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The Phrase ‘competitive Environment' Refers Firstly To The Industry Sector ...


The phrase ‘competitive environment' refers firstly to the industry sector as a whole, in which an organisation competes against those operating in similar markets. In compensation issues, however, there is also a competitive environment where organisations both inside and outside the sector compete to attract senior staff: movement between sectors is widespread, and this presents a second competitive environment.
The term ‘incentives' refers to any factor that may be seen as influencing behaviour to try and achieve a specific goal. This would normally be seen as an attempt to motivate the individual towards achievement, but may also be focused on preventing detrimental behaviour.
‘Incentive' and ‘compensation' may be differentiated: ‘compensation' may refer to elements of reimbursement intended to motivate performance and also to providing a level of remuneration that merely functions to prevent dissatisfaction (‘hygiene' factor). This is discussed in more detail later, particularly in section 1.1.2. It will also become clear that factors widely perceived as having a ‘motivating' effect may actually be hygiene factors rather than motivators.

Objective
The objective of this study is to examine whether there is a ‘best practice' for compensating and incentivising senior staff. This will be done by looking at trends in compensation packages and attempts to incentivise senior management, Board level executives and CEOs in order to motivate them to aim for specific goals, typically a healthy share price. It will consider theories of motivation, typical personalities and leadership styles of senior executives along with psychological factors that may impact on behaviour in both positive or negative ways.

1Background
1.1Motivation theories
Motivation has been widely researched since the middle of the 20th century. The most frequent criticism of theories is probably oversimplicity, particularly given the range of variation in behaviour between individuals in what appear to be similar circumstances.
This section covers several key theories and explores their relevance to more senior staff.

Maslow
Maslow identifies five core needs of an individual, which he labels physiological, safety, love, esteem, and self-actualization (1943: 394). His theory is that the individual's focus moves through this list once previous needs are largely satisfied. For example, someone who does not have enough to eat (physiological need) will prioritise meeting that need ahead of requirements for social interaction (love needs).
For workers lower down the workplace hierarchy, with lower compensation, the lower needs are likely to be a focus.


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