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Research methodology


Submitted to:-
Mr.Vishwas Chakranarayan

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MBA 193(LSM)

I feel immense pleasure to give the credit of my term paper not only to one individual as

this work is integrated effort of all those who are concerned with it. I want to owe my

thanks to all those individuals who guided me to move on the track.


I sincerely express my gratitude and lot of thanks to MR. VISHWAS

CHAKRANARAYAN for helping me in completing my Term paper and give me ideas

for doing my job and making it a great success.

I would like to express my deep sense of gratitude to staff of LOVELY SCHOOL OF

MANAGEMENT who introduced me to the subject and under whose guidance I am able

to complete my project














The efficiency wage theory predicts that higher levels of wages lead to higher levels of
productivity by employees. Expanding this to an ―efficiency compensation theory‖ as in
Meyer et al. (2001) implies that a well-constructed compensation package will enhance
productivity through attraction of higher levels of talent, increased effort, and reduced
turnover. In general, relative to companies with less-satisfactory compensation packages,
employees who are well-satisfied with their compensation package (and work
environment) should be expected to generate greater levels of productivity. The result for
shareholders, therefore, should be relatively higher levels of return. The purpose of my
study is to determine whether ―satisfied‖ employees–that is, employees who indicate
(collectively) that their company is an excellent one to work for, lead to increased wealth
for shareholders.

Employee satisfaction may arise from a number of sources including a high level of
wages, excellent company provided benefits (e.g., educational offerings/reimbursements,
health care, on-site childcare, counseling ser-vices, etc.), opportunities for within-
company mobility, and an innovative or creative work environment. Each of these
offerings is costly to the firm, however. Indeed, prior research has indicated that while
some policies may enhance shareholder wealth, others, at best, may not benefit
shareholders, and, in some instances may reduce share-holder wealth.

For example, Levine (1992) and Wadhwani and Wall (1992) find a positive correlation
between wages and productivity, implying greater levels of wages lead to enhanced
productivity. Jones and Murrell (2001) find that firms named to Working Mother
magazine‘s list of ―Americas Most Family-Friendly Companies‖ for the first time have a
positive and significant mean abnormal return during the announcement period. The
Working Mother criterions for inclusion are relative wages, advancement opportunities
for women, on-site childcare, and other family-friendly benefits. Thus, market
participants infer that these companies‟ employees are more productive than those in
other firms. Perry-Smith and Blum (2000) find that companies with greater levels of
family-friendly policies exhibit higher levels of product quality, increases in market
share, and increases in profits. On the other hand, Meyer, et al. (2001) find that, while
policies such as leave of absence to care for family members and adoption benefits
increase profitability, more common benefits such as on-site childcare and job sharing
negatively affect profits. Also, Filbeck (2001) finds a significantly negative mean
abnormal return to the announcement of inclusion on Mother Jones magazine‘s ―20
Better Places to Work.‖ This list includes companies that are environment-friendly,
provide innovative benefits, and have satisfied employees. Filbeck (2001) also finds that
these firms do not perform significantly better than a matched sample of firms in the
calendar year following the announcement.1 To further investigate the relation between
employee satisfaction and shareholder wealth, we examine the announcement effect and
post-announcement returns of a group of companies named to Fortune magazine‘s ―100
Best Companies to Work For‖ list for the years 1998-2000. Firms named to the 1998 list
are examined by Chan, Gee and Steiner (2000) over the year prior to the list
announcement. Using a variety of performance measures, they find that firms on the list
have better relative performance prior to the list announcement. In our study, we find no
evidence of abnormal returns surrounding the announcement of inclusion on the list.
Overall, during the year fol-lowing inclusion on the list, firms outperform matched firms
on average. Interestingly, however, this result holds only for those firms named to the
1999 list. In fact, further examination shows that only those firms that appear on both the
1998 and the 1999 list exhibit superior stock returns for the eleven months following
release of the 1999 list.

Interventions aimed at altering employee satisfaction with compensation systems take

many forms. In particular, job evaluation has become a popular method for determining
organizational compensation levels. The goal of this procedure is to develop an internally
consistent job hierarchy in order to achieve a pay structure acceptable to both
management and labor. One of the most common methods of conducting job evaluation
involves determining a set of compensable factors, numerically scaling them, assigning
weights in terms of their relative importance, and then applying them to a set of jobs
based on a job analysis. This process has been termed the point method of job evaluation.

A key, but often implicit, goal of this method is to enhance employee perceptions of pay
satisfaction and pay fairness. However, we could find no empirical studies documenting
this effect in the research literature. To address this deficiency, the present study
examines, in a quasi-experimental field study, the extent to which participation in the job
evaluation process during a compensation system implementation influences pay
satisfaction. To provide an understanding of why participation may influence pay
satisfaction, we briefly review the job evaluation and fairness and participation

Job Evaluation
Job evaluation is a ―generic term for a set of procedures that attempt to measure the
organizational value or worth of a job for the purpose of scientifically establishing wage
and salary rates‖ (Doverspike, Carlisi, Barrett, & Alexander, 1983, p. 476). While others
define job evaluation in slightly different ways, all focus on systematic procedures that
establish differences among jobs for the purpose of determining pay (e.g., Hahn &
Dipboye, 1988; Hornsby, Smith, & Gupta, 1994; McCormick, 1979; Milkovich & Cogill,
1984; Schwab, 1985). In addition to providing a measure of organizational worth, job
evaluation is also designed to gain agreement about a wage structure (Milkovich &
Cogill, 1984). That is, another focus of job evaluation is to ―rationalize and gain
acceptability‖ for the manner in which wages are distributed (Munson, 1963, p. 60). One
key index of the acceptability of a job evaluation system is pay satisfaction. As Carey
(1977) notes, ―if pay is to satisfy employees—and that is what salary administration is all
about—then each pay rate must be established with at least some consideration for the
views of the people in and around the job‖ (p. 32). As an outcome of the job evaluation
process, however, pay satisfaction has long been neglected in organizational research,
with most of the recent attention focused on pay satisfaction dimensionality and not its
determinants (e.g., Judge & Welbourne , 1994). Few studies have examined pay
satisfaction as a result of pay intervention and change programs (Hene- man, 1985). This
gap in the literature is unfortunate since understanding the determinants of pay
satisfaction may lead to improved compensation system design and implementation
(Gerhart & Milkovich, 1992).

Fairness and Participation

Because compensation decisions are particularly salient and important to employees, the
process by which they are made is likely to influence employee satisfaction. A number of
different strategies have been developed to minimize the negative consequences that
often accompany hierarchical decision making. One class of techniques utilize
participative decision making where employees become involved by participating in the
decision making process (Neuman, Edwards, & Raju, 1989). The psychological dynamics
that underlie these interventions can be understood within a procedural justice
framework. This perspective focuses on the procedures or processes used to make
decisions and their relative fairness (Folger & Greenberg, 1985; Greenberg, 1987,
1990a). It thus concerns how decisions are made. While different criteria of procedural
justice have been discussed (see Greenberg, 1990a, for an overview), all
conceptualizations include aspects of participation and involvement. These two elements
are critical to perceptions of fairness, particularly when allocation decisions are made
(Barrett-Howard & Tyler, 1986).

The potential importance of procedural fairness for compensation systems was noted by
Folger and Greenberg (1985), although they focused only on systems that either provide
information (open pay systems) or choice (cafeteria-style benefit plans). That is, they did
not discuss instances where individuals were actually involved in the process of changing
a compensation system. Milkovich and Newman (1993), however, suggest that the
manner in which a pay decision is made may be as important as the actual decision.
Support for this comes from research showing that perceptions of procedural justice
contribute significantly to pay satisfaction (Folger & Konovsky, 1989). It appears that the
opportunity to express one‘s opinion, regardless of actual influence over the decisions
made, enhances perceptions of procedural justice (Tyler, Rasinski, & Spodick, 1985), and
involvement in the process seems to satisfy the desire to have one‘s opinion considered.
As a result, including important stakeholders in the job evaluation process may increase
perceptions of fairness and pay satisfaction because it allows them to have a voice in the
design of the pay plan, even if they ultimately have little direct control over the final pay
levels assigned.
Objectives of the study

The objectives of the study are as follows –

1) To know the impact of wages paid to employees by their organizations on their

satisfaction level.

2) There is a need to understand how the workers react to the company‘s program
and policies of the organization.

3) The need of the organaization to know what are the various requirement and
expectation of the workers and various problems that the workers face in working
place .
4) The need of the organization to know the extent of dependability of employees on
monetary and non-monetary benefits.

5) One of the primary reasons for evaluating employee satisfaction is to identify

problems and try to resolve them before they impact on organization operations.
Literature Review

Job satisfaction describes how content an individual is with his or her job. The happier
people are within their job, the more satisfied they are said to be. Job satisfaction is not
the same as motivation, although it is clearly linked. Job design aims to enhance job
satisfaction and performance; methods include job rotation, job enlargement and job
enrichment. Other influences on satisfaction include the management style and culture,
employee involvement, empowerment and autonomous work groups. Job satisfaction is a
very important attribute which is frequently measured by organizations. The most
common way of measurement is the use of rating scales where employees report their
reactions to their jobs. Questions relate to rate of pay, work responsibilities, variety of
tasks, promotional opportunities the work itself and co-workers. Some questioners ask
yes or no questions while others ask to rate satisfaction on 1-5 scale (where 1 represents
"not at all satisfied" and 5 represents "extremely satisfied").The concept of job
satisfaction traditionally has been of great interest to social scientists concerned with the
problems of work in an industrial society. A number of consequences have been shown to
result from job satisfaction/dissatisfaction. Despite the large number of studies that have
dealt with these issues, however, there has been little accumulation of knowledge.

Job satisfaction has been defined as a pleasurable emotional state resulting from the
appraisal of one‘s job; an affective reaction to one‘s job; and an attitude towards one‘s

Job Satisfaction is the favorableness or un-favorableness with which the employee views
his work. It expresses the amount of agreement between one‘s expectation of the job and
the rewards that the job provides. Job Satisfaction is a part of life satisfaction. The nature
of one‘s environment of job is an important part of life as Job Satisfaction influences
one‘s general life satisfaction.

Job Satisfaction, thus, is the result of various attitudes possessed by an employee. In a

narrow sense, these attitudes are related to the job under condition with such specific
factors such as wages. Supervisors of employment, conditions of work, social relation on
the job, prompt settlement of grievances and fair treatment by employer. However, more
comprehensive approach requires that many factors are to be included before a complete
understanding of job satisfaction can be obtained. Such factors as employee‘s age, health
temperature, desire and level of aspiration should be considered. Further his family
relationship, Social status, recreational outlets, activity in the organizations etc. contribute
ultimately to job satisfaction.


Major specifics of what workers need in job satisfaction include self-esteem and identity.
A significant portion of job satisfaction often comes just from the sheer fact of being
employed. The compensation provided by the organization should be adequate so that
employees are satisfied and motivated and finally it will reflect on the performance of
their work. If work creates positive features about being employed, unemployment
almost invariably lowers self-worth. Genuine job satisfaction comes from a feeling of
security whereby one's performance is judged objectively by the quality of work
performance rather than artificial criteria such as being related to highly placed
executives or to relatives in the firm. Yet at the same time, monotonous jobs can almost
shatter a worker's initiative and enthusiasm. Employees have definite needs that they feel
are essential to activate as they spend their working hours and years expending their
efforts on behalf of their employers.


For the organization, high levels of job satisfaction of its workers strongly suggest a
workforce that is motivated and committed to high-quality performance. Increased
productivity—quantity and quality of output per hour worked—would seem to be almost
an automatic by-product of improved quality of workmanship. It is important to note,
however, that the literature on the relationship between job satisfaction and productivity
is neither conclusive nor consistent. Studies dating back to Frederick Herzberg's (1957)
have shown surprisingly only a low correlation between high morale and high
productivity. But this is contrary to easily formed logic that satisfied workers tend to add
more value to an organization. Unhappy employees, motivated by fear of job loss, will
give 100 percent of their effort for a while, but not for very long. Though fear is a
powerful motivator, it is also a temporary one. As soon the threat is lifted, the
performance declines.

Tangible ways in which job satisfaction benefits the organization include reduction in
complaints and grievances, absenteeism, turnover, and termination, as well as improved
punctuality and worker morale. Job satisfaction also appears to be linked to a healthier
workforce and has been found to be quite a good indicator of longevity. Although only
low correlation has been found between job satisfaction and productivity, some
employers have found that satisfying or "delighting" employees is a prerequisite to
satisfying or delighting customers, thus protecting the "bottom line." No wonder Andrew
Carnegie is quoted as saying: "Take away my people and soon grass will grow on the
factory floors. Take away my factories, but leave my people, and soon we will have a
new and better factory" (quoted in Brown, 1996, p. 123). Job satisfaction and
occupational success can result not only in job satisfaction but also in complete personal


Job satisfaction does not come automatically to business organizations. In a broad sense,
the job satisfaction program needs to exist and should have activities carefully designed
to achieve the intended job satisfaction goals. It must be an action program. And it should
be carefully monitored to ensure that changes are periodically made as needed.

Most large organizations now include human resource departments within their
management structure. At one time human resource departments were limited to handling
the acquisition of new workers. Today, however, many human resource programs take
the worthwhile initiative of helping to develop complete programs of personnel practices,
such as conducting research on current wage structures.

Most human resource departments learn about employees through interviews,

administration of insurance policies, study of legislation that deals with workers, and
participation in decisions that affect employees' jobs. These activities must be carefully
designed to concentrate in a positive manner on job satisfaction so that employees feel
that all the personnel activity is for their benefit.

A primary reason for the emergence of labor unions during the early 1920s was to
develop safety measures for working conditions and equipment. Throughout the years
labor unions appear to have played an uncertain role in achieving job satisfaction. In
some cases, employees join labor unions primarily because they are the only
organizations that bring health insurance benefits and increased legal benefits. Sometimes
union members get better vacation and retirement benefits than do nonunion members.


In exchange for job performance and commitment, an employer offers rewards to
employees. Adequate rewards and compensations potentially attract a quality work force,
maintain the satisfaction of existing employees, keep quality employees from leaving,
and motivate them in the workplace. A proper design of reward and compensation
systems requires careful review of the labor market, thorough analysis of jobs, and a
systematic study of pay structures.

There are a number of ways of classifying rewards. A commonly discussed dichotomy is

intrinsic versus extrinsic rewards. Intrinsic rewards are satisfactions one gets from the job
itself, such as a feeling of achievement, responsibility, or autonomy. Extrinsic rewards
include monetary compensation, promotion, and tangible benefits.

Compensation frequently refers to extrinsic, monetary rewards that employees receive in

exchange for their work. Usually, compensation is composed of the base wage or salary,
any incentives or bonuses, and other benefits. Base wage or salary is the hourly, weekly,
or monthly pay that employees receive. Incentives or bonuses are rewards offered in
addition to the base wage when employees achieve a high level of performance. Benefits
are rewards offered for being a member of the company and can include paid vacation,
health and life insurance, and retirement pension.

A company's compensation system must include policies, procedures, and rules that
provide clear and unambiguous determination and administration of employee
compensation. Otherwise, there can be confusion, diminished employee satisfaction, and
potentially costly litigation.

Models of job satisfaction

Affect Theory

Edwin A. Locke‘s Range of Affect Theory (1976) is arguably the most famous job
satisfaction model. The main premise of this theory is that satisfaction is determined by a
discrepancy between what one wants in a job and what one has in a job. Further, the
theory states that how much one values a given facet of work (e.g. the degree of
autonomy in a position) moderates how satisfied/dissatisfied one becomes when
expectations are/aren‘t met. When a person values a particular facet of a job, his
satisfaction is more greatly impacted both positively (when expectations are met) and
negatively (when expectations are not met), compared to one who doesn‘t value that
facet. To illustrate, if Employee A values autonomy in the workplace and Employee B is
indifferent about autonomy, then Employee A would be more satisfied in a position that
offers a high degree of autonomy and less satisfied in a position with little or no
autonomy compared to Employee B. This theory also states that too much of a particular
facet will produce stronger feelings of dissatisfaction the more a worker values that facet.

Dispositional Theory

Another well-known job satisfaction theory is the Dispositional Theory. It is a very

general theory that suggests that people have innate dispositions that cause them to have
tendencies toward a certain level of satisfaction, regardless of one‘s job. This approach
became a notable explanation of job satisfaction in light of evidence that job satisfaction
tends to be stable over time and across careers and jobs. Research also indicates that
identical twins have similar levels of job satisfaction.

A significant model that narrowed the scope of the Dispositional Theory was the Core
Self-evaluations Model, proposed by Timothy A. Judge in 1998. Judge argued that there
are four Core Self-evaluations that determine one‘s disposition towards job satisfaction:
self-esteem, general self-efficacy, locus of control, and neuroticism. This model states
that higher levels of self-esteem (the value one places on his/her self) and general self-
efficacy (the belief in one‘s own competence) lead to higher work satisfaction. Having an
internal locus of control (believing one has control over her/his own life, as opposed to
outside forces having control) leads to higher job satisfaction. Finally, lower levels of
neuroticism lead to higher job satisfaction.

Job Characteristics Model

Hackman & Oldham proposed the Job Characteristics Model, which is widely used as a
framework to study how particular job characteristics impact on job outcomes, including
job satisfaction. The model states that there are five core job characteristics (skill variety,
task identity, task significance, autonomy, and feedback) which impact three critical
psychological states (experienced meaningfulness, experienced responsibility for
outcomes, and knowledge of the actual results), in turn influencing work outcomes (job
satisfaction, absenteeism, work motivation, etc.). The five core job characteristics can be
combined to form a motivating potential score (MPS) for a job, which can be used as an
index of how likely a job is to affect an employee's attitudes and behavior ----. A meta-
analysis of studies that assess the framework of the model provides some support for the
validity of the JCM.

Measuring job satisfaction

There are many methods for measuring job satisfaction. By far, the most common
method for collecting data regarding job satisfaction is the Likert scale (named after
Rensis Likert). Other less common methods of for gauging job satisfaction include:
Yes/No questions, True/False questions, point systems, checklists, and forced choice
answers. This data is typically collected using an Enterprise Feedback Management
(EFM) system. The Job Descriptive Index (JDI), created by Smith, Kendall, & Hulin
(1969), is a specific questionnaire of job satisfaction that has been widely used. It
measures one‘s satisfaction in five facets: pay, promotions and promotion opportunities,
coworkers, supervision, and the work itself. The scale is simple, participants answer
either yes, no, or can‘t decide (indicated by ‗?‘) in response to whether given statements
accurately describe one‘s job.

· The work itself—responsibility, interest, and growth.

· Quality of supervision—technical help and social support.

· Relationships with co-workers—social harmony and respect.

· Promotion opportunities—chances for further advancement.

· Pay—adequacy of pay and perceived equity vis-à-vis others.

The Job in General Index is an overall measurement of job satisfaction. It is an

improvement to the Job Descriptive Index because the JDI focuses too much on
individual facets and not enough on work satisfaction in general. Other job satisfaction
questionnaires include: the Minnesota Satisfaction Questionnaire (MSQ), the Job
Satisfaction Survey (JSS), and the Faces Scale. The MSQ measures job satisfaction in 20
facets and has a long form with 100 questions (five items from each facet) and a short
form with 20 questions (one item from each facet). The JSS is a 36 item questionnaire
that measures nine facets of job satisfaction. Finally, the Faces Scale of job satisfaction,
one of the first scales used widely, measured overall job satisfaction with just one item
which participants respond to by choosing a face.


Argument: Satisfaction Causes Performance -If job satisfaction causes high levels of
performance, the message to managers is quite simple: To increase employees‘ work
performance, make them happy. Research, however, indicates that no simple and direct
link exists between individual job satisfaction at one point in time and work performance
at a later point. This conclusion is widely recognized among OB scholars, even though
some evidence suggests that the relationship holds better for professional or higher level
employees than for nonprofessionals or those at lower job levels. Job satisfaction alone is
not a consistent predictor of individual work performance.

Argument: Performance Causes Satisfaction: If high levels of performance cause job

satisfaction, the message to managers is quite different. Rather than focusing first on
peoples‘ job satisfaction, attention should be given to helping people achieve high
performance; job satisfaction would be expected to follow. Research indicates an
empirical relationship between individual performance measured at a certain time period
and later job satisfaction. A basic model of this relationship, based on the work of
Edward E.Lawler and Lyman Porter, maintains that performance accomplishment leads
to rewards that, in turn, lead to satisfaction. In this model rewards are intervening
variables; that is, they ―link‖ performance with later satisfaction. In addition, a moderator
variable—perceived equity of rewards—further affects the relationship. The moderator
indicates that performance will lead to satisfaction only if rewards are perceived as
equitable. If an individual feels that his or her performance is unfairly rewarded, the
performance–causes–satisfaction relationship will not hold.

Argument: Rewards Cause Both Satisfaction and Performance: This final argument
in the job satisfaction–performance controversy is the most compelling. It suggests that a
proper allocation of rewards can positively influence both performance and satisfaction.
The key word in the previous sentence is proper. Research indicates that people who
receive high rewards report higher job satisfaction. But research also indicates that
performance contingent rewards influence a person‘s work performance. In this case, the
size and value of the reward vary in proportion to the level of one‘s performance
accomplishment. Large rewards are given for high performance; small or no rewards are
given for low performance. And whereas giving low performer only small rewards
initially may lead to dissatisfaction, the expectation is that the individual will make
efforts to improve performance in order to obtain greater rewards in the future. The point
is that managers should consider satisfaction and performance as two separate but
interrelated work results that are affected by the allocation of rewards. Whereas job
satisfaction alone is not a good predictor of work performance, well-managed rewards
can have a positive influence on both satisfaction and performance.

Fair and adequate compensation is critical to motivating employees attracting high-
potential employees, and retaining competent employees. Compensation has to be fair
and equitable among all workers in the same company (internal equity). Internal equity
can be achieved when pay is proportionate to the individual employee's qualifications and
contributions to a company. On the other hand, compensation also has to be fair and
equitable in comparison to the external market (external equity). If a company pays its
employees below the market rate, it may lose competent employees. In determining
adequate pay for employees, a manager must consider the three major factors: the labor
market, the nature and scope of the job, and characteristics of the individual employee.

Potential employees are recruited from a certain geographic area—the labor market. The
actual boundary of a labor market varies depending on the type of job, company, and
industry. For example, an opening for a systems analyst at IBM may attract candidates
from across the country, whereas a secretarial position at an elementary school may
attract candidates only from the immediate local area of the school.

Pay for a job even within the same labor market may vary widely because of many
factors, such as the industry, type of job, cost of living, and location of the job.
Compensation managers must be aware of these differences. To help compensation
managers understand the market rate of labor, a compensation survey is conducted. A
compensation survey obtains data regarding what other firms pay for specific jobs or job
classes in a given geographic market. Large companies periodically conduct
compensation surveys and review their compensation system to assure external equity.
There are professional organizations that conduct compensation surveys and provide their
analysis to smaller companies for a fee.

Several factors are generally considered in evaluating the market rate of a job. They
include the cost of living of the area, union contracts, and broader economic conditions.
Urban or metropolitan areas generally have a higher cost of living than rural areas.
Usually, in calculating the real pay, a cost-of-living allowance (COLA) is added to the
base wage or salary. Cost-of-living indexes are published periodically in major business
journals. During an economically depressed period, the labor supply usually exceeds the
demand in the labor market, resulting in lower labor rates.

The characteristics of an individual employee are also important in determining

compensation. An individual's job qualifications, abilities and skills, prior experiences,
and even willingness to work in hardship conditions are determining factors. Within the
reasonable range of a market rate, companies offer additional compensation to attract and
retain competent employees.

In principle, compensation must be designed around the job, not the person. Person-based
pay frequently results in discriminatory practices, which violates Title VII of the Civil
Rights Act, and job-based compensation is the employer's most powerful defense in
court. For job-based compensation, management must conduct a systematic job
analysis, identifying and describing what is happening on the job. Each job must be
carefully examined to list the necessary tasks and actions, identify skills and abilities
required, and establish desirable behaviors for successful completion of the job.

With complete and comprehensive data about all the jobs, job analysts must conduct
systematic comparisons of them and determine their relative worth. Numerous techniques
have been developed for the analysis of relative worth, including the simple point
method, job classification method, job ranking method, and the factor comparison

Information resulting from the comprehensive job analysis will be used for establishing
pay or wage grades. Assume that twenty-five jobs range from 10 to 50 points in their job
scores based on the job point method. All twenty-five of these jobs are reviewed carefully
for their relative worth and plotted on Figure 1. The x-axis represents job points and the
ordinate (y-axis) represents relative worth or wage rates. Once a manager can identify fair
and realistic wages of two or more jobs, desirably top and bottom ones, then all the rest
can be prorated along the wage curve in the diagram.

In order to simplify the administration of a wage structure, similar jobs in the

approximate cluster are grouped together into a class or grade for pay purpose. Figure 2
shows how twenty-five jobs are grouped into five pay grades. Employees move up in
their pay within each grade, typically by seniority. Once a person hits the top pay in the
grade, he or she can only increase the pay by moving to a higher grade. Under certain
unusual circumstances, it is possible for an outstanding performer in a lower grade to be
paid more than a person at the bottom of the next-highest level.


As the market becomes more dynamic and competitive, companies are trying harder to
improve performance. Since companies cannot afford to continually increase wages by a
certain percentage, they are introducing many innovative compensation plans tied to
performance. Several of these plans are discussed in this section.

Incentive Compensation Plan

Incentive compensation pays proportionately to employee performance. Incentives are

typically given in addition to the base wage; they can be paid on the basis of individual,
group, or plant-wide performance. While individual incentive plans encourage
competition among employees, group or plant-wide incentive plans encourage
cooperation and direct the efforts of all employees toward achieving overall company
Skill-Based or Knowledge-Based Compensation

Skill-based pay is a system that pays employees based on the skills they possess or
master, not for the job they hold. Some managers believe that mastery of certain sets of
skills leads to higher productivity and therefore want their employees to master a series of
skill sets. As employees gain one skill and then another, their wage rate goes up until they
have mastered all the skills. Similar to skill-based pay is knowledge-based pay. While
skill-based pay evolved in the manufacturing sector, pay-for-knowledge developed in the
service sector (Henderson, 1997). For example, public school teachers with a bachelor's
degree receive the lowest rate of pay, those with a master's degree receive a higher rate,
and those with a doctorate receive the highest.

Team-Based Compensation

As many companies introduce team-based management practices such as self-managed

work teams, they begin to offer team-based pay. Recognizing the importance of close
cooperation and mutual development in a work group, companies want to encourage
employees to work as a team by offering pay based on the overall effectiveness of the

Performance-Based Compensation

In the traditional sense, pay is considered entitlement that employees deserve in exchange
for showing up at work and doing well enough to avoid being fired. While base pay is
given to employees regardless of performance, incentives and bonuses are extra rewards
given in appreciation of their extra efforts. Pay-for-performance is a new movement away
from this entitlement concept (Milkovich and Newman, 2005). A pay-for-performance
plan increases even the base pay—so-called merit increases—to reflect how highly
employees are rated on a performance evaluation. Other incentives and bonuses are
calculated based on this new merit pay, resulting in substantially more total dollars for
highly ranked employee performance. Frequently, employees also receive an end-of-year
lump sum bonus that does not build into base pay.
At the end of 2007, conducted its third annual survey of employee job
satisfaction and the factors that contribute to satisfaction and retention. The survey asked
questions of both employees and employers and yielded surprising and often conflicting

 Employers continue to underestimate employee‘s interest in actively searching for

new employment within the near future.
 Compensation is the most important factor for employees when choosing to leave a
job; it is less of a factor for why they stay in a job.
 When broken down by gender, attractive compensation is the top reason for
staying in a job for men, while women focus more on working relationships and
desirable working hours. A gender breakdown does not alter the results for why
employees leave a job.
 Although employers recognize the rising costs of replacing employees due to
turnover, they will only offer, on average, a 7% increase to entice a valued
employee to stay.

Employer Perception of Employee Satisfaction

Sixty percent of employers feel they are ―somewhat perceptive‖ and 24% feel they are
―highly perceptive‖ when assessing employee satisfaction, survey results reveal that
confidence is unwarranted.
Reality of Competitive Offers
►Fifty percent of employers believe a salary increase of 8-15% is enough to lure current
employees away.

►Thirty-eight percent of employees would need a competitive offer of 16- 30% to

consider moving to a different organization. Seventeen percent would expect 31% or

►Fifty-one percent of employers ―sometimes‖ make counter-offers; 14% ―almost

always‖ counter- offer; 35% never counter-offer.
Hypothesis is a proposition formulated for empirical testing; a tentative descriptive
statement that describes the relationship between two and more variables. Considering
the objectives of the study, the present scientific investigation will be conducted after
testing the hypothesis. It is important to note here that there is no clear cut information
available regarding the variables under consideration with regards to celebrity
endorsements. Since the present work is a pioneer (to the best knowledge of the
investigator) and so is of exploratory nature. It was considered better to frame null
hypothesis in which we assume ―0‖ amount of difference between the mean scores of two
variables. If the difference is sizeable, the null hypothesis is rejected; and if it is
attributable, it is accepted. The following null hypothesis will be considered for the

 There will be no influence of income on job satisfaction of employees.

 There will be no significant difference between low age groups of Employees in

terms of job satisfaction.

 High and low level of occupational stress will have equal effect on job Satisfaction
of employees.

 High and low level of organizational climate will have equal effect on job
satisfaction of managers

The present study is descriptive in nature. Such type of studies serves a variety of the
research objectives:-

1) Descriptions of phenomena or characteristics associated with a subject population (

who, what, when, where, and how of a topic).

2) Estimates of the proportions of a population that have these characteristics.

3) Discovery of associations among the different variables.

The simplest descriptive study concerns a uni-variate question or hypothesis in which we

ask about, or state something about, the size, form, distribution, or existence of a variable.

This type of study employs primary data collected by communicating with the
respondents through a structured questionnaire.


The basic idea of sampling is that by selecting some of the elements in a population, we
may draw conclusions about the entire population. A population element is the individual
participant or object on which the measurements are taken. It is the unit of study. While
an element is a person, it can just be easily be something else. A population is the total
collection of elements about which we wish to make inferences. We call the listing of all
population elements from which the sample will be drawn the sample frame.
1) WHY SAMPLE:- There are several compelling reasons for sampling including
which are as follows:-

a) Lower Cost:- the economic advantages of taking a sample is that the cost involved
is very low as compare to a census.

b) Greater Accuracy of Results:- The quality of the study is quite better with a
sample as compare to a census. The possibility of better interviewing (testing),
more thorough investigation of missing, wrong, or suspicious information, better
supervision, and better processing is possible with a complete coverage.

c) Greater Speed of Data Collection:- Sampling speed‘s of execution reduces the

time between the recognition of a need for information and the availability of that

d) Availability of Population Elements:- Some situations require sampling.

Sampling is also the only process possible if the population is infinite.


There are several questions to be answered in securing a sample. Each question requires
unique information. The various steps involved in the sampling design are as follows:-

1) What is the target population?

2) What are the parameters of interest?
3) What is the sampling frame?
4) What is the appropriate sampling method?
5) What size sample is needed?

1) What Is the Target Population?

The definition of the population may be apparent from the management problem or
the research question(s), but often it is not. There also may be confusion about
whether the population consists of individuals, households, or families, or a
combination of these. The present study deals in studying the effect of celebrity
endorsement in brand recalling, thus, the target population was selected as –

1) Service men.
2) Middle Class Workers.
3) Top Management Employees.
4) Employers of different Organizations.
5) Employees of different Organizations.

In context to the demographic factors that would be appropriate in choosing the target
population for the sampling design would be the population between the age of 20 to
25 years and 25 to 30 years. However, other age groups are also included in the
sample size and choosing as the target population.

2) What are the Parameters of Interest?

Population parameters are summary descriptors (e.g., incidence proportion rates, mean,
and variance) of variables of interest in the population. Sample statistics are descriptors
of those same relevant variables computed from the sample data. It is used as estimators
of population parameters. The sample statistics are the basis of our inferences about the
population. Depending on how measurement questions are framed, each may collect a
different level of data. Each different level of data also generates different sample
statistics. Thus choosing the parameters of interest will actually dictate the sample type
and sample size.

When the variables of interest in the study are measured on interval or ratio scales, we
use the sample mean to estimate the population mean and the sample standard deviation
to estimate the population standard deviation. When the variables of interest are
measured on nominal or ordinal scales, we use the sample proportion of incidence to
estimate the sample proportion and the pq to estimate the population variance.

3) What is the Sampling Frame?

The sampling frame is closely related to the population. It is the list of elements from
which the sample is actually drawn. Ideally it is a complete and correct list of population
members only. For this study on impact of wages on employee satisfaction, the total
number of members of population was 50. Out of the total members of the population 41
were male members and 9 were female members.

Often we have to accept a sampling frame that includes people or cases beyond those in
whom we are interested. We have to use a telephone directory to draw a sample of
business telephone numbers. Fortunately, this is easily resolved. We draw a sample from
a larger population and then use a screening procedure to eliminate those who are not
members of the group we wish to study.

4) What is the Appropriate Sampling Method?

The researcher faces a basic choice: a probability or non-probability sample. With a

probability sample, a researcher can make probability-based confidence estimates of
various parameters that cannot be made with non-probability samples. Choosing
probability techniques has several consequences. A researcher must follow appropriate
procedures so that:
1) Interviewers or others cannot modify the selection made.

2) Only the selected elements from the original sampling frame are included.

3) Substitutions are excluded expect as clearly specified and controlled according to

predetermined decision rules.

Despite all due care, the actual sample achieved will not match perfectly the sample that
is originally drawn. Some people will refuse to participate, and others will be difficult, if
not impossible to find. Thus no matter how careful we are in replacing those who refuse
or are never located, sampling error is likely to arise.

In order to select the sample for the study of celebrity endorsement and brand recall,
Non-probability convenient sampling was used. Non-probabilistic sampling is arbitrary
and subjective; when we choose subjectively, we usually do so with a pattern or scheme
in mind (e.g., only talking with young people or talking with women). Each member of
the population does not have a known chance of being included. With a subjective
approach like non-probability sampling, the probability of selecting population elements
is unknown. There a variety of ways to choose persons or cases to include in the sample.
Often we allow the choice of subjects to be made by field workers on the scene. When
this occurs, there is greater opportunity for bias to enter the sample selection procedure
and to distort the findings of the study. Also, we cannot estimate any range within which
to expect the population parameter.


Nonprobability samples that are unrestricted are called convenience samples. They are
the least reliable design but normally the cheapest and easiest to conduct. Researchers or
field workers have the freedom to choose whomever they find, thus the name
‗convenience‘. Examples include informal pools of friends, neighbors; people responding
to a newspaper‘s invitations for readers to state their positions on some public issue, a TV
reporter‘s ―person-on-the-street‖ intercept interviews, or the use of employees to evaluate
the taste of a new snack food.

While a convenience samples has no controls to ensure precision, it may still be a useful
procedure. Often we will take such sample to test ideas or even to gain ideas about a
subject of interest. In the early stages of exploratory research, when we are seeking
guidance, we might use this approach. The results may present evidence that is so
overwhelming that a more sophisticated sampling procedure is unnecessary.


We may use nonprobability sampling procedures because they satisfactorily meet the
sampling objectives. While a random sample will give us a true cross section of the
population, this may not be the objective of the research. If there is no desire or need to
generalize to a population parameter, then there is much less concern about whether the
sample fully reflects the population. Often researchers have more limited objectives.
They may be looking only for the range of conditions or for examples of dramatic
variations. This is especially true in exploratory research where one may wish to contact
only certain persons or cases that are clearly atypical.

Additional reasons for choosing nonprobability sampling over probability sampling are
cost and time. Probability sampling clearly calls for more planning and repeated
callbacks to ensure that each selected sample member is contacted. These activities are
expensive. Carefully controlled nonprobability sampling often seems to give acceptable
results, so the investigator may not even consider probability sampling. While probability
sampling may be superior in theory, there are breakdowns in its applications. Even
carefully stated random sampling procedures may be subject to careless application by
the people involved. Thus the ideal probability sampling may be a part of only partially
achieved because of the human element. It is also possible that nonprobability sampling
may be the only feasible alternative. The total population may not be available for study
in certain areas. At the scene of the major event, it is impossible to construct an attempt
the probability sample. A study of past correspondence between two companies must use
an arbitrary sample because the full correspondence is normally not available.

This research was conducted using a questionnaire designed to understand consumer‘s

views on product endorsement by celebrities, measuring their attractiveness, expertise
and trustworthiness. For the study, a questionnaire containing 20 statements was specially
constructed. Self designed and self administered questionnaire was used as the data
collection tool. The questionnaire included both combinations of close and open ended
questions. In the first question, respondents were asked to fill the name of a celebrity that
they prefer to see in advertisements. This was again an open ended question and
respondents were asked to recall the brand and write it. The next question was targeted at
understanding the effectiveness of wages in satisfying the employees. The responses were
collected on a three point likert scale. The last question aimed at understanding the
satisfied employees. Again, the responses were collected on a three point Likert scale (3-
strongly disagree; 1-strongly agree). Through the last part of the questionnaire,
demographic details of the respondents like gender, age, and occupation were collected.

Drafting or selecting questions begins once you develop a complete list of investigative
questions and decide on the collection processes to be used. The creation of a survey
question is not a haphazard or arbitrary process. It is exacting and requires paying
significant attention to detail and simultaneously addressing numerous issues. The order,
type, and wording of the measurement questions, the introduction, the instructions, the
transitions, and the closure in a quality communication instrument should accomplish the

a. Encourage each participant to provide accurate responses.

b. Encourage each participant to provide an adequate amount of information.

c. Discourage each participant from refusing to answer specific questions.

d. Discourage each participant from early discontinuation of participation.

e. Leave the participant with a positive attitude about survey participation.


Selecting a measurement scale and constructing it requires the consideration of several

factors that influence the reliability, validity, and practicality of the scale:-

1) research objectives

2) response types

3) data properties

4) number of dimensions

5) balanced or unbalanced

6) forced or unforced choices

7) number of scale points

8) rater errors


The likert scale is the most frequently used variation of the summated rating scale.
Summarized rating scales consists of statements that either express a favorable or an
unfavorable attitude toward the object of interest. The responses of the respondents for
the questionnaire of the celebrity endorsement were collected on a five point likert scale.
The respondents were asked to agree to disagree with each statement. Each response is
given a numerical score to reflect its degree of attitudinal favorableness, and the scores
may be summed to measure the participants overall attitudes. Summation is not necessary
and in some instances may actually be misleading, as our caution below clearly shows.
The likert scale has many advantages that account for its popularity. It is easy and quick
to construct. Conscientious researchers are careful that each item meets an empirical test
for discriminating ability between favorable and unfavorable attitudes. Likert scales are
probably more reliable and provide a greater volume of data than many other scales. The
scale provides interval data. The responses were collected on a three point scale. If a five
point scale is used, the maximum favorable score would be 20 (assuming 3 is assigned to
the strongly agree response and question 3, a negation, is reverse scored).

Preparing percentage analysis, two-way table and chi-squire test does the analysis of job
satisfaction, which is directly extracted from the questionnaire. The variations in the
extent of the consumer satisfaction can be measured with the variables such as job
secured, promotional opportunity, relationship with management, and satisfaction factors
of the respondents.

Calculation of Satisfactory Scores

The Respondents were asked to state their level of Satisfaction relating to twenty factors.
Based on their responses the Satisfaction score obtained by each respondent was found
out. Points or scores were allocated based on the response. For each of the factor three
levels of satisfaction were assigned namely high, medium and low. For high satisfaction
three points were given, for Medium two and for low satisfaction one point was given.

The total scores secured by each respondent were thus arrived at. All the hundred
respondents were classified based on their level of satisfaction. Those who have obtained
up to 13 points were classified under low satisfaction category, Respondents with 14 – 20
points were classified under medium satisfaction category and those with more than 21
points were classified under high satisfaction category.



High satisfaction
Medium satisfaction

Low satisfaction


The score secured by the respondents who falls between the score as up to 14 indicates
less satisfaction of the respondents, from 15 – 21 are got average satisfaction and 22 – 49
respondents are highly satisfied.


Age is an important factor that has an influence of job satisfaction. Hence according to
age levels the respondents are classified into three factors.



21 TO 30 11 22
31 TO 40 23 46
ABOVE 40 16 32
TOTAL 50 100
Majority of the respondents (22%) are in 21 to 30 years age group and 46% of the
respondents are above 30 years age group and 32% of the respondents are above 40
years age group.

There is as yet no consistent evidence as to whether women are more satisfied with their
job than men, bolding such factors as job and occupational level constant. One might
predict this to be the case. Considering the generally lower occupational aspiration of



MALE 41 82


TOTAL 50 100

Majority of the respondents (82%) are male and 18% of the respondents are female.
The marital status may influence the job satisfaction as a personal factor. Because the
married people has some unavoidable responsibility.


TOTAL 50 100

Majority of the respondents (62%) are unmarried and 38% of the respondents
are married.
The experience of the employees in their job is another factor affecting the perception on
job satisfaction. Highly experienced may expect better working acmaspear and having
less experienced satisfy with the existing one. The respondents are classified into three
categories according to their level of experience as under:


BELOW 5 23 46
5 TO 10 18 36
ABOVE 10 9 18
TOTAL 50 100

Majority of the respondents (46%) are below 5 years and 36% of the
respondents are 5 – 10 years and 18% of the respondents are above 10 years.
Man work to earn every employee in the organization will expect a correct pay to be paid

for the job done by him. The reasonable pay for each job which is performed in

the organization. This scale of pay may help for the job satisfaction to a greater extent.


3,000 TO 10,000 10 20
10,000 TO 20,000 18 36
20,000 TO 35,000 22 44
TOTAL 50 100


Majority of the respondents (44%) are Rs.20,000-35,000 and 36% of the respondents are
10,000 – 20,000 and the remaining 20% of the respondents are 3,000 – 10,000.

Relationship between Age and SATISFACTION

Level Of Satisfaction LEVEL OF



YOUNG 4 6 1 11

MIDDLE 10 12 1 23

OLD AGE 8 6 2 16

TOTAL 22 24 4 50


The above table reveals that the percentage of highly satisfied is in the old age group
(53%) and 50% of highly satisfied in the middle age group and followed by middle age
group. And in medium satisfaction 57% of highest percentage in middle age group and
followed by young age group & old age group with 52% of satisfaction. The highest
percentage of 50% in low satisfaction is in old age group.

Relationship between Gender and SATISFACTION

Level of Satisfaction LEVEL OF



MALE 22 17 4 43

FEMALE 3 3 1 7

TOTAL 25 20 5 50


From the above table the percentage of highly satisfied is in male group followed by the
female group. The percentage of medium satisfied is highest in male group.


Relationship Between SATISFACTION

Educational Status And Level Of
Satisfaction LEVEL OF



GRADUAT 20 18 4 42

P. 2 5 1 8

TOTAL 22 23 5 50

From the above table the percentage of highly satisfied is the graduate group. The
percentage of medium satisfied is highest among the respondents of graduate group.


Relationship Between Marital SATISFACTION

Status And Level Of Satisfaction



MARRIED 12 5 2 19

UNMARRI 11 18 2 31

TOTAL 23 23 4 50


The above table reveals that the percentage of highly satisfied is in unmarried group
followed by married group. And in medium satisfaction highest percentage is in married
group and followed by unmarried group.

Relationship Between Experience SATISFACTION

And Level Of Satisfaction



BELOW 5 9 12 2 23

5 TO 10 11 6 1 18

ABOVE 10 5 3 1 9

TOTAL 25 21 4 50


The above table reveals that the respondents from below 5 years group have derived
highest satisfaction. The percentage of medium satisfaction is high in the category of less
than 5 years group.


Relationship Between Monthly SATISFACTION

Salary And Level Of Satisfaction



3,000 TO 5 4 1 10

10,000 TO 9 8 1 18
20,000 TO 12 8 2 22

TOTAL 26 20 4 50


From the above table the percentage of highly satisfied respondents is more in the group
above Rs.20,000. It was followed by the groups Rs.20,000 – Rs.25,000. In medium
satisfaction the highest percentage is in Rs.10,000 – Rs.20,000 group.


Chi-square test is applied to test the goodness of fit, to verify the distribution of observed
data with assumed theoretical distribution. Therefore it is a measure to study the
divergence of actual and expected frequencies; Karl Pearson‘s has developed a method to
test the difference between the theoretical (hypothesis) & the observed value.

Chi – square test (X2) = (O – E)2 / E

Degrees Of Freedom = V = (R – 1) (C -1)


‗O‘ = Observed Frequency

‗E‘ = Expected Frequency

‗R‘ = Number of Rows

‗C‘ = Number of Columns

For all the chi-square test the table value has taken @ 5% level of significance.





Ho: There is E O-E (O-E)2 (O-E)2/E

no significant
between age
and level of

4 4.84 -0.84 0.7056 0.145

10 10.12 -0.12 0.0144 1.422

8 7.04 0.96 0.9216 0.131

6 5.28 0.72 0.5184 0.098

12 11.04 0.96 0.9216 0.083

6 7.68 -1.68 2.8224 0.367

1 0.88 0.12 0.0144 0.016

1 1.84 0.84 0.7056 0.383

2 1.28 0.72 0.5184 0.405

TOTAL 5.05

Degree of freedom - 4

Table value - 9.48

Calculated value - 5.05

INFERENCE: Since the calculated value is less than the table value. So the Null
hypothesis is accepted. Hence, there is no significant relationship between age and
level of satisfaction.



HO: There is E O-E (O-E)2 (O-E)2/E

no significant
and level of

9 11.50 -2.5 6.25 0.5434

11 9.00 2 4 0.4444

5 4.50 0.5 0.25 0.0555

12 9.66 2.34 5.4756 0.5668

6 7.56 -1.56 2.4336 0.3219

3 3.78 -0.78 0.6084 0.1609

2 1.84 0.16 0.0256 0.0139

1 1.44 -0.44 0.1936 0.1344

1 0.72 0.28 0.0784 0.1088

TOTAL 2.35



HO: There is E O-E (O-E)2 (O-E)2/E

no significant
income and
level of

5 5.20 -0.2 0.04 7.6923

9 9.36 -0.36 0.1296 0.0167

12 1.14 10.86 117.9396 103.4557

4 4.00 0 0 0

8 7.20 0.8 0.64 0.0888

8 8.80 -0.8 0.64 0.0727

1 0.80 0.2 0.04 0.05

1 1.44 -0.44 0.1936 0.1344

2 1.76 0.24 0.0576 0.0327

TOTAL 111.5433
The percentage table reveals that the majority of the respondents are belongs to
the group 21 years to 30 years of age. The two-way table shows that the high
satisfaction is derived by the old age group.

Chi-squire test indicates that there is no significant relationship between the age
and level of satisfaction.

From the percentage table the majority of the respondents are from the male
group. The two-way table says that the high level of satisfaction is obtained by the
male group.

Chi-squire test reveals that there is no relationship between the gender and the
level of satisfaction.

Educational qualification:
From the percentage table the majority of the respondents are in graduate level
educated group. The two-way table showing the high level of satisfaction is
derived by the graduate level group respondents.

The chi-squire test indicates that there is significant relationship between the
educational qualification and the level of satisfaction.

Marital status:
The percentage table shows that the majority of the respondents are unmarried. The
two-way table showing the high satisfaction is derived by the unmarried group.

The chi-squire test indicates that there is no significant relationship between the
marital status and the level of satisfaction.

From the percentage table majority of the respondents were in below 5 years of
experience. The two way table reveals that the high level of satisfaction is derived
by the below 5 years of experience.

Chi-squire test shows that there is no relationship between the experience and the
level of satisfaction.

Monthly income:
The percentage table indicates that the majority of the respondents are in Rs20,000
to Rs.25,000 salary group. The two-way table tells us the high satisfaction is
derived by the respondents who are in above Rs.20,000 group.

Chi-squire test reveals that there is significant relationship between the monthly
income and the level of satisfaction.

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