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Eficiency of Compensation in Quality Management

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Meghdad Ahmadi MBA(critical review)

Efficiency of compensation and specifically stock option on increasing the

Productivity of work force as a means of change in quality


Production of an organization is the matter of concern to a lot of big companies and productivity is a function of technology and management and workforce and since the expense of workforce make up a great proportion of production cost any change in costs of workforce would lead to increasing the productivity of whole company in fact the workers's rate of efficiency work influences the outcome in an organization in fact the quality of workforce is really important and one of the factors by which the workforce could be affected is compensation system which is implemented by the management in any organization compensation could be defined as any praise which is received by employees on behalf of the management in turn for the employees contribution in achievement of the company.

Research objective

Indian companies have been chosen to be investigated in term of companies, efficiency of their ESOP since different sectors of Indian companies from telecommunication center to computer education and Manufacturing sector have been adopting ESOP and according to statistics there have been a remarkable rise in tendency toward this system in India.

Through this study, productivity of companies was measured based on their asset turnover ratio.

Asset turnover ratio is defined as the company's net sale divided by net assets which is evident

In the annual report which is presented to stock exchange every year.

Literature review

Compensation could be categorized in two ways as direct and indirect, direct would be referred to As receiving financial promotions and earnings, such as any kind of reward and stock option while indirect compensation could be referred to as transferring employees from one position to other position, but managers should always keep in their mind that their compensation strategies should be parallel with the industry standards .in fact they shouldn't take it to an extreme because in that way the expectations of employees would be increased dramatically and it would be very difficult to full fill their needs and there would be possibility of losing employees

Compensation could be implemented through different ways but one of the most effective ways with which employees get inspiration to work more actively is stock option.

Stock option is the chance of buying the shares of company that is offered to employees in fact by this process employees take themselves granted for the owners of company so the rate of their participation would be increased because they feel that their voice also functions in making decisions within the organization so employees do their best to come up with a better performance which leads to increasing the value of stock price

Based on previous studies which was carried out by (Janes and Kato, 1995) applying ESOP returned in 4.5 percent rise in productivity and It took four years to end up with this result based on former studies the rate of sales of accompany under ESOP system is 2/4 percent bigger than a non ESOP company. During former studies it had been evident that (Mehram,1992) the desire

Of employees in owner ship of company is affected by the companies leverage Ration .in fact

Small companies are not very likely to adopt such programs.

Based on studies done by (Rosen 1987) ,Equity owner ship results in enhancing productivity and in turn the firm would compensate employees with stock. based on studies which were done by Blasi(1999) employees ownership makes significant contribution on improving the qualification of employees since employees would be willing to receive training. one of the major problems which always have been challenging to firms and management is the employees resistance to receive and accept training but under ESOP employees consider training as a means of ncreasing their own profit so they would readily accept.

based on Blasi (1996) ESOP has negative effect on stock price in the way That usually employees will prefer to increase their short term profits instead of waiting for



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