Investigation of the development of enterprise compensation management
Abstract:Based on the needs of management practice, the theory of enterprise compensation management continues to develop with the development of management practice. These theories affect the changes of the basic concepts and basic risks of enterprise compensation management, and the rich and colorful management methods and management techniques reflect the essence of these theories. This paper divides the early factory system period to the modern salary management into four stages, and describes and analyzes the basic situation of enterprise compensation management at different stages, so as to grasp the basic context of the development process of compensation management, in order to understand the logical process of evolution, which is conducive to the guidance of the practice of compensation management in Chinese enterprises.
For more than a century, the issue of corporate compensation has been a hot issue in the field of economics and management. From the classical to the development of modern economics, the study of wages in the field of economics (economists are more accustomed to calling wages "wages" to reflect the meaning of labor **) has been quite systematic. Looking at all these wage theories, we can find that the basic premise of these theories is that the subject of wage acceptance is a "rational" economic man, and the various views deduced from this have penetrated into management activities and have a very wide impact on management behavior. However, from the perspective of management, the individuals in reality are not completely "rational" economic people, and the environmental factors in the management reality are also complex and changeable, and the wage system cannot be implemented so rationally. Based on the requirements of management practice, the theory of corporate compensation management has also continued to develop with the development of management practice. Although these theories are scattered in various management theories, they affect the changes in the basic concepts and styles of corporate compensation management. At the same time, the rich and colorful management methods and management techniques in reality reflect the essence of these theories. From the impact of the industrial revolution on the early factory system, to the full penetration of management reform by the network economy today, the compensation theory that guides the practice of enterprise compensation management is also evolving. Undoubtedly, it is of great significance to analyze the development of these compensation management theories and understand the logical process of their evolution for the practice of enterprise compensation management.
1. Changes in traditional payroll management.
Generally speaking, the transformation of traditional compensation management can be boiled down to three stages:
1 The Early Factory System Stage: The Idea of Reducing Wage Levels to a Minimum.
In the pre-industrial revolution, when workers were accustomed to family or rural life, did not like to be constrained by factory management, and their working hours were arbitrary, the biggest difficulty faced by factories was to cultivate "industrial habits". As one observer described, "If a man earns enough money to live for seven days in a four-day period, he will take those three days as a day of rest." In other words, he will live a splendour. (J Powell, 1772). Against this backdrop, mercantilist economics finds that "the relationship between income and the labor provided is inversely correlated, that is, when wages increase, workers prefer to spend their money and work when they need more money when they run out of money (a.).Wren). So, for a long time, employers believed that "the hungriest workers are the best workers." They lowered the wages of the workers as much as possible, kept them to a minimum, and made them just able to make ends meet, trying to "get the workers to spend their money as quickly as possible and then have to go back to the factories." "However, in order to attract skilled workers, these employers in turn have to provide them with a consistently high level of wages. As a result, employers have resorted to a variety of material stimulation methods in order to strike a balance between the two.
During this period, factory salaries were paid on a simple piece-rate basis under the family system. Wage incentives are widely used in labor-intensive factories, where labor costs account for a large proportion of total costs, and labor compensation is closely related to individual performance. At that time, some companies also adopted group piecework schemes. For example, most coal mines work in small groups. Since worker performance was measured on historically averaged hours rather than on research of the work itself and the time it should take to complete the task, "the piecework plans of the group, although developed in practice, were largely inefficient" (Pitch and Wren, 1992).
In order to give full play to the incentive effect of wages, a small number of management scholars have proposed profit-sharing plans as a supplement to fixed wages. For example, Babich's proposed profit-sharing plan includes two aspects: (1) part of the workers' wages will depend on the profits of the factory; (2) If the worker can make any suggestions for improvement, then he should receive another benefit, that is, the recommendation bonus. In addition to sharing the profits, workers receive a fixed salary according to the nature of the tasks they undertake. In this way, under the profit-sharing plan, the worker-work portfolio will take action to weed out undesirable workers who reduce their dividends (aWren). It should be said that in the process of the gradual maturity of the factory system, business owners have realized the status and role of remuneration in management.
2. Scientific management stage: salary policy around work standards and cost savings.
In the era of scientific management, the idea of "increasing productivity with high wages and reducing the unit cost of products" has been developed. The view at the time was that the best way to do this was to link labor remuneration to labor performance. Profit sharing encourages workers to produce more at a lower cost because they share in the profits.
Frederick. w.Frederick W Taylor disagreed with the profit-sharing scheme that was in place at the time, arguing that profit-sharing schemes did not promote the realization of individual ambitions, because all people participated in the sharing of profits, regardless of the size of their contributions. Moreover, according to the psychological principle of proximity to time, such a system is "too far away to be rewarded", and sharing profits at the end of the year does not motivate workers to do their best every day. In 1895, he proposed a differential piecework wage system against the "laziness" of workers as "a further measure to partially solve the problem of labor." The plan consists of three parts: (1) observation and analysis through working hours studies to determine the "wage rate", i.e., wage scale; (2) differential piecework wage system; (3) "Pay people instead of positions". Taylor argues that if differential piece-rate wages are introduced, once the standards of work are established, the differential piecework system can have two effects: it allows workers who do not meet the standards to receive only very low wage rates, while at the same time paying higher wages to those who do meet the standards (W. Lytle, 1942).
On this basis, Gantt invented the system of "bonuses for completing tasks" to achieve the purpose of encouraging workers to cooperate with each other, which could not be achieved by the Taylor system. According to this system, if a worker completes all the work assigned to him on a given day, he will receive a bonus of 50 cents per day. He suggested that workers who completed their tasks at or below the prescribed time should be paid a percentage of that time in addition to the prescribed remuneration (Gantt, 1916). In addition, Gantt took a colleague's advice: a worker who meets the standard gets a bonus for the foreman; If all the workers meet the standards, he also gets an additional bonus. Gantt argues that this extra bonus is given to the foreman in order to "bring the less capable workers up to the standard and to enable the foreman to devote his energies to those who need their help most" (Gantt, 1916). It can be said that this is the earliest expression of the remuneration incentive of managers.
At the same time, the profit-sharing plan is being revised and improved. In 1938, Joseph? f?Scanlon proposes a compensation plan for group incentives. At the time, his company, Lat Kok, was on the verge of bankruptcy. In consultation with Steelworkers' Union staff, Scanlon developed a union-management partnership to increase productivity, which offered bonuses to workers when they saved labor costs. This scheme saved the company from bankruptcy. At the heart of Scanlon's plan was the suggestion that the Planning and Production Committee should be the main body to seek ways and means to save labor costs. Individuals who make recommendations are not compensated, and the overarching principle of the entire scheme is to target groups. The emphasis is on collaboration and cooperation rather than competition, and the advice of any one person will benefit everyone. Factory-wide or company-wide remuneration is encouraged, and union-management collaboration is encouraged to reduce costs and share profits. The Scanlon Plan is unique in that (1) group remuneration is applied to proposals made; (2) the establishment of a joint committee to discuss and develop labor-saving technologies; (3) Workers share in cost savings, not increased profits.
It can be seen that this period completed a fundamental shift from the stimulus concept of "low salary" to "high salary". The idea that "the hungriest worker is the best worker" has gradually evolved to "the cheapest labor is the labor that is best paid; It is precisely because of the best-paid labor force that operates the machine that the maximum product relative to the capital input is guaranteed. (Atkinson). The prevailing view at the time was: if employers paid low wages, production would fall; However, if the workers are paid high wages, and when combined with machines, the output increases. In order to confirm this conclusion, Schöhenhofer compared the situation of different countries and found that the countries with the highest wages had the lowest costs (J Schöhenhof, 1893). At that time, the wages of Pittsburgh nail makers were 10 times that of their British counterparts, and the cost of nails in the former was only half that of the latter. In this way, the viewpoint of "high wages, low costs" is established in companies.
3 Behavioral Science Stage: A compensation system that adapts to the psychological needs of employees.
According to the interpersonal school of thought, "people at work are not much different from people in other areas of life." They are not thoroughly rational creatures. They have feelings. They like to feel important and make their work perceived as important. Sure, they're interested in their paybags, but that's not their main concern. Sometimes, they are more concerned about the relative importance of their salary that accurately reflects the different jobs they do. (Letlisberger, 1950). Therefore, some companies make different attempts to meet the psychological needs of individuals.
James? f?Lincoln tried and experimented with an experience-based approach. He argues that pride in work, self-reliance, and other time-tested virtues are disappearing, and that in order to properly address this issue, it is necessary to restore the "wise selfishness" of the individual. The main motivating factor for people is not money, security, but recognition of their skills. The Lincoln Program seeks to maximize the abilities of its employees, and then awards "bonuses" based on their contribution to the company's success. The results show that Lincoln Electric has no downtime and almost no employee turnover compared to the wage levels of other manufacturing workers in the Cleveland area, individual productivity is 5 times the average productivity of the entire manufacturing industry, average dividends per share have risen steadily, product ** has steadily declined, and workers' bonuses have remained high (F. Lincoln, 1951). Lincoln Electric's personal stimulus program has continued to be successful, and the business has continued to be successful. These practices are still highly regarded in the United States today (cHandlin, 1992).
Huaiyan? Williams was the first to propose the theory of wage equity. He argues that wages are relative from the worker's point of view, that is, what matters is not the absolute wages that a person receives, but the relative wages he receives. By the 60s of the 20th century, Elliott? Jacques (1961) with John? Stacy? The fair incentive theory of Adams et al. (1963) developed the idea that justice in the distribution of wages is the result of social comparisons. They argue that a person's perception of salary is based on at least two ratios: (1) the ratio of earned wages to others' wages; and (2) the ratio of their "inputs" (i.e., effort, education, skills, training, experience) to their "outputs" (salaries). As a result, they highlight the place of pay surveys in compensation decisions.
Looking at the whole process, in traditional compensation management thinking, the factors considered in pay policy tend to be multidimensional, and "the evidence shows that the effectiveness of the wage stimulus is so dependent on its relationship to other factors that it cannot be isolated as a separate factor to measure the effect" (Letlisberger and Dixon, 1939).
Second, the new development of modern payroll management.
The basic point of traditional compensation management is the efficiency of ordinary employees, and the payment of compensation is to reduce the degree of "laziness" of employees. In the 70s of the 20th century, the employee stock ownership movement in the United States lasted for nearly 10 years, and the idea that "employees can have company ownership" was gradually accepted by many enterprises. Especially after the theory of entrustment is proposed, the economics and management circles will use this idea to solve the problem of managerial remuneration, and propose to put the manager's remuneration with the performance of the enterprise, so that the manager can share part of the business risk, and strive to improve the business performance of the enterprise, so that the goals of the principal (enterprise owner) and the first person (enterprise manager) tend to be the same. In this way, the proportion of long-term remuneration linked to the value of the manager is increasing. After the 90s, the management community began to care about how to adapt compensation to new management changes, such as flexibility, team management, process reengineering, etc., which made the first option and employee stock ownership system more popular. In addition, starting from the broad meaning of salary, a relatively flexible new salary system is proposed.
The compensation management of this period emphasized the initiative, collaboration and innovation of employees, rather than the traditional constraints on "lazy" behavior. It is generally accepted that compensation is not simply a recognition and reward for employees' contributions, but should also be a concrete action plan for the transformation of a company's strategic goals and values, as well as a management process to support employees in implementing these actions (Thomas D Wilson, 1999). A large number of cases show that enterprises have begun to try variable compensation systems, tending to pay according to performance and competitive advantage, the concept of compensation has broken through the category of "money" and material, and indirect income (welfare) and some non-economic rewards (psychological income) are becoming more and more important in salary design. The main reason for this is that there is a new understanding of the needs of employees. Many employees value both pay and earnings, but also care about the work environment and development opportunities, and tend to think that they are working for themselves, regardless of the form of employment. As a result, in addition to various forms of revenue-sharing schemes, there have been some new changes to the compensation system.
1 Broadband remuneration system.
This kind of salary system will be the original remuneration of a number of positions are roughly classified, each category of remuneration is the same, so that the same level of salary personnel category increases, some subordinates can even enjoy the same salary and treatment as supervisors, the salary fluctuation range increases, the incentive effect is strengthened. Some scholars believe that this compensation model breaks through the connection between administrative positions and compensation, is conducive to the improvement of career development management, establishes a collective cohesion, and adapts to the objective reality that the promotion opportunities are reduced due to organizational flattening. Of course, due to operational problems, this compensation system continues to be tested in practice.
2 Skills- and performance-based compensation system.
Since the 90s of the 20th century, the skill wage system and revenue sharing system of Western enterprises have developed rapidly. As the American scholar Leiba? As Nils pointed out in a 1998 article, the response of U.S. companies to the independence of technical talent is to develop competitive compensation plans to compete with other companies and attract more talent. In order to adapt to the new environment, some companies have begun to change the traditional practice of determining compensation based on job title or work value, and adopt a compensation system based on "input" (including knowledge, skills and abilities) to encourage employees to consciously master new job skills and knowledge. This approach is adapted to the nature and characteristics of the knowledge economy. At the same time, in order to better motivate employees, a large number of enterprises have also adopted a performance-based revenue sharing compensation system. According to surveys, 70 percent of large firms in the United States have adopted this system (Milkovich and Newman, 1993), and many in the UK are improving and experimenting with performance-based compensation systems that offer bonuses and ** options to senior executives (Mickna and Bichy, 1995). The starting point of this policy is not only to reduce costs, but also to strengthen employees' sense of belonging and teamwork.
3 Generalized remuneration policy.
John E Tropman (1990) proposed a total compensation plan for customization and diversity. He proposed that basic salary, additional salary, welfare salary, work supplies subsidy, additional allowance, promotion opportunities, development opportunities, psychological income, quality of life and personal factors should be unified and considered as an overall compensation system. Moreover, this approach must be based on a "performance-based" compensation philosophy that balances investment and rewards to meet employees' requirements for non-cash compensation components. When this unconventional compensation model was first proposed, no company dared to try it, but it was later accepted by the "American Compensation Association" and gradually promoted. This shows that the role of non-monetary compensation is increasingly valued by Western companies.
3. Analysis of the development context of enterprise compensation management.
Here, we summarize the development process of corporate compensation management (see Table 1).
As can be seen from Table 1, the basic idea of enterprise compensation management is also adjusted with the different stages of enterprise development. However, the techniques and methods of compensation management are only a process of continuous improvement and development. For example, at the end of the 19th century, Babich proposed a profit-sharing plan; In 1938, Scanlon refined it to achieve the purpose of motivating his team; After the 70s of the 20th century, enterprises adopted the equity sharing plan linked to the best value to solve the problem of long-term incentives, and the use of employee stock ownership plans to strengthen employees' sense of belonging and identity, which is only the continuation and development of the original profit-sharing plan. These profit-sharing theories, based on the needs of managerial practice, predate economist Weizman's theory of the "sharing economy" (1985) by nearly a century. Therefore, in the field of compensation management, practice often precedes theory and promotes the continuous development of theory.
4. Inspiration and suggestions.
Due to the long-term influence of the planned economic system, most of the research on enterprise remuneration in China has a certain degree of administrative color. With the development of the market economy, in the face of new problems in the development of enterprise management, many scholars are also introducing foreign salary management methods, in order to change the original single management model. In this process, attention should be paid to the combination of theory and practice.
1. Strengthen the basic work of salary management.
Over the past 100 years, the payroll management of Western enterprises has undergone a process of change and development from rigid to flexible. Among them, the compensation system based on the determination of position and work value has always occupied a major position. This highly operational compensation model has played a huge role in the company's performance. The basic work that goes hand in hand with these strict and standardized systems is the condition why they can implement flexible management today, and it is an insurmountable stage in management. The reality of China's enterprises is that the basic work in this area is quite weak. Therefore, we must pay special attention to the basic work when carrying out various compensation system reforms.
2. Maintain the improvement and development of the original salary system.
We are aware that some of the compensation policies used by Chinese companies are in full swing in Western companies. For example, the skill level wage system for workers belongs to a "input" based salary model, which is more in line with the requirements of the knowledge economy for new technologies and new skills, but China is designing a new salary system to replace it. China's "work-efficiency linkage" system and their profit-sharing system are also "similar", but due to the problem of the main body of distribution, it has also fallen into a relatively difficult situation. At a time when Western enterprises are implementing generalized salaries, China is focusing on "welfare socialization". In the face of these problems, enterprises should be soberly aware of some "resemblance to god" phenomenon, and grasp the essence to improve and develop.
3 Pay attention to the real attention to people.
China's "people-oriented management" is quite mature in theory. However, in practice, respect and concern for people remain too much in words, and the content of principles has not been truly implemented. Compensation management is an indirect reflection of the perception of people and the improvement of work efficiency, and the business philosophy is often reflected in the details of each compensation decision. In reality, enterprises do not pay attention to people, and they are often exposed to unreasonable salary systems, which do not meet the basic requirements of modern enterprise systems.