Incentive Pay, Benefits, Chevron:

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Running head: INCENTIVE PAY, BENEFITS, CHEVRON

Incentive Pay, Benefits, Chevron:
A Compensation Strategy that Motivates
Terra Pegram
Strayer University

Chevron at a Glance
With operations in more than 100 countries, more than 62,000 employees and 5,000 service stations, Chevron is one of the largest integrated energy companies in the world. The company operates across the entire supply chain, from exploration and production to refining, marketing, and transportation of an assortment of petroleum products – crude oil, natural gas, and coal (www.chevron.com). Chevron’s success is owed to a string of divestures, acquisitions and mergers dating back to the early 1980’s. In more recent years, policies to promote renewable energy have multiplied around the world. Both Secretary of State Hillary Clinton and President Barack Obama campaigned on renewable energy or the creation of green jobs as essential to their energy plans. Chevron has responded by investing in renewable and advanced technologies, such as non food based biofuels, hydrogen fuel systems, geothermal, solar and wind power protect and sustain the environment. These investments coupled with accusations of pollution create the need for environmental engineers to assist in the prevention, control and remediation of environmental health hazards. Motivation

Employers want employees to perform in ways that lead to better organizational performance (Milkovich & Newman, 2008, p. 256). According to Milkovich and Newman (2008), incentive pay and other rewards should be used to reinforce desired behavior, but compensation alone will not attract and retain top performing employees (p. 258). Improving motivation is the key to managers at Chevron attracting the best environmental engineers, retaining them and getting them to develop new skills in a rapidly changing environment/workplace and be more skillful and productive in doing so. Two theories in particular that are suggested by organizational theorist as instrumental to employee motivation are Maslow’s Hierarchy of Needs and the Equity Theory. Maslow’s Hierarchy of Needs

Maslow’s theory of motivation proposes that basic needs drive the behavior of people. These needs are structured like a pyramid or hierarchy with the basic needs on the bottom and the higher needs on the top. Once the lowest need, the physiological need for food, water, and air is satisfied, people are motivated by the higher needs –safety, social, esteem, and self actualization. This theory can be instrumental in determining what type of reward is most effective in motivating individual behavior because it gauges where an employee is in the hierarchy, thereby providing a way for managers at Chevron to tailor rewards to meet individual needs (Buhler, 2003, p. 21). However, employee needs are not stagnate, they change. Recognizing the employee’s position within the hierarchy and catering to it is the challenge for manager at Chevron. Equity Theory

According to the equity theory, employees are motivated when outcomes from a job (pay, prestige, benefits) and inputs to a job (effort, educational level, experience) are perceived as being equal. Employees compare these outcomes/inputs to other employees to determine equitability; consequently, this theory implies that both dissatisfaction and reduced performance will occur when employees perceive an over reward or under reward for his or her job performance (Kilduff & Baker, 1994, p. 59). Chevron’s use of broadbanding is one way to dispel perceived inequity because employees know pay grades and the salary ranges for positions within the company (Buhler, 2003, p. 22). Furthermore, in a broadbanding system, an employee receives incentive pay and rewards based on his or her own skills, competencies and/or job performance. Accordingly, high performing employees are paid for performance and can move to the top of a pay band faster.

A Compensation Strategy...
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