Business owners are faced with the hard task of making decisions since the decisions have to be based on the objectives of the business for both effectiveness and profitability. As a result, every decision that is made with regards to the operations of any business ought to be precise, objective and valid. The validity of any decision made with regards to a business’s operations is based off facts about how such a decision influences the performance of that very business. Some of the decisions made within a business include financial decisions, structural decisions, strategic decisions, operational decisions as well as decisions regarding manpower. Regarding strategic decision making, a business can choose to provide an incentive in the form of monetary compensation in an effort to improve the quality and rate of their performance, which translates to business profitability. The aim of this essay, therefore, is to argue in favor of using incentives in the form of monetary compensation among employees of a business in an attempt to improve production.
There are numerous benefits of giving employees monetary compensations, thus the validity of making the decision to do so. Among the benefits is that 1. It is a seemingly straightforward way of influencing specific behaviors (Hameed, Ramzan, & Zubair, 2014). When a business wants to influence certain behavior among its employees such as improvement with regards to their quality of work, offering money as incentives is a viable decision. This is because offering employees money as an incentive, gives them a reason to adapt to the intended behavior, which in turn translates into profitability for the business. Benefit number 2. Monetary incentives help in boosting employee morale and facilitate the business’s retention of such employees. Employees like being recognized and rewarded for their contribution to a business through incentives such as monetary compensation (Hameed, Ramzan, & Zubair, 2014). When a business actively makes such a decision they are able to boost the morale of employees to work harder at their duties since they will be awarded for their hard work. Similarly, the decision to introduce monetary compensation for employees as an incentive enables a business to retain its employees by giving them a reason to continue working for the business. Employee retention and improved performance of their duties translate into better business productivity and profitability.
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Another benefit of making the decision to introduce monetary compensation as a form of incentive is 3. It improves employees’ attitude, as well as the atmosphere within which they are working. The idea of providing monetary compensations can help to change the attitude of employees from bad to good, which makes them perform better in their duties (Hameed, Ramzan, & Zubair, 2014). Similarly, a business that decides to compensate its employees creates a conducive working environment since the compensations are a guarantee that hard work will yield benefits. Overall, improved working atmosphere and the attitude of employees improves their performance, thus business productivity and profitability. Another benefit that is accrued from the decision to introduce monetary compensation as incentives is 4. It is an alternative to restriction on promotions and raises for top performing employees, thus maintaining steady and quality performance (Hameed, Ramzan, & Zubair, 2014). Some of the times the structure or operations of a business do not allow for promotion or raises among certain employees whose contributions are significant to that business. Therefore, by deciding to give them monetary compensation instead, such employees are appreciated for their contribution which fosters the spirit of continuing the good work.
The decision to compensate employees with money can 5. Often achieve short-term goals, such as increasing productivity, as well as reducing problematic behavior among employees. When employees have problematic behavior as a result of poor compensation and appreciation, this can negatively influence the performance and profitability of a business. Therefore, by offering the employees money as a form of compensation for improving their performance, this causes the reduction of problematic behavior (Hameed, Ramzan, & Zubair, 2014). Overall, increased performance and reduction of problematic behavior among employees improves the general performance and profitability of a business thus the validity of the decision to introduce incentives in the form of monetary compensation. The validity of the decision to introduce monetary compensation is due to the fact that 6. It introduces a fair working system within the business. Extra effort among employees should be tied to extra money for there to be a fair system within an organization or business. The idea of introducing monetary compensation achieves the fair system. This is because it prevents an unfair system, where all employees get paid the same irrespective of the effort each one put into their duties to achieve the general performance of the business. Therefore, the decision to introduce monetary compensation for effort demonstrated and work done will indeed improve the performance and profitability of that business.
However, there is another factor associated with the decision to introduce monetary compensation, that is not quite favorable, such as added financial responsibility for the business. This may cause a business to struggle financially to be able to uphold such as decision, which may negatively affect the performance of that business (Ehrenberg & Smith, 2016). Nonetheless, for a company that has properly planned and is financially stable, the decision to offer monetary compensation is an easy one and it has numerous benefits. Therefore, based on the benefits associated with monetary compensation as a form of incentive for excellent business performance and profitability, such a decision is indeed valid.
References
Ehrenberg, R. G., & Smith, R. S. (2016). Modern labor economics: Theory and public policy . Routledge.
Hameed, A., Ramzan, M., & Zubair, H. M. K. (2014). Impact of compensation on employee performance (empirical evidence from banking sector of Pakistan). International Journal of Business and Social Science , 5 (2).
