreciation of
performance, expressing of gratitude for extra effort done by employees,
acknowledgement of successful completion of organizational goals is
the most preferred motivational factors to the Narsee Monjee College of
Commerce and Economics academic staffs. The next most preferred
compensation is noted to be payment. With respect to the hierarchy of
needs theory, pay is an important reward because it provides employees
with the means to purchase items which satisfy their physiological
needs. The next to payment, promotion and working conditions were
ranked as the third and the fourth preferred motivational tools
respectively. Finally, benefits are ranked as fifth less motivating factors

Opinion of employees towards dimension of payment

Pay equity concerns whether employees believe they are being fairly
paid. A major determinant of employee productivity and satisfaction
arises from the degree of fairness (equity) or unfairness (inequity) that
an employees in the work place in comparing with others. Pay
dissatisfaction can influence employees feeling about their job. It can
increase the desire for more money and it can lower the attractiveness of
the job. In Narsee Monjee College of Commerce and Economics
payment for overload, extensions and summers are not fair and what
they earn does not match to their effort.
Opinion of respondents toward the dimension of promotion and
work motivation
Promotions are advancement into position with greater responsibility
and more authority than the previous job. Promotion usually includes
pay increase. Because of psychological and tangible rewards of
promotion (such as increased feeling of self-worth, a salary and status in
the organization), employees are more motivated to accept promotion.
Promotion and growth in the organization and interesting work are
important factors that motivate people to do their work. In Narsee
Monjee College of Commerce and Economics, the survey shows that,
promotion to the academic staffs are largely determined based on years
of service to the university and the criteria are similar to all staffs. Even
if there is performance appraisals in the university it is not much
considered and its contribution for promotion is not such significant.

Opinion of respondents towards dimension of recognition and work

motivation
Recognition is appreciation of performance by the organizations of an
act done by the team or team members. It is an approach of expressing
gratitude for extra effort done by the employees within an organization.
It is essential to encourage the employees or teams to repeat or continue
the behavior and to encourage other employees to do the same.
Recognition is either informal (oral) or formal (written remarks).
Motivator has a positive power to satisfy and produce high performance
and includes recognition. The respondents were asked their opinion from
the dimension of recognition and work motivation such as provision of
recognition, praise, appreciation, and if there is participation in
professional or career development training and their responses are
summarized in table 5. From this, one can infer that good performer
employees were not appreciated and praised for their work.

Opinions of respondents towards dimension of working condition

and work motivation
Job satisfaction and motivation is a positive emotional state resulting
from evaluating working conditions. If an employee expect clean safe
working conditions on the job, then the employee is likely to be
dissatisfied if the work place is not clean and attractive. From table 7
one can infer that, the supporting equipment which helps employees on
the job were enough and motivating. However, the communication
between the employees and the management as well as the participation
in decision making was not satisfactory.

Opinion of employees towards dimension of benefits and work

motivation
Benefits include insurance payment and retirement plan, payment for
time not worked, extra cash payment other than bonus based on
performance, and cost of service like subsidized cafeteria and so on.
Unlike pay for performance, most benefits are available to workers as
long as they are employed by an organization regardless of seniority or
performance. In this section, respondents were asked about benefit
packages of the university whether there is attractive benefit packages,
retirement benefits are motivating, the medical schemes are satisfactory,
employees understand the available benefit and their responses are
summarized in table 9. The majority of respondents responded
negatively. The response of management on this issue shows that; there
is half coverage of medical costs for the academic staffs and their
families. However, there is no awareness of its availability for the staffs.

Conclusion
Based on the findings of the study, the following conclusion forwarded.
It is evident from the study that payment, promotion, recognition,
working conditions, and payment influence work motivation. There is
also significant and positive relationship between compensation and
work motivation. The study has shown that respondents were not
motivated and satisfied in payment system of the university.
Respondents replied for all items of payment towards the range of
disagreement. From this, one can conclude that payment for the
employees such as over loud, extension and summers were not fair and
motivate the employees. Moreover, money they earn from their job was
not satisfactory. Respondents replied that, the promotion criteria were
inappropriate and not based on performance. Moreover, staffs
dissatisfied with the assignment of responsibility in the university and
fairness promotion. The respondents were feeling negatively for all
items in this category. From this result, it is possible to conclude that the
promotion criteria and its fairness were not motivated and satisfy
employees to put their effort on the job. Appreciation at work is one of
the factors causing work motivation and satisfaction. To the dimensions
of recognition respondents were perceived negatively to all items. Staffs
were responded towards disagreement for Rijalu et al. 26 the item there
is appreciation at work place. Moreover, staffs were responded towards
negative response for the item I am praised regularly for my work and
there is feedback for what I am doing. From this one can conclude that
the academic staffs were not motivated with the currently available
recognition programs. Respondents are negatively responded to the
attractiveness of internal working environment. The perception of
respondents to the item effectiveness of communication channels in

work place was negative. Respondents were also responded towards

disagreement to the item participation in decision making on
compensation system and negative response to the item I am
motivated in autonomy at working place. Respondents were positive,
for the item the supporting equipment that helps the job of employees
are sufficient and motivating. From this result it is possible to conclude
that the working materials are motivates and satisfy the academic staffs.
However, the remaining items under this part were towards negative
response, and de-motivate academic staffs. Respondents are responded
negatively to item benefit packages of the university is motivating.
Also respondents were disagree and strongly disagree to all items in this
category and particularly to item my medical benefits are satisfactory
and motivating. The respondents responded that, the housing allowance
was insufficient. Also respondents are unaware about the available
benefit packages of the university. Therefore, it is possible to conclude
that the benefit packages of the university were unable to motivate the
staffs to higher performance. The respondents of this study ranked
compensation components as the factor that motivate them on their job:
recognition, payment, promotion, working condition and benefit. These
factors reflect the current affairs in terms of employee needs and imply
that compensation may use to reinforce and to motivate employees.
Recognition was generally valued by large number of respondents as the
first most preference. After recognition, the next most preferred
compensation was payment. Promotion and working conditions were
ranked as the third and fourth preference of academic staffs. Benefits
were ranked as the fifth as least motivating factors. From this result one
can conclude that the academic staffs were preferred recognition as the
most motivating factors and benefit as the least motivating factors.

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Invancevich JM (1998). Human Resource Management. 7thed. By the
27. Basic Res. J. Bus. Manag. A/cc.
http://humanresources.about.com/od/glossaryc/g/compensation.htm
http://www.businessdictionary.com/definition/motivation.html
http://www.businessdictionary.com/definition/research-methodology.html#ixzz3FAWhxwd
http://www.nmcollege.in/AboutUs/Faculty_static.aspx