Reflection on Compensation Approach

Description of the Job (Construction Office Manager)

The construction office manager works for property development firms and completes responsibilities such as completing paperwork, processing invoices, coordinating subcontractors, maintaining the company database, collecting and managing expense data and even training new employees. Therefore, the job description for a construction manager entails planning, directing, organizing, evaluating, and controlling constructing projects.

Compensation Plan for a Construction Office Manager Based On Reinforcement, Expectancy, and Agency Theories: Advantages and Drawbacks

The reinforcement and expectancy theories apply an almost similar principle. The compensation plan aligned to the two theories is built on the notion that rewarding behaviors are more likely to be repeated. A reinforcement theory assumes that an employee would do similar thing or strive to produce the same result for a task the management acknowledged them once. Likewise, for the expectancy theory, the worker would be motivated to perform a particular job for which it is expected that the performance attracts a definite outcome or reward (Lazear, 2018). However, aligning compensation plan with reinforcement and expectancy theirs attracts potential advantages and drawbacks.

The advantage of positive reinforcement is that it motivates employees to work harder and more effectively. An employee is more likely to begin responding to reinforcement theory’s conditioning upon learning that excellent performance attracts pleasant consequences. When given a chance to repeat similar behavior, the worker will have more incentive to perform better due to the understating that they will receive a reward for the same (Lazear, 2018). Such incentives also boost the worker’s abilities and overall morale, leading to superior performance. Similarly, the expectancy theory also emphasizes rewards and incentives to increase performance. When the administration has a concrete grasp of expectancy theory’s fundamentals, they can use the model to assemble the best team to accomplish the company goals.

The potential negatives for reinforcement and expectancy theories are that they may not work in real-life without the manager’s active participation. For instance, both theories assume that all other elements are constant and known. However, organization leaders must strive to establish what the employee value as rewards. Again both the positive and negative reinforcement tends to be fixed, and employees must operate within the range, thus curbing creativity among the workers (Lazear, 2018). The reward system for the expectancy theory also follows a similar pattern.  

On the one hand, agency theory considers both the employer and the employee/workers as two stakeholders of the company. The employer acts as the principal while the latter as an agent, and compensation is the agency cost. The agency theory emphasizes the company’s stakeholders’ divergent goals and interests and how the worker remunerations can be used to align such goals and interests. The remuneration model aligns to agency also has its advantages and potential negatives. The advantage is that an employee will strive to produce a positive result or superior performance as the compensation or agency cost is decided based on the behavior of the employee or overall outcome (Banks, Woznyj, Kepes, Batchelor & McDaniel, 2018). The disadvantage of aligning compensation with agency theory is that manager/principal may make compensation decision that is not commensurate with the employee performance, hence generating conflict of interests, which may crumble performance. Delayed compensation may also demotivate employees and lower their morale to work

Difficulties in Administering the Plan

HR will face challenges when aligning compensation with reinforcement and expectancy theories, particularly when determining what the employee value as rewards. The employees may lose motivation to perform when the management choose rewards not perceived as valuable to them. Another challenge is that the plan requires close monitoring and active participation by the administration to assess the workers’ capabilities accurately, also known as expectancy and what they value as a reward (valence) (Lazear, 2018), and making available necessary resources to assist the workers to succeed in their roles. As for aligning the compensation with agency theory, the biggest challenge will be balancing the company’s interests and that of employees. In an ideal scenario, conflict always arises as management wants to pay lesser remuneration when employees, on the one hand, want more. 

References

Banks, G. C., Woznyj, H. M., Kepes, S., Batchelor, J. H., & McDaniel, M. A. (2018). A meta‐analytic review of tipping compensation practices: An agency theory perspective. Personnel Psychology, 71(3), 457-478.

Lazear, E. P. (2018). Compensation and Incentives in the Workplace. Journal of Economic Perspectives, 32(3), 195-214.