Dissertation > Economic > Economic planning and management > Enterprise economy > Enterprise planning and management decision - making > Corporate Administration > Personnel Management

Experimental Research on Employees’ Psychological Valence of Compensation Incentive

Author JiWenZe
Tutor FanZuo
School Shanghai Normal University
Course Applied Psychology
Keywords employee compensation incentive psychological valence prospecttheory
CLC F272.92
Type Master's thesis
Year 2013
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Compensation incentive is one of the most common means of incentive in human resource management, which can be defined as using compensation means to stimulate the employees to behave and work positively, actively and persistently towards the expectations of the organizations. Employee psychological valence of compensation incentive refers to the subjective evaluation of the compensation incentive measures carried out by the organization, main types of which are employees’ satisfaction, feelings, emotions, and the will of action.Each compensation provided by the organization is expected to be followed by an incentive result, whilst in practice there are situations in which employees on the contrary complain about the compensation (especially the bonus and welfare) they receive. A multitude of organizations are confused by this and much thought has been provoked. The present study, based on prospect theory, discussed a better way for organizations to make incentive design.This study used literature review method and experimental method,257business employees were involved in the experiment.Five paper situational simulations constitute the experiment research:1. Effects caused by different incidences of incentive.2. Effects caused by same amount of gain and loss.3. Effects caused by status quo references and non-status quo references.4. Effects caused by losses above or below quo references.5. Effects caused by different types of notification. Main findings follow:1. The same amount of reward presented in different ways will make different influences on the incentive effect. Employees will work harder for small probability events. 2. The psychological experience of pain caused by loss is stronger than that of the happiness caused by gain of equal value. Staffs are willing to work harder to avoid loss.3. Employees’ psychological valence will reduce when the amount of real reward is lower than the psychological reference point. In the process, status quo references play a more important role than non-status quo references do.4. The incentive effect of reducing the amount of award which has already increased is significantly lower than making the award at a stable level. The reducing can cause dissatisfaction of staff.5. When there are several types of salary, informing separately will increase staffs’ satisfaction with compensation.

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