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Intrinsic Compensation

Employee compensation stands for the payment to employees in return for their participation in the working process of organization. It is known that employee compensation is one of the best motivators. (Martocchio, 2010, p.5) It can be distinguished between intrinsic and extrinsic compensation. My goal in this paper is to analyze two scholarly articles which are focused on intrinsic compensation and to write a synthesis of these articles.

The first article How to Effectively Link Compensation with Performance can be found in the Journal Industrial Management. The authors of the article Anthony Corbo and Brian Kleiner are well-qualified specialists from the department of management and school of business administration and economics at California State University. In their article, they try to find out how to link both compensation and performance effectively. The authors argue that “it’s important to have a clear understanding of basic motivational factors”. (Corbo & Kleiner, 1991, para.1)Moreover, the impact of the intrinsic-extrinsic approach on rewards management of the organization should be analyzed in a proper way. Special attention should be paid to the expectancy theory proposed by Victor Vroom which can help to define the effectiveness of the compensation. It is known that money has always been a prime motivator of employees’ working efforts. In the past, special compensation programs developed by Frederick Taylor, the father of scientific management, were used to motivate employees.

Nowadays, the belief that “money is a prime motivator of performance” is challenged. Such scientists as McGregor and Herzberg developed a so-called motivation theory that divided rewards into two types: intrinsic and extrinsic. According to this theory intrinsic reward or non-monetary compensation which includes feelings of accomplishment, employee responsibility and autonomy and other factors is the only motivator of employees work behavior. The scientists argue that extrinsic compensation which includes employee pay and benefits, working conditions and other factors play the secondary role. It is considered that extrinsic rewards are required to prevent the employees’ dissatisfaction with their job but they do not influence the motivation of performance. As can be seen from the above, intrinsic compensation is the best motivator of employees’ performance. That is why it should be taken into consideration by all the managers who have the major goal – to improve employees’ performance. The second article Reward Strategies for R&D written by Lynn Ellis and Sandra Honig-Haftel touches upon the theme of implementation of different types of rewards in business organization. The authors argue that reward strategies should be “part of basic management systems used in research and technology management”. (Ellis & Honig-Haftel, 1992, para.1)

It is known that different types of rewards are used in order to motivate employees. According to recent investigations, not all types of rewards can give positive results. The authors of the article are sure that intrinsic rewards or intrinsic compensation give only positive results for employees’ motivation to perform their duties in a proper way. Among positive intrinsic rewards are public recognition and self-esteem. According to investigations, in many cases, high monetary rewards had rather negative results. (Ellis & Honig-Haftel, 1992, para.4)

However, the authors of the article consider that both intrinsic and extrinsic compensation should be used for employees’ motivation as both non-monetary and monetary rewards are important for employees.The above mentioned information helps to evaluate the role of intrinsic compensation in organizations. Although extrinsic compensation is considered to be the most recognized, non-monetary rewards also influence the employees’ motivation and can help to improve the quality of work. (Frey, 2001, p.41)

Sometimes, employee benefits are more important for employees as they feel their contribution to organization. It helps them to perform their duties better. I am sure that special attention should be paid to intrinsic compensation of employees. Intrinsic compensation can show how much the employees are appreciated and worth. It is a good psychological tool which should be used in any type of organization. I agree with the authors of the first article discussed in this paper who try to find the link between compensation and performance. Moreover, I am sure that compensation and motivation are inseparable. All the employees must know that effective performance leads to certain rewards. Of course, these rewards should be attractive for the employees. The employees must always know that their work output will be appreciated by the supervisors in the form of intrinsic rewards.

In conclusion, it is necessary to say that all organizations should pay special attention to the system of employees’ compensation. It will help to improve motivation and performance. Although money has always been a prime motivator for employees, non-monetary rewards or intrinsic compensation is, sometimes, the most effective means to motivate employees.

Corbo, A. & Kleiner, B. (1991) How to effectively Link Compensation with Performance. Journal of Industrial Management. Vol.33. May 1, 1991. Retrieved from:<http://www.thefreelibrary.com/How+to+effectively+link+compensation+with+performance.-a010941285>
Ellis, L. & Honig-Haftel, S. (1992) Reward Strategies for R&D. Journal of Research Technology Management. Vol.35(2). Retrieved from:<http://www.questia.com/PM.qst?a=o&d=5037230623>
Frey, B. (2001) Successful Management by Motivation. Springer. 1-st Edition.
Martocchio, J. (2010) Strategic Compensation: A Human Resource Management Approach. Prentice Hall.