Abstract

Compensation administration since its inception has been based upon a single-causation principle, money motivates people. From this principle it follows that the task of compensation administration is to determine the amount of money to be paid. Since compensation is the price paid for contribution to the organization, determining compensation consists of determining contribution. The compensation administrator assumed that, by closely watching the external labor market and by creating an internal labor market which closely matched the external labor market, he was measuring contribution and at the same time achieving equity and providing motivation. It is becoming apparent that the compensation administrator must be concerned with organization and job design, labor markets, equity, and several kinds of motivation. Also he can no longer limit his reaction to present conditions, but must continually search for the implications of changes in the future. First, he must recognize the accelerating pace of change in organizations. Second, compensation administrators must recognize that organizations, to be successful, must become more diverse rather than more similar.