Job satisfaction has already been studied by many discipline such as sociology, economics, psychology as well as management science frequently in work and organisational literature. The reason behind that many specialists believe that job satisfaction has huge impact on work productivity and labour market behaviour. Moreover, job satisfaction is counted as a well-built forecaster of individual welfare. Gazioglu and Tansel quote in 2002 (Measuring job satisfaction surveys-comparative analytical report, 2006) that job satisfaction is also important intentions or judgments of employees to stay or leave a job.
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Job Satisfaction through this: People bring mental and physical abilities and time to their jobs. Many try to make a difference in their lives and in the lives of others through working. The reason for wanting a job is often considerably more than just a paycheck. Jobs can be looked at as the means used to achieve personal goals. When a job meets or exceeds an individual's expectation, the individual often experiences positive emotions. These positive emotions represent job satisfaction. Job satisfaction in turn is a major contributor to life satisfaction (Smith, 1992), a personal goal that many find worth pursuing. Job satisfaction may be compared to another source of life satisfaction-marriage. When people lack marriage satisfaction or experience dissatisfaction in their union, they often get a divorce. It is similar with the relationship between employee and employer. "Take this job and shove it!" is not only a recorded blue-collar anthem by Johnny Paycheck during the 1980s, but also an illustration of the sentiments and actions of many people who are dissatisfied with their jobs overall or with certain aspects of their jobs. To grasp the meaning of a construct like job satisfaction, it seems logical to look at how it is defined in the literature. The search for a universal definition of job satisfaction is not a difficult one; it is an impossible one. Even though many researchers define job satisfaction, the definitions vary. The three definitions most commonly referred to among researchers are Hoppock's, Locke's, and Vroom's. In the thirties, Hoppock's (1935) response to the question 'What is job satisfaction?' was: "…any combination of psychological, physiological, and environmental circumstances that causes a person truthfully to say, 'I am satisfied with my job'" (p. 47). Locke's (1976) answer to the same question in the seventies was: "…a pleasurable or positive emotional state resulting from the appraisal of one's job or job experiences" (p. 1300). Vroom (1982), who used the terms "job satisfaction" and "job attitudes" interchangeably, defined job satisfaction as "...affective orientations on the part of individuals toward work roles which they are presently occupying" (p. 99). Even though the definitions vary, a commonality among them seems to be that job satisfaction is a job-related emotional reaction.
Importance of Job Satisfaction
Spector (1997) presented three reasons to clarify the importance of job satisfaction. First, organizations can be directed by humanitarian values. Based on these values they will attempt to treat their employees honorably and with respect. Job satisfaction assessment can then serve as an indicator of the extent to which employees are dealt with effectively. High levels of job satisfaction could also be a sign of emotional wellness or mental fitness. Second, organizations can take on a utilitarian position in which employees' behavior would be expected to influence organizational operations according to the employees' degree of job satisfaction/dissatisfaction. Job satisfaction can be expressed through positive behaviors and job dissatisfaction through negative behaviors. Third, job satisfaction can be an indicator of organizational operations. Assessment of job satisfaction might identify various levels of satisfaction among organizational departments and, therefore, be helpful in pinning down areas in need of improvement. Spector (1997) believed that each one of the reasons is validation enough of the significance of job satisfaction and that the combination of the reasons provides an understanding of the focus on job satisfaction. Spector, of course, is only one of many researchers, scholars, and writers who addressed the importance of job satisfaction. His reasons appear to be representative of many views on the importance of the concept in other major works (i.e., Bruce & Blackburn, 1992; Cranny et al., 1992; Gruneberg, 1976; Hopkins, 1983) dealing with job satisfaction.
From Faisal RM: In 1998 Clark summarises the importance of job satisfaction for both employers and their workers in the following way, "Job satisfaction is important in its own right as a part of social welfare, and this simple taxonomy of a good job allows a start to be made on such question as 'In what respects are old workers' jobs better than those of younger workers?'(and vice versa), 'Who has the good job?' and 'Are good jobs being replaced by bad jobs?' in addition, measure of job quality seem to be useful predictors of future labour market behaviour. Workers' decisions about whether to work or not, what kind of job to accept or stay in, and how hard to work are all likely to depend in part upon the worker's subjective evaluation of their work, in other words on their job satisfaction."
From Introduction: Organisations are increasingly focusing on corporately align performance and trying to ensure that employees should be accountable and rewarded for their contribution to make them satisfied. Lawler (Cited on the book of Armstrong and Brown, 1999) advocated that the employers should adopt compensation and benefits staff through an integrated reward approach which should be linked with the company strategy, pay system and employee behaviour. Pay system thus become an important thing to achieve the business goal of the organisation. This does not mean that its represent an important cost for the business, but also it will make employee inspire to pursue and reach these business goals and to develop and apply the essential capabilities supporting them. According to US Business strategy guru Michael Porter believes that 'having the right reward in place helps people to make the right choices to support your strategy'. (Cited on the book of Armstrong and Brown-1999, p-59). From the quotation of Michael Porter, it can be said that for managing the performance and retaining the employees who are key to organisational success, reward is an important factor. In the past, total reward statements of J Sainsbury were only distributed 1,246 senior management staff but in October (2008), it sent the statements out to all 150,000 employees. This statement contains a details of employees' benefits packages including pay, bonuses, entitlement to staff discounts and overtime worked as well as training and development opportunities (Sullivan, 2008). According to Michelle Burton, head of reward and people system of J Sainsbury, "we need to ensure that every part of our benefits package is engaging and get people behind it. In every part of our offer, we try to engage our colleagues with our brand. One of the objectives of the total reward statements initiatives is to highlight to our employees the amount of colleague discount they have used". (Sullivan, 2008)
Final RM:
Many organisations now define reward as including financial and non-financial elements. Financial rewards might include pay, 'perks', paid holiday, etc. Non-financial rewards might include opportunities for learning and development, as well as 'voice' and quality of working life. According to Brown and Armstrong (1999), financial reward consists of base pay, annual bonuses, long term incentives, shares, profit-sharing, pensions, holidays, perks and flexibility which represents transactional rewards and also necessary to recruit and retain.Today, the idea of reward strategy which is now widely accepted in companies and HR departments. The elements of financial reward discuss below briefly:
2.1- Base or Basic pay
The base rate is the amount of pay that constitutes the rate for the job. It may be varied according to the grade of the job or for manual workers, the level of skill required. Base pay will be influenced by internal and external relativities.
Internal relativities may be measured by some sort of job evaluation which is a systematic process for defining the relative worth or size of jobs within organisation in order to established internal relativities and provide the basis for designing an equitable grade structure, grading jobs in the structures and managing relativities. External relativities are assessed by tracking market rate analysis which is the process of identifying the rates of pay in the labour market for comparable jobs to inform decisions on levels of pay within the organisation. Jobs may be also placed in the grade structure according to their relative size. Pay levels in the structure are influenced by market rates. The pay structure may consist of pay ranges attached to grades which provide scope for pay progression based on performance, competence, contribution or service.
Base pay may be expressed as an annual, weekly or hourly rate. For manual workers this may be an hourly rate which is known as a time rate. Allowance for overtime, shift working, unsocial hours or increased cost of living in London or elsewhere may be added to base pay. When determining rates of pay, employers must meet the requirements of the national minimum wage (NMW). The national minimum wage (NMW) was established on 1 April and applies to all workers age 16 and over. The NMW rates are expressed as national hourly rates. There are no variations by region, occupation, industry or employer size. Employees cannot agree to accept a rate lower than the NMW.(Armstrong-2009)
2.2- Contingent Pay
Many people see pay related to performance, competency, contribution or skill as the best way to motivate people. Contingent pay is used to described any formal pay scheme that provides for payments on top of the base rate, which are linked to the performance, competency, contribution or skill of people. This system is apply to individual or teams, or it can operate on an organisation wide basis. A distinction should be made between financial incentives and rewards while considering contingent pay as a motivator. For giving direct motivation to employee, organisation apply financial incentives which tell people how much money they will get in the future if they perform well like- 'do this and you will get that'. A best example of financial incentive is sales representative's commission where as financial reward act as indirect motivators because they provide a actual means of recognizing achievements, as long as people expects that what they do in the future will produce something worthwhile.
2.2.1- Performance related pay
Performance-related pay (PRP) is a method of remuneration that links pay progression to an assessment of individual performance, usually measured against pre-agreed objectives. PRP also known as individual PRP or merit pay. Pay increases awarded through PRP are normally consolidated into basic pay although sometimes they involve the payment of non-consolidated cash lump sums. While the focus of this fact sheet is individual, consolidated PRP as a means of pay progression, PRP can be defined more broadly to include many differing systems that link individual and group performance to pay, for example bonus schemes.
2.2.2- Competency related pay
People receive financial rewards in the shape of increases to their base pay by reference to the level of competence they demonstrate in carrying out their roles. It is a method of paying people for the ability to perform now and in the future. Competency-related pay is attractive in theory because it can be part of an integrated competency-based approach to HRM. Competency pay sound like a good idea but it has never been taken up to a great extent because of the problem like bias.
2.2.3- Contribution related pay
Contribution related pay is a process for making pay decisions based on assessments of both the outcomes of the work carried out by individuals and the inputs in term of levels of competency that influence those outcomes. It focuses on what people in organisations are there to do, that is, to contribute by their skill and efforts to the achievement of the purpose of their organisation or team. (Brown and Armstrong 1999). Contribution-related pay rewards people for both their performance and their competency.
2.2.4- Skill-based pay
Skill-based pay provides employee with a direct link between their pay progression and the skills they have acquired and can use effectively. It focuses on what skills the business wants to pay for and what employee must do to demonstrate them. It is therefore a people based rather than a job based approach to pay. Rewards are related to the employee's ability to apply a wider range or a higher level of skills to different jobs or tasks.
2.2.5- Service based pay
Service-related pay provides fixed increments that are usually paid annually to people on the basis of continued service either in a job or a grade in a pay spine structure. Increments may be withheld for unacceptable performance and some structure have a merit bar that limits increments unless a defined level of merit has been achieved. This is the traditional form of contingent pay and is still common in many organisation.
2.3- Bonuses and cash incentives
The payment of bonuses or cash incentives may be linked either to the quality or quantity of work, on an individual or collective basis, or to some measure of company performance such as profit levels.
2.3.1- Individual-based
Payment of the bonus or incentive is determined by some measure of individual performance. An advantage of such schemes is that individuals should be able to directly influence their own bonus payments by attaining the desired performance levels, hence there should be a considerable incentivisation effect. Sales commission could be included within this category. Individual bonuses might also be used in the situation where employees at the top of their pay scale would receive a non-consolidated bonus payment rather than a consolidated pay rise.
2.3.2- Profit sharing
These schemes often use company profit levels as a measure to help determine bonuses, with other measures including company turnover, revenue, sales and cash flow. Under cash-based profit sharing, for example, the level of payout might be determined by means of a formula linking the levels of profit to individual payments across the workforce. Business results also tend to be a key indicator for executive schemes designed to incentive or reward high-level executives.
2.3.3- Team-based
Such schemes link the bonus with some measure of team performance, often with the aim of fostering effective team working.
2.3.4- Department or site-based
A variation on the collective bonus theme, payments could be pitched to reward, for instance, production workers who attain productivity improvements in one particular plant in a manufacturing firm.
2.3.5- Gainsharing
An approach based on the idea that employees should be able to share in financial gains achieved through improved performance.
Moreover, a wide range of perks and benefits offer to employees, from the traditional such as paid leave, occupational sick pay, occupational pensions and healthcare benefits etc. Some benefits, such as work-based pensions, are tax-efficient methods of remuneration. There are various reasons for why employers offer employees benefits. For some, it is to match market practice, for others it is to provide employees with some measure of security, such as occupational sick pay, while others use them to retain employees, such as occupational pension schemes. Voluntary benefits (where employers provide third-party goods and services at a discount) excite most interest. Flexible benefits schemes are formalised systems that allow employees to vary their pay and benefits package in order to satisfy their personal requirements.
2.4- Non-financial rewards
While pay and benefits are important, and getting them wrong can have dire consequences for the organisation, they are not the only rewards that employers should consider. Research shows that non-financial rewards can be just as important. Employers need to consider what they are rewarding and try and align what employees want with the needs of the business. There are various elements to reward from the financial to the non-financial and it's important that employers chose the appropriate mix of base to variable pay, fixed to flexible benefits, and pay to non-pay rewards.
These include:
opportunities for personal and career development
flexible working (such as working from home or flexitime)
being involved in decisions that affect how and when employees do their work
a pleasant working environment.
good performance management and appraisals.
recognition, such as through an employee of a month award or team-based events.
Both new and old-economy companies currently have to rethink their reward strategies to give the satisfaction to their employees. Newer companies, particularly those in the hi-tech sectors rewarded employees with exciting and challenging surroundings, but with no guarantee of job security. They also offered significant financial rewards, in the form of stock options. Now that the stock options have to be expensed on the profit and loss account, and the traditional companies have stopped providing a job for life, both have to look at new ways of attracting and retaining key personnel. As Smith(1957) stated, "The study of job satisfaction should be able to contribute to the general psychology to motivation, preferences and attitudes". Job satisfaction refers one's believe or attitude about the nature of their occupation. The primary aims of job design are to enrich job satisfaction and performance takes into processes includes job enlargement, job rotation and job enrichment (www.managementhelp.org). It can be seen from the recent studies that satisfied employees are likely to be more creative, dynamic and committed to their employers and HR practitioners have shown a straight relationship between staff satisfaction and tolerant satisfaction. Moreover, by creating a positive workplace for employees, employer can increase their own satisfaction. (Syptak and et al., 2009).
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UK researchers found that part-time workers do not appear to be more or less satisfied 'with their jobs' than full-time workers. However, female part-time workers are on average more satisfied with 'pay' and 'hours' than female full-time workers, but are less satisfied with 'the work itself'. The same research also found that men in mini-jobs (involving between one and 15 hours of work per week) were generally more satisfied with their work than men working 30-48 hours per week (except for satisfaction with 'hours worked' but this result was statistically insignificant). However, Rose (2003) analysed a number of possible influences on job satisfaction including individual well-being, working hours, work orientation, financial variables, the employment contract, and market and job mobility. His findings provide having the 'right package' - contractually assured promotion opportunities, annual pay increments, bonuses and, above all, a job that was regarded as permanent - significantly boosted the job satisfaction score, with a marginal increment for not having to work unpaid overtime. There was also little support for the view that job satisfaction rises in a closely linear association with earnings; rather, jobs enabling financial expectations - at whatever level these were set - to be met, were more important. Having a recognised career path was also a highly significant factor relating to job satisfaction.
Job satisfaction through this:
Theoretical Frameworks of Job Satisfaction
Three theoretical frameworks of job satisfaction can be identified in the literature. Framework one is based on content theories of job satisfaction. Framework two is grounded in process theories of job satisfaction. Framework three is rooted in situational models of job satisfaction (Thompson & McNamara, 1997).
Framework One: Content Theories
Content theorists assume that fulfillment of needs and attainment of values can lead to
job satisfaction (Locke, 1976). Maslow's (1954) need hierarchy theory and Herzberg's
motivator-hygiene theory (Herzberg, 1966) are examples of content theories.
Maslow's Need Hierarchy Theory. According to Maslow's (1954) view of individual needs, job satisfaction is said to exist when an individual's needs are met by the job and its environment. The hierarchy of needs focuses on five categories of needs arranged in ascending order of importance. Physiological, safety, belongingness and love are the lower-level needs in the hierarchy. The higher-level needs are esteem and self-actualization. When one need is satisfied, another higher-level need emerges and motivates the person to do something to satisfy it. A satisfied need is no longer a motivator. Whaba and Bridwell (1976) did an extensive review of the research findings on the need hierarchy concept. The results of their review indicate that there was no clear evidence showing that human needs are classified into five categories, or that these categories are structured in a special hierarchy. Even though hardly any research evidence was discovered in support of the theory, it enjoys wide acceptance.
Herzberg's Motivator-Hygiene Theory. The study of job satisfaction became more
sophisticated with the introduction of Herzberg's motivator-hygiene theory (Herzberg, 1966; Herzberg, Mausner, & Snyderman, 1959). This theory focuses attention upon the work itself as a principal source of job satisfaction. To Herzberg the concept of job satisfaction has two dimensions, namely intrinsic and extrinsic factors. Intrinsic factors are also known as motivators or satisfiers, and extrinsic factors as hygienes, dissatifiers, or maintenance factors. The motivators relate to job content (work itself) and include achievement, recognition, work itself, responsibility and advancement. The hygienes relate to job context (work environment) and involve, for example, company policy and administration, supervision, salary, interpersonal relations, and working conditions. Motivators are related to job satisfaction when present but not
to dissatisfaction when absent. Hygienes are associated with job dissatisfaction when absent but not with satisfaction when present. Before the emergence of the motivator-hygiene theory, only single scales had been used to measure job satisfaction. Scores on the high end of the scale reflected high levels of job satisfaction, whereas scores on the low end represented high dissatisfaction. Research based on the motivator-hygiene theory should apply different scales for job satisfaction and dissatisfaction because the opposite of job satisfaction is no job satisfaction and the opposite of job dissatisfaction is no job dissatisfaction (Iiacqua, Schumacher, & Li, 1995). Assessing the motivator-hygiene theory, Locke, Fitzpatrick, and White (1983) pointed out that Herzberg's theory is method dependent. Herzberg used what is known as the critical
incident technique in the development of his theory. This type of research approach has been the only one consistently leading to results confirming the theory. The results of other applied methods have indicated that hygienes indeed can be associated with job satisfaction and motivators with job dissatisfaction.
Framework Two: Process Theories
Process theorists assume that job satisfaction can be explained by investigating the
interaction of variables such as expectancies, values, and needs (Gruneberg, 1979). Vroom's expectancy theory (1982) and Adams' equity theory (1963) are representative of the second framework.
Vroom's Expectancy Theory. Vroom's (1982) expectancy theory suggests that people not only are driven by needs but also make choices about what they will or will not do. The theory proposes that individuals make work-related decisions on the basis of their perceived abilities to perform tasks and receive rewards. Vroom established an equation with three variables to explain this decision process. The three variables are expectancy, instrumentality, and valence. Expectancy is the degree of confidence a person has in his or her ability to perform a task successfully. Instrumentality is the degree of confidence a person has that if the task is performed successfully, he or she will be rewarded appropriately. Valence is the value a person places on expected rewards. Expectancy, instrumentality, and valence are given probability values. Because the model is multiplicative, all three variables must have high positive values to imply motivated performance choices. If any of the variables approaches zero, the probability of motivated performance also approaches zero. When all three values are high, motivation to perform is also high. Vroom's (1982) expectancy theory suggests that both situational and personality variables produce job satisfaction.
Adams' Equity Theory. The primary research on equity theory was done by Adams
(1963). Equity theory proposes that workers compare their own outcome/input ratio (the ratio of the outcomes they receive from their jobs and from the organization to the inputs they contribute) to the outcome/input ratio of another person. Adams called this other person "referent." The referent is simply another worker or group of workers perceived to be similar to oneself. Unequal ratios create job dissatisfaction and motivate the worker to restore equity. When ratios are equal, workers experience job satisfaction and are motivated to maintain their current ratio of outcomes and inputs or raise their inputs if they want their outcomes to increase. Outcomes include pay, fringe benefits, status, opportunities for advancement, job security, and anything else that workers desire and receive from an organization. Inputs include special skills,
training, education, work experience, effort on the job, time, and anything else that workers perceive that they contribute to an organization.
Framework Three: Situational Models
Situational theorists assume that the interaction of variables such as task
characteristics, organizational characteristics, and individual characteristics influences job satisfaction (Hoy & Miskel, 1996). Examples of models are the situational occurrences theory of job satisfaction (Quarstein, McAfee, & Glassman, 1992) and Glisson and Durick's (1988) predictors of job satisfaction.
Situational Occurrences Theory. The situational occurrences theory of job satisfaction was proposed by Quarstein, McAfee, and Glassman (1992). The two main components of the theory are situational characteristics and situational occurrences. Examples of situational characteristics are pay, promotional opportunities, working conditions, company policies, and supervision. Individuals tend to evaluate situational characteristics before they accept a job. Situational occurrences tend to be evaluated after accepting a job. Situational occurrences can be positive or negative. Positive occurrences include, for example, giving employees some time off because of exceptional work or placing a microwave in the work place. Negative occurrences
include, for example, confusing email messages, rude remarks from coworkers, and copiers which seem to break down a great deal. Quartstein et al. (1992) hypothesized that overall job satisfaction is a function of a combination of situational characteristics and situational occurrences. The findings of their study supported the hypothesis. According to the researchers, a combination of situational characteristics and situational occurrences can be a stronger predictor of overall job satisfaction than each factor by itself.
The hidden cost of Reward (21 repeat 3)
Direct relationship between pay satisfaction and job satisfaction
The relationship established between compensation and job satisfaction is determined largely through a process of social comparison theory. This model associates the use of incentives and the compensation system of an organisation with employee job satisfaction. Lawler (1971) formulated this theory as a subsidiary to discrepancy theory (Locke, 1976) and equity theory (Adams, 1965).
The link between compensation and job satisfaction can be largely described in the sense that a multi-dimensional view of pay satisfaction can be used as a surrogate measure of compensation (e.g., fixed pay, bonuses, benefits) (see Dyer & Theriault, 1976; Igalens & Roussel, 1999). This link is critical in the establishment of a relationship which sees a correlation between compensation and job satisfaction through several pay satisfaction measures. However, some prior studies such as Lawler (1971) provided a one dimensional view of this relationship, in the sense that only the individuals' flat compensation (that is, their set wage or salary) was taken into account.
The relationship between pay satisfaction, as a measure of compensation, is related to
overall job satisfaction (e.g., Cable and Judge, 1994; Oshagbemi and Hickson, 2003). The reason is that an individual's degree of satisfaction with their pay has the ability to increase the overall perceived level of job satisfaction for that individual. Researchers such as Smith, Kendall, & Hulin (1969) and Weiss, Dawis, England, & Lofquist (1967) state that several "conceptualizations and measurements of job satisfaction include pay satisfaction as a central element" (Judge, 1993). Pay is also noted as one of the five major determinants of job satisfaction in the Job Diagnostic Survey (JDS) (Kulik, Oldham and Langer, 1980).
As each of the determinants of pay satisfaction are related to a different aspect of the compensation package, Heneman and Schwab (1985) suggests that not all aspects will affect the measure of pay satisfaction to the same degree. For this reason the magnitude, or the extent of each compensation aspect is also of interest. Heneman and Schwab (1985) and Miceli and Lane (1991) provide support for the multidimensionality of pay satisfaction arguing that, "The multidimensional concept [represents major contributions] to research on interactions between compensation and job satisfaction…an individual can experience feelings of satisfaction in relation to various elements of compensation" (cited in Igalens and Roussel, 1999, p. 1007).
The structure and administration of compensation can also influence job satisfaction
(Dyer & Theriault, 1976). Understanding the pay criteria as well as performance measures used in any incentive compensation payments, increases an individual's satisfaction with both pay and the job as a whole. Additionally, Miceli and Lane (1991) concluded that compensation affects pay satisfaction in relation to how much influence the employees' manager has in the administration of an individual's pay level or bonus payment. Effectively, it was observed that the more influence a manager has in the administration of compensation, the more the perceived satisfaction of the individual. Morgeson, Campion and Maertz (2001, p. 135) reinforce the relationship between compensation and job satisfaction, they state, "because compensation decisions are particularly salient and important to employees, the pr
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