Theories Of Managerial Compensation

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In recent years, compensation researchers have challenged the notion that variation in wages can be accounted for solely by explanations derived from human capital and other conventional economic theories. Studies have found persistent inter-organizational differences in pay levels after controlling for employee human capital and factors such as industry and size. These findings support the notion that organizations possess a measure of discretion in setting compensation policies, resulting in variation in pay levels between similarly situated organizations. The nature of the factors influencing managerial compensation, however, is less well understood. Most research on managerial pay has focused on top executives, and has examined agency problems…show more content…
Managers have always asked questions such as "What is the right thing to do? Should we have a mechanistic or an organic structure? A functional or divisional structure? Wide or narrow spans of management? Tall or flat organizational structures? Simple or complex control and coordination mechanisms? Should we be centralized or decentralized? Should we use task or people oriented leadership styles? What motivational approaches and incentive programs should we use?" The contingency approach to management (also called the situational approach) assumes that there is no universal answer to such questions because organizations, people, and situations vary and change over time. Thus, the right thing to do depends on a complex variety of critical environmental and internal…show more content…
The HR practices and their effect on employee performance that right person may get right amount of reward, and how performance appraisal and compensation system affect employee‘s commitment to perform. Inadequately designed or badly managed appraisal systems will remain unsuccessful in assessing the right attitude to attain right performance. Moreover, HRM practices proved empirically effective when executed in bundle . Effectiveness of cross contextual generalizability and universality of HRM practices was confirmed to get sustainable performance for the organizations . Islam views performance appraisal as a virtuous activity to count reward against the effort rendered. The Qur‘an declares (39:3-5):―Not an atoms weight or less than that or greater escapes Him in the heavens or in the earth but it is in a clear record. That He may reward those who believe and do good works. For them are a provision and a rich provision. them are a provision and a rich

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