English Composition/"Is Financial Compensation Beneficial Or Detrimental In An Empowerment Program ?" term paper 4140

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What is an Empowerment ? Basically empowerment means giving the employee the ability to do their work, i.e. through the right training, the right environment, the right information, the right tools and the authority that they need.

It is thought that by giving the employee increased power and responsibility that the employee will have increased motivation.

Organisations have developed a number of new programs in which it is hoped that employees will have empowerment and so increased motivation.

What is an Empowerment Program ? There are six different forms of empowerment programs.

i. Pay for Performance. This gives employees rewards in relation to their performance on the job.

ii. Gain Sharing. Employees are rewarded when performance targets are met.

iii. Employee Stock Ownership Plan (ESOP). Employees are given shares in the company and so co-own the company which allow them to share in the improved profit performance.

iv. Lump-Sum Bonuses. Rewards are given to employees in a lump sum based on performance.

v. Pay for Knowledge. When employees learn new skills they are rewarded. This leads employees to learn new skills and so become more flexable within a company.

vi. Flexible Work Schedules. Workers can set their own working times.


Motivation is a force which pushes a person to take a particular course of action, i.e. being motivated to go to school, to get something out of it, be it, to learn new things or just to get a good job out of it at the end which will bring high earnings.

A basic model of motivation is shown below:


This shows motivation in action, from the previous example we can show that the need is the desire to learn or to get a good job, the behavior is to go to college or university and then the reward is gaining knowledge or a good job.

There are two different types of reward ; intrinsic rewards and extrinsic rewards. Intrinsic are rewards gained in performing an action, i.e. feeling of accomplishment, and extrinsic are rewards given by another person, i.e. Money. In most cases extrinsic rewards are the reason that people go to work and so it can be said at this stage that financial rewards are beneficial in an empowerment program.

Motivation Theories

Maslow"s Hierarchy of Needs: This theory shows that humans are motivated by a series of needs which are in an hierarchical order, i.e.

1.Self Actualisation


2.Esteem Needs

3.Social Needs

4.Safety Needs

5.Physiological Needs

1. Self Actualisation is basically the feeling of self fulfilment, i.e. reaching your ambitions.

2. Esteem Needs is the respect of friends, family and people around you.

3. Social Needs are having friends and family around you.

4. Safety Needs. This is the feeling of having a safe environment around you, i.e. no threat of war, pollution, violence, etc.

5. Physiological Needs are having basic survival needs such as food, water, clothing and shelter.

Maslow states to progress to each level you must fulfil the levels below it and that the lower levels take priority.

McGregors Theory. This is the theory that there are two different types of worker, Theory X and Theory Y.

Theory X"s characteristics are that of a dislike for work, unambitious and works only for money.

Theory Y"s characteristics are that they enjoy their work, looks for promotions and is generally ambitious.

Financial compensation in an empowerment program works here for both workers because the Theory X workers that work only for money will work harder and become more motivated by the financial compensation. Theory Y workers will be motivated by the empowerment that they are given and will have the feeling of increased responsibility. The financial compensation here for Theory Y will be a bonus.

Taylor"s theory is that "People are like donkeys – put a carrot in front of a donkey and it walks, put money in front of a worker and they work".

If this is true then this theory basically shows that financial compensation can only be beneficial in an empowerment program.

Herzberg"s theory. Herzberg developed two factors, motivators in that workers were highly satisfied with their work, i.e. through gaining achievement, recognition, responsibility, the work itself and personal growth. The second factor is hygiene factors in which workers are dissatisfied with their work, i.e. working conditions, pay and security, company policies, supervisors and interpersonal relationships.

Herzberg states that improving hygiene factors does not act as motivation for workers, it just removes the job dissatisfaction. To increase motivation at work it is best to concentrate on the motivators.

This means that financial rewards are not beneficial in an empowerment program.

Process Theories look at how the employee chooses their behavior to suit their needs and determines whether their choice was successful or not. There are two process theories.

i) Equity Theory. This looks at how the employee feels they are being compared with the other workers around them.

ii) Expectancy Theory.. This theory looks at how the employee feels how well that they can do the job.

The reinforcement theory shows how the relationship between a behavior and its consequences. There are a number of tools that can be used within this theory:

Behavior modification : This is where the reinforcement theory is used to modify human behavior.

Positive reinforcement : The employee is immediately rewarded pleasantly following a desired behavior.

Avoidance learning : Employees look to avoid unpleasant consequences after a desired behavior.

Punishment : This normally happens after undesirable behavior and is the unpleasant outcome for an employee.

Extinction : This is getting rid of positive rewards. The employee sees that their behavior is no longer reinforced and so will happen less in the future.

Job Design. This is putting motivational theories to use and is thought to improve productivity and job satisfaction. There are usually three approaches to job design and are job simplification, job rotation, job enlargement and job enrichment.

Job Simplification is when efficiency is increased by reducing the number of processes that an employee has to go through, it allows the worker to concentrate on perhaps one task that they have been trained at. Job Simplification fails in motivation because the workers is likely to find it highly repetitive and boring doing exactly the same job over and over again.

Job Rotation. This is a process that moves employee from one different job to another and so increases the number of tasks that each employee does. It is thought that this works in motivation because the employee has a number of different tasks and is so stimulated by this.

Job Enlargement. This is when a number of different tasks are put together into one big job. This works as a motivational technique because the employee will feel that they have added responsibility through having a bigger job and so a greater challenge.

Job Enrichment relates back to Herzberg"s theories and has increased the motivators that he identified, i.e. job responsibility, recognition and opportunities for growth, learning and achievement.


From what I have looked at it shows that financial rewards are mainly beneficial in an empowerment program although I have encountered areas in which it could be detrimental, for example with Herzberg"s theory he states that with his two factors that workers have a set of motivators that it is best to concentrate on as this will lead to more job satisfaction and so improved motivation, of these motivators none of these were financial rewards. Improving financial rewards will lead to less job dissatisfaction and not job satisfaction or improved motivation for the work.

Taylor argues that workers are like donkeys and that money is the main motivation, this is because in the capitalistic world today money does make a lot of difference and as in Maslow"s hierarchy of needs to satisfy the lower levels of the needs, money does make the difference and employees will be influenced by the amount of money that they can have, it will leave them feeling secure.

Overall I feel that financial rewards can be very beneficial in an empowerment program and lead to job satisfaction which will lead to increased motivation from workers.


Management, Fourth Edition. Richard L. Daft.

Business Information Technology, Systems, Theories and Practise. Geoffrey Elliot and Susan Starkings.

The Practise of Management. Peter F. Drucker.

Information Systems – A Management Prospective, Second Edition. Stephen Alter.


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