CHAPTER 2 THEORETICAL FRAMEWORK

Transcription

1 CHAPTER 2 THEORETICAL FRAMEWORK 2.1 Risk Allowance In the everyday work life employees often received what is called a total compensation package. Total compensation package is usually classified into fixed pay, flexible pay, and benefits. In this classification, fixed pay is compensation where the amount and payment are guaranteed (base pay, seniority bonuses, etc.). The second component which is flexible pay includes variable pay and deferred income. Variable pay is compensation in which the amount is variable and/or its distribution is uncertain (gain-sharing, bonuses, incentives, goal-based pay, overtime, etc.). Deferred income are sums that are blocked for a given period of years before becoming available (company savings plans, employee stock ownership plans, etc.). The third component of total compensation regroups all the different kinds of benefits and is made up of four principal elements. The first comprises allowances and reimbursements for miscellaneous expenses concerning food, transportation, clothing, etc. The second consists of miscellaneous benefits and perquisites in the form of goods and services supplied at a reduced price, made available, or offered to employees (company housing, company car, private usage of telephone, public transportation passes, etc.). The third includes employee welfare programs and recreational opportunities concerning tickets for various entertainment events, Christmas presents family assistance, scholarships, etc. Finally, the fourth comprises complementary pension plans and health insurance cover paid for by the employer. Risk allowance is one of the parts that built benefit in workers total compensation package. In general it is a compensation paid for performing work involving particularly high-risk factors. A typical example is the cash-handling or money-handling allowance paid to employees who, by reason of their jobs involving paying out or collecting money,

2 are particularly exposed to the risk of error on their own part or fraud on the part of others. 2.2 Hazardous Environment Environmental hazard is the state of events which poses a threat to the surrounding natural environment and adversely affects people's health. This term incorporates topics like pollution and natural disasters such as storms and earthquakes. Hazards can be categorized in five types: 1. Chemical 2. Physical 3. Mechanical 4. Biological 5. Psychosocial 2.2 Job Satisfaction Job satisfaction has been defined in many ways possible by a lot of researchers. The most commonly used definition in today s would probably the description of Locke (1976) that defined job satisfaction as a pleasurable or positive emotional state resulting from the appraisal of one's job or job experience. According to study conduct by Timothy and Klinger, job satisfaction is a salient and perhaps inveterate attitude, permeating cognitive, affective, and behavioral aspects of peoples' work and non-work lives. These features accentuate the importance of job satisfaction as a construct worthy of attention in the organizational sciences as well as subjective well-being research more generally. The reciprocal nature of job attitudes and subjective well-being highlights the fact that a sound understanding of one domain is incomplete without due consideration of the other. (Timothy and Klinger, 393)

3 Several theories or model in determining job satisfaction in employees: 1. Job Characteristic Model The job characteristics model (JCM) argues that jobs that contain intrinsically motivating characteristics will lead to higher levels of job satisfaction (Hackman & Oldham, 1976). Five core job characteristics define an intrinsically motivating job: a) Task identity-degree to which one can see one's work from beginning to end b) Task significance-degree to which one's work is seen as important and significant; Skill variety-extent to which job allows one to do different tasks c) Autonomy-degree to which one has control and discretion over how to conduct one's job. d) Feedback-degree to which the work itself provides feedback for how one is performing the job. According to the theory, jobs that are enriched to provide these core characteristics are likely to be more satisfying and motivating than jobs that do not provide these characteristics. More specifically, it is proposed that the core job characteristics lead to three critical psychological states--experienced meaningfulness of the work, responsibility for outcomes, and knowledge of results-which, in turn, lead to outcomes such as job satisfaction. Initially a purely situational model, the JCM was modified by Hackman and Oldham (1976) to account for the fact that two employees may have the same job, experience the same job characteristics, and yet have different levels of job satisfaction. The concept of growth need strength (GNS), an employee's desire for personal development, was added as a moderator of the relationship between intrinsic job characteristics and job satisfaction. According to this interactional form of the model, intrinsic job characteristics are especially satisfying for

4 individuals who score high on GNS. Empirical evidence supports this position: The relationship between work characteristics and job satisfaction is stronger for high-gns employees (average r =.68) than for low-gns employees (average r =.38) (Frye, 1996) 2. Frederick Herzberg's two-factor theory, or as known as intrinsic/extrinsic motivation, concludes that certain factors in the workplace result in job satisfaction, but if absent, they don't lead to dissatisfaction but no satisfaction. He distinguished between: Motivators; (e.g. challenging work, recognition, responsibility) which give positive satisfaction, and Hygiene factors; (e.g. status, job security, salary and fringe benefits) that do not motivate if present, but, if absent, result in de-motivation. From the 3 theories we can see that the value-percept model expresses job satisfaction in terms of employees' values and job outcomes. But the flaw of this model is that its ignores influences from exogenous factors, such as costs of holding a job, or current and past social, economic, or organizational conditions external to the individual. From the Job Characteristics model and Herzberg's theory we can see how several aspects in job can affect job satisfaction of employees. Judge et al. (1998) showed that individuals with positive core self-evaluations perceived more intrinsic value in their work, and Judge, Bono, and Locke (2000) showed that core self-evaluations was related to the actual accomplishment of complex jobs. Because job complexity is related with intrinsic job characteristics this result shows that part of the reason individuals with positive core selfevaluations perceived more challenging jobs and reported higher levels of job satisfaction is that they actually have obtained more complex (and thus challenging and intrinsically enriching) jobs. By choosing this model as the theoretical framework to determine worker job satisfaction, it is to be expected to find a clear performance management in the workers place.

5 2.3 Work Motivation There are a lot of definitions of motivation but the most commonly used is that it is as a process that drives the individual to voluntarily produce effort in his work (e.g. Campbell and Pritchard, 1976; Graen, 1969; Lawler, 1964; Porter and Lawler, 1968, etc.). The general idea of motivation is basically to give something in order for specific action or certain behavior to take place. Motivation is present in every life function and can be anything from reward to coercion. Motivation is divided into two categories; intrinsic motivation and extrinsic motivation. Intrinsic motivation is internal or come from within. It occurs when people are required to do something out of pleasure, importance, or desire. Extrinsic motivation occurs when external factors require the person to do something. Howlett hierarchy of work motivators explained these two kinds of motivation in the form of hierarchy; Level 1: Salary, Benefits, Working conditions, Supervision, Policies of agency Level 2: Safety in the workplace, Job security Level 3: Affiliation, Interpersonal relationships Level 4: Recognition, Growth, Responsibility, Nature of job Level 5: Achievement, Advancement Level 1, level 2, and level 3 in this hierarchy are all externally motivated needs. When these needs are achieved, the person moves up to level four and then five. However, if levels 1 through 3 are not met, the person becomes dissatisfied with their job. When satisfaction is not found, the person becomes less productive and eventually quits or is fired. Level 4 and level 5 are internal motivators. They occur when the person motivates themselves (after external motivation needs are met.) An employer or leader that meets the needs on the "Howlett Hierarchy" will see motivated employees and see productivity increase.

6 Theories of management and work motivation distinguish between two kinds of rewards; extrinsic and intrinsic. Extrinsic rewards are ones such as money and verbal reinforcement which are mediated outside of the person, whereas intrinsic rewards are mediated within the person. We say a person is intrinsically motivated to perform an activity if there is no apparent reward except the activity itself or the feelings which result from the activity. Most theories of work motivation (e.g., Porter & LaMer, 1968) assume that the effects of two kinds of rewards (intrinsic and extrinsic) are independent, or additive. This suggests, therefore, that work should be structured to arouse intrinsic motivation and also that workers should be rewarded extrinsically (and contingently) for doing well. Deci has suggested a cognitive evaluation theory to explain the change in intrinsic motivation. It concentrates on a person's perception of why he is doing the activity. When he is intrinsically motivated, the perceived locus of causality (Heider, 1958) of that behavior is within himself. He is doing it because it provides him with some sort of internal satisfaction. However, when he performs the activity for external reinforcements such as money, he comes to perceive that he is doing it for the money. The perceived locus of causality changes from within him to the environment. Basically he evaluates that by doing this activity he will received external reward. In other words, the first process by which intrinsic motivation can be affected is a change in perceived locus of causality. On the other hand, Deci (1971, 1972) has reported that verbal reinforcements do not decrease intrinsic motivation; in fact, they appear to enhance it. In the Deci (1971), the experimental subjects were rewarded with verbal statements such as, "That's very good, it's the fastest anyone has solved this one," each time they solved a puzzle. The control group received no rewards. The results indicated that subjects who received verbal rewards were more intrinsically motivated following that experience than subjects who received no rewards. Hence, the verbal reinforcements strengthen his intrinsic motivation because they provide additional positive value which becomes associated with the activity; so the subject is more likely to perform the activity in the absence of external

7 rewards. According to the cognitive evaluation theory then, the second process by which intrinsic motivation can be affected is that of feedback. Positive feedback increases the total positive value properties (Koch, 1956) associated with the activity by strengthening the person's sense of competence and self-determination. This makes him more intrinsically motivated to perform the activity. In building their study in finding the relationship between compensation, work motivation and job satisfaction, Jacques Igalens and Patrice Roussel (1999) use expectancy theory model as their theoretical framework in order to allows them to find a better differentiation between the concepts of work motivation and job satisfaction compared to other possible approaches such as need, intrinsic motivation, equity, or goal setting theories. Furthermore, they stated that expectancy theory clearly indicates the attitudinal factors which, during the motivational process, drive the individual to produce effort to perform better. 2.4 The Interaction between Risk Allowance, Work Motivation, and Job Satisfaction There are no particular/specific studies that already done the interaction between risk allowance with work motivation and job satisfaction. That is why the theoretical framework is concentrating more on a big picture of total compensation (that include benefit as part of the risk allowance) relation respectively with both of the variables. There are already a lot of studies in finding the relationship between total compensation, work motivation, and job satisfaction. One of them is the study by Jacques Igalens and Patrice Roussel (1999). In this research they make several conclusions, which are: 1. Fixed pay can have a positive influence on job satisfaction. In fact, the more employees are satisfied with the internal equity of their fixed pay, the more then tend to be satisfied with their job. Similarly, the more employees are satisfied with the external equity of their fixed pay, the more they tend to be satisfied with their job. These results suggest a high expectancy on the part of employees for

8 individualized compensation based on fixed pay and the recognition of their contributions to the company. 2. Flexible pay (variable pay and deferred income) neither motivates nor increases job satisfaction. An employee can experience feelings of satisfaction with regard to gain-sharing dividends or a bonus without the increasing of job satisfaction. 3. Benefits neither motivate nor increase job satisfaction. Benefits include allowances and reimbursements for miscellaneous expenses, miscellaneous benefits and perquisites, employee welfare programs and recreational opportunities, complementary pension plans and insurance cover. They make this conclusion because they see that benefits have little influence on job satisfaction. There is actually a positive and significant, but weak relation between benefit satisfaction and job satisfaction. Employees who are attracted or motivated by this form of compensation seem to seek the satisfaction of a need for comfort or security. They are more satisfied with their job if it offers benefits that correspond to their expectations, but their motivation to perform will not be increased. J. Igalens and P. Roussel (1999) also build a model for their theoretical framework. They analyze job satisfaction and work motivation using expectancies model and discrepancy theory. They only examined the relations between perceptual variables. To get to the employee motivation and job satisfaction they built a model like shown below.

9 Figure II-1 J.Igalens and P.Roussel Model The first results from the way in which they set out their hypotheses on the efficiency of compensation in relation to satisfaction and to motivation. Thus in each case, they examine whether a first field of perceptions has an influence on the second. If pay satisfaction has an influence on job satisfaction, and if being incited by compensation actually increases motivation to perform at work, then the compensation, or one or other component of the compensation, is efficient. Another theoretical framework in order to determine this interaction is the big picture of job performance that is represent by Behavior = f (M, A, E). This motivation triangle model as shown below simply said that in order to motivate employee to establish a certain behavior, compensation cannot do it alone. It needs to back up by culture and performance management of the company.

10 Figure II-2 The Triangle Model 2.6 Discriminant Analysis Discriminant analysis is a statistical method that is used by researchers to help them understand the relationship between a "dependent variable" and one or more "independent variables." A dependent variable is the variable that a researcher is trying to explain or predict from the values of the independent variables. Discriminant analysis is similar to regression analysis and analysis of variance (ANOVA). The principal difference between discriminant analysis and the other two methods is with regard to the nature of the dependent variable. Discriminant analysis requires the researcher to have measures of the dependent variable and all of the independent variables for a large number of cases. In regression analysis and ANOVA, the dependent variable must be a "continuous variable." A numeric variable indicates the degree to which a subject possesses some characteristic, so that the

11 higher the value of the variable, the greater the level of the characteristic. A good example of a continuous variable is a person's income. In discriminant analysis, the dependent variable must be a "categorical variable." The values of a categorical variable serve only to name groups and do not necessarily indicate the degree to which some characteristic is present. The categories must be mutually exclusive; that is, a subject can belong to one and only one of the groups indicated by the categorical variable. While a categorical variable must have at least two values, it may have numerous values. As the mathematical methods used in discriminant analysis are complex, they are described here only in general terms. There are two basic steps in discriminant analysis. The first involves estimating coefficients, or weighting factors, that can be applied to the known characteristics of the independent variables. Second, this information can then be used to develop a decision rule that specifies some cut-off value. There are various tests of significance that can be used in discriminant analysis. One widely used test statistic is based on Wilks lambda, which provides an assessment of the discriminating power of the function derived from the analysis. If this value is found to be statistically significant, then the set of independent variables can be assumed to differentiate between the groups of the categorical variable. This test, which is analogous to the F-ratio test in ANOVA and regression, is useful in evaluating the overall adequacy of the analysis. Once the analysis is completed, the discriminant function coefficients can be used to assess the contributions of the various independent variables to the tendency of an employee to be a high performer. The discriminant function coefficients are analogous regression coefficients and they range between values of -1.0 and 1.0. The discriminant function is treated as a standardized variable, so it has a mean of zero and a standard deviation of one. The average values of the discriminant function scores are meaningful only in that they help us interpret the coefficients. The magnitudes of the coefficients also tell us something about the relative contributions of the independent variables. The closer

12 the value of a coefficient is to zero, the weaker it is as a predictor of the dependent variable. On the other hand, the closer the value of a coefficient is to either 1.0 or -1.0, the stronger it is as a predictor of the dependent variable. The second step in discriminant analysis involves predicting to which group in the dependent variable a particular case belongs. A subject's discriminant score can be translated into a probability of being in a particular group by means of Bayes Rule. Separate probabilities are computed for each group and the subject is assigned to the group with the highest probability. Another test of the adequacy of a model is the degree to which known cases are correctly classified.