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The Significance of Organizational Culture and Compensation in Achieving Strategic Objectives

Organizational culture and compensation are the two key elements that assist an organization in achieving the strategic objectives of the company. If the compensation system is not well aligned with the organizational culture, there can be severe consequences that can impact organizational goals. If the culture and compensation within an organization are well synchronized, it will act as an asset for the organization, thereby generating a significant amount of competitive advantage for the company. However, the compensation system needs to be designed properly in order to make sure it is positively affecting the organization's culture. There are various organizational culture and compensation strategies that an organization can use to achieve optimal performance for themselves. As stated by Madhani (2014), in his article that if employees within an organization is not well compensated, they will not act in adherence to the organizational goals, thereby affecting the long-term objectives of the organization.

If an organization offers below the market level compensation towards its employees, it will not be able to retain many employees. On the other hand, if an organization lacks a proper foundation towards its culture, goals, and beliefs, it will not be able to promote its core value towards the community (Allui & Sahni, 2016). Culture measures the behaviour of employees against the value of an organization which is essential towards the long-term success of an organization. The following section of the paper will denote the impact of organizational culture and compensation system on its growth.

Now it gets important to understand the specific link between the concept of compensation and company culture. Talking from a general perspective, compensation could be considered as a system that has the ability to reward individuals based on how well those individuals are able to fulfil the corporation's expectations. Also, this gets measured on the basis of performance, loyalty, level of cooperation, or something else. Now looking it from the theoretical lens, it needs to be stated that this system helps with the understanding of how closely an employee's behaviour aligns with the culture of the company. This behaviour includes factors such as practices, goals, and beliefs; in simple terms, these are the factors that create the foundation of a corporation's unique psychological and social environment. However, it has been stated by Ma, Mayfield & Mayfield (2018) that workers assume that they will be significantly rewarded for obeying the company's values and beliefs.

The Impact of Compensation on Employee Behavior

Quite to its opposite, it has also been identified that these employees will feel disappointed when the "reward system" (compensation) has not been properly aligned with that of their very own perception of the business's culture. CEO & Founder of Culture Amp, the world's leading Culture Analytics platform, Didier Elzinga, has stated in one of his interviews that "The way you choose to compensate people will shape your culture." He further particularizes on the topic, "It's bewildering to see companies that say their core value is collaboration, but pay bonuses based on individual performance. If collaboration is your core value, then it is counterintuitive to promote individual performance over group performance." (Cultureamp, 2022). This statement made by Didier enables us the understanding that the way in which the employees of the company get compensated has a huge connection with that of the culture that the company tends to exhibit. Fellnhofer (2017) has specifically mentioned in the article that one of the major drivers of success for a company is the culture that the company exhibits in the long run. Now the fact that the culture is directly connected to the way in which employees are compensated could only be proved with real-life examples. Under certain circumstances, it could be identified that, the employees are given much freedom to take risks, and the leadership concept connected to this is significantly entrepreneurial.

Based on the reports presented by to Franchise Times (2022), Chick-fil-A is one of the fastest-growing fast-food franchises, with more than 2,000 stores across the United States of America. Studies state that the primary reason that Chick Fil A thrives is based on the pleasant dining experience that the customers tend to value, which gets delivered from the restaurant. It has also been identified that this experience is the result of the top-down corporate culture of the company. Their consistency could be realized from the fact that Chick Fil A has reported sales growth in each and every year of their operations starting from 1946, the year when this privately owned company was founded (Gerhardt et al., 2015). Now, based on various aspects of the company, it has been identified that Chick Fil A cares about its employees. It has been already that very few individuals get a franchise; in simple words, the privilege of running a store and these store owners are encouraged to run the location with dedication, and it is important to have care and compassion towards their employees. It is important to mention that the franchisees have been identified to cover costs for an employee's education.

The Connection between Compensation and Company Culture

Adding to that, it has also been identified that the company support their employees during a personal emergency and also, at the same time, they encourage their employees to follow their dreams, even if while in the process, it will ultimately lead the worker to leave the chain (Taylor, 2020). Therefore, the connection between the compensation and culture could be realized when it could be seen that the company's culture of caring has directly translated into the way in which the employees treat their customers. The success of the company is evident based on the fact during the year 2018, and Chick Fil A was awarded America's most beloved fast-food restaurant in the American Customer Satisfaction Index's annual survey and that too for the third year in a row (Fornell et al., 2020). Based on the above discussion, the importance of the company culture in connection to the way in which the employees are being compensated plays a significant role in making an organization a huge success. Modern-day corporate leaders have already realized the importance of good company culture as they have realized the basics of business which simply implies if the employees of a company are happy, they will work to their utmost solution and provide the best possible service to the customers making the experience memorable for the customers. This amplifies brand recognition, and also, at the same time, this helps any given company to amplify their customer base and retain the existing customer base.

Now, it has also been identified that compensation should be considered as important as the other factors related to the hiring process. It could be identified that most of the companies tend to leverage compensation in attracting and hiring new staff (Keller, 2018). Based on that, it could be realized that organizations that tend offer their employees below-market rates could be identified that are more likely to miss out on top candidates. As those top candidates have a high chance of dismissing offers which is significantly not within their anticipated salary range. Major studies regarding this study have indicated the conclusion that most of the top establishments implement a substantial amount of compensation packages in order to attract the finest and brightest talent that has been present in the market. Therefore, the primary reason behind this approach could be realized that helps the readers to understand that compensation tends to make up 70.6% of an employer's costs in the United States (Foong et al., 2018). Based on this data, it could be analyzed that the ways in which the employees of the company are being compensated play a huge role.

Real-life Examples of a Strong Culture of Caring towards Employees Leading to Success

If any given organization misses out on all the top talents that are present in the market due to their low compensation structure, there are significantly high chances that the company would not be able to survive in the market for a significant amount of time. Also, employee engagement plays a huge role in deciding the future of the company. There are aspects that enable the readers with the understanding that if the employees are not properly compensated based on their job, it will finally create a gloomy state inside the organization. Finally, this will lead to significantly low employee engagement, and finally, this will result in the shutting down of the entire business process. That being said, it also needs to be highlighted is that money is not only the driving factor for a company. It is also important to highlight the fact that there are multiple factors related to employee engagement that money cannot buy or make up for. Those factors tend to include bad company culture or subpar everyday work experiences. Again a similar claim has been made by Didier Elzinga, Culture Amp's CEO that "As soon as you are paying people enough, compensation stops being a substantial driver of engagement. That is also due to the fact that individuals do not just crave money. Apart from that they also want feedback, opportunity, and visible career development. We have all seen people go to another job that has more of these things, despite offering the same or less pay." (Cultureamp, 2022). From this statement, it could be easily realized that compensation and organizational culture are deeply intertwined. Both the aspects are connected in way which dictates the future of any given organization in the long run.

Each organization has its own company culture. Now in this part of the paper, the four organizational culture archetypes will be presented, which will again help the readers with the understanding of the ways in which the whole thing functions.

Organizational Culture

The four primary archetypes have been presented in the above diagram and now it is important to talk about the different features that they entail:

Clan Culture: It could be identified that the organization which follows clan culture tends to follow that long term employee development and employee collaboration are the two most important principles (Huang, Ma & Wang, 2022). Also, it needs to be mentioned that in this particular culture, it could be seen that loyalty and group work are two most important high valued aspects that the company tends to follow.

The Importance of Compensation in Attracting and Hiring Top Talents

Adhocracy Culture: Companies that follow this type of culture are generally agile and innovative in their nature, and also, at the same time, they tend to exist in an environment that is significantly dynamic. It could also be identified that in this type of workplace, the employees are given much freedom to take risks, and the leadership concept connected to this is significantly entrepreneurial (Njagi, Nugget Kamau & Muraguri, 2020). However, it is important to mention that even if the concept of collaboration is reinvigorated in this type of organization but also at the same time, it could be seen that adhocracies might be given rewards depending on the innovation and the creativity.

Market Culture: In this particular type of culture, it could be easily identified that the given organizations become extremely focused on displacing all the relevant market rivals that are currently present in the market. Adding to that, it could also be seen that the employees are rewarded based on their personal achievement, and there is the presence of strong internal competition.

Hierarchy Culture: This kind of culture has the traits of bureaucratically-oriented and controlling behaviours. The goal of this type of organization are primarily focused towards making all the rule relevant in the system, and the employees are generally compensated based on the tenure of the employee and also at the same time based on their loyalty (To et al., 2020). The employees are not rewarded based on their current performance.

Based on the information that has been presented, it could be easily identified that all the cultures that have been classified are one way or the other connected to the concept of compensation. Now, it gets important to mention that there is no such way to select the best culture. Based on the observation, it could be stated that the best culture type is variable, and the way in which they tend to differ is primarily based on the kind of services that the company provides or the kind of products that the company produces. Apart from that, it has also been realized that the nexus between the concept of compensation and the organizational culture plays a significant role.

The future of any given company depends on these two factors, and therefore they should be given the maximum importance under any circumstances. It also needs to be stated that modern-day corporate leaders have already realized the importance of good company culture as they have realized the basics of business (Polnaya, Nirwanto & Triatmanto, 2018). If the employees of the company get treated in the right manner, they become significantly more productive. Therefore, it could be easily stated that culture measures the behaviour of employees against the value of an organization which is essential towards the long-term success of an organization.

Consequences of Offering Below-market Compensation Rates

On a concluding note, it could be said that the discussion that has been presented in this essay has been able to bring out certain aspects of this nexus. It could be realized that the most relevant and useful cultural model for any specific business completely rests on the fact that the kind of industry and the kind of product or services that the company is offering. Therefore, the exact right cultural model for business is completely subjective. This claim is being done based on the observation that has been made from this essay where it has identified that culture first companies come in all shapes and sizes. Therefore, to conclude, focusing on aligning the different aspects of the employee experience, which includes compensation, is the best way to reinforce the values as well as the behaviours that an employer wants to implement. Factors such as state of diversity, equity, and inclusion in the workplace become the most important aspect behind the success of a company, along with the ways in which the employees are being paid and promoted.

Lastly, this paper has been able to present the connection between the compensation and the culture of the company and also, at the same time, the paper has been able to present the discussion in a way that will help the readers to get a holistic idea of the entire concept. All the claims that have been made in this paper are backed with proper sources of information, and this information is collected from a viable source. Therefore, this essay will prove to be a major source of knowledge based on its reliability and the area of research it has been able to cover.

References

Allui, A., & Sahni, J. (2016). Strategic human resource management in higher education institutions: empirical evidence from Saudi. Procedia-Social and Behavioral Sciences, 235, 361-371.

Cultureamp. (2022). Aligning compensation to organizational culture | Culture Amp. Retrieved 20 March 2022, from https://www.cultureamp.com/blog/aligning-compensation-organizational-culture

Fellnhofer, K. (2017). Drivers of innovation success in sustainable businesses. Journal of Cleaner Production, 167, 1534-1545.

Foong, E., Vincent, N., Hecht, B., & Gerber, E. M. (2018). Women (still) ask for less: Gender differences in hourly rate in an online labor marketplace. Proceedings of the ACM on Human-Computer Interaction, 2(CSCW), 1-21.

Fornell, C., Morgeson III, F. V., Hult, G. T. M., & VanAmburg, D. (2020). The reign of the customer: customer-centric approaches to improving satisfaction. Springer Nature.

franchisetimes. (2022). Fast-food franchises. Retrieved 20 March 2022, from https://www.franchisetimes.com/top-200/chick-fil-a/

Gerhardt, S., Hazen, S., Lewis, S., & Hall, R. (2015). ENTREPRENEUR OPTIONS:" FRANCHISING" VS." LICENSING"(MCDONALD'S VS. STARBUCKS AND CHICK-FIL-A). ASBBS E-Journal, 11(1), 80.

Huang, L., Ma, M., & Wang, X. (2022). Clan culture and risk-taking of Chinese enterprises. China Economic Review, 101763.

Keller, J. R. (2018). Posting and slotting: How hiring processes shape the quality of hire and compensation in internal labor markets. Administrative Science Quarterly, 63(4), 848-878.

Ma, Q. K., Mayfield, M., & Mayfield, J. (2018). Keep them on-board! How organizations can develop employee embeddedness to increase employee retention. Development and Learning in Organizations: An International Journal.

Madhani, P. M. (2014). Aligning compensation systems with organization culture. Compensation & Benefits Review, 46(2), 103-115.

Njagi, A. W., Nugget Kamau, J., & Muraguri, C. W. (2020). Adhocracy Culture and Strategy Implementation: An Application within Professional Bodies in Kenya. International Journal of Business and Management, 15(9), 47-57.

Polnaya, I., Nirwanto, N., & Triatmanto, B. (2018). The evaluation of lecturer performance through soft skillls, organizational culture and compensation on private university of Ambon. Academy of Strategic Management Journal, 17(2), 1-9.

Taylor, B. D. (2020). An Examination of the Relationship Between the Relational Orientation of Leaders and Employee Engagement at Chick-Fil-A (Doctoral dissertation, Indiana Wesleyan University).

To, C., Leslie, L. M., Torelli, C. J., & Stoner, J. L. (2020). Culture and social hierarchy: Collectivism as a driver of the relationship between power and status. Organizational Behavior and Human Decision Processes, 157, 159-176.

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