Business Research Project

Question:

ASSIGNMENT: Research Project, Organizational Behavior

The paper should be (20) pages or more of research findings, typed and double-spaced. All references must be cited in a bibliography and in the paper. 

The paper will be graded based on its substantive content as it relates to contemporary management issues, evidence of reading and research, style and grammar. 

Research Topic Ideas: (UAE Company as case study)
� Motivation and Reward Systems used in today�s companies
� Employee Benefit and Education Programs
� Employee Performance and Evaluation Systems
� Managing a Diverse Workforce
� How to handle stress 
� Participative Management Programs
� Conflict and negotiation
� Organization change and learning
� Group and team behavior

� Other: Topic of choice but prior approval from professor

Research papers will include the following elements: 

1. The paper will use 3-7 references that are published books, peer-reviewed journal articles, and/or peer-reviewed journal articles found on the Internet. Not appropriate for these sources are newspaper articles, articles from popular magazines, interviews, or non-referred Internet sources. There may be additional sources exclusive of the 15 which fall in other categories. 

2. Follow these directions exactly:
a. Page 1�title page (no page number)
b. Page 2�abstract (no page number)
c. Page 3�table of contents (no page number)
d. Page 4�introduction to paper (page number 1)

3. The paper will have 5 sections:
a. Introduction�outlines purpose of the paper and present hypothesis of paper.
b. Literature Review�reviews the theories, theorists, models, or principles that are connected to the topic of the paper.
c. Analyses�compare and contrast of the theories, principles, or models that are presented in Literature Review.
d. Conclusion�relevant information to serve as a conclusion of the paper
Reference List�only those articles sited in the paper are to be listed.
The important part of this assignment is presentation (abstract of the research topic).

Answer:

Title: Employee Benefit and Education Programs

Abstract

Employee benefit and education programs play a critical role in every organization. They motivate employees to make greater contributions to organizational objectives. At the same time the employees benefit from professional development. This paper contains three main parts. The first part is the literature review. In this part, various theories, models, and principles relating to employee benefit and education programs are discussed. The second part is the analysis. In this part, the theories, models, and principles are analyzed through comparisons and contrasts.  Moreover, the case study of the UAE-based Ajman Bank is presented. This analysis is the basis of the conclusions, which constitute the third part of the paper.

The most dominant model in this paper is that of distributive and procedural justice. On the other hand, equity theory is the most dominant framework. It is also the theory with the most comprehensive explanation on how to measure distributive justice, to determine when employees perceive inequalities in benefits, the responses that they consequently make, and the best corrective measures that employers can use in such situations. The paper found out that today, scholars are focusing more on distributive justice in their discussions on employee benefits and their relevance in organizations. Moreover, many organizations are abandoning traditional benefit plans in favor of flexible employee benefit programs. In conclusion, organizations have to adopt employee programs in order to provide them with the much-needed motivation that is necessary for organizational productivity to be improved.

Contents

Abstract 2

Introduction. 4

Literature review.. 5

Analysis. 15

The case study Ajman Bank. 17

Conclusion. 22

References. 24

Introduction

Employee benefit programs are aimed at promoting economic security among employees by insuring them against uncertain events in life. They are also aimed at raising their living standards through the provision of various targeted services. These programs are also important in contributing to economic stability in the society by securing the welfare and incomes of entire families. In many countries, employee benefit systems succeed through partnerships between individuals, businesses, and the government. Examples of such systems include health insurance and pension schemes.

On the other hand, employee education programs are aimed at enabling employees achieve professional growth while at the same time bringing about greater job satisfaction. Through these education programs, employees are able to access higher education. Without such programs, it may be very difficult for the employees to pursue further studies given that the cost of higher education is rapidly increasing.

Moreover, the demand for highly skilled workers continues to increase. For many organizations, there are numerous benefits to be achieved through the introduction of education programs for employees. Through such programs, the employees are able to access the skills needed for increased performance and professional growth in today’s highly dynamic work environment.

 This paper investigates the role played by employee benefit and education programs in an organization. The thesis of this paper is that any organization that has not put in place employee benefit and education programs will find it hard to survive in today’s highly competitive work environment. First, the paper focuses on literature review, in which case attention is on the theories, models, and principles that are connected to the debate on employee benefit and education programs. In the second part, an analysis is presented, and the paper compares and contrasts theories, models, and principles discussed in the literature review. On the basis of this analysis, conclusions are made.

Literature review

There are many theories and models that address the issue of employee benefit programs. In most of these models, employee benefit programs are said to have a positive impact on the behavior, attitude, and performance of employees. The aim of the theories and models is normally to explain the contemporary dynamics in the adoption of employee benefits. Barringer & Milkovich (1998) point out that this dynamism is evident in the way organizations are abandoning traditional plans in favor of flexible benefit plans.

According to Barringer & Milkovich (1998), many companies had started putting in place flexible benefit plans as early as during the 1970s. Today, the practice of offering these plans has become entrenched, with one third of all organizations that have more than 1,000 employees offering flexible benefit plans (Barringer & Milkovich, 1998). The traditional plans were rather simple, there was limited flexibility, and very few choices were available for employees. In contrast, the flexible benefit plans of today offer a wide range of choices. In some cases, pre-tax reductions are made to pay for the employee benefits. In other instances, highly complex benefit plans are put in place, with a wide range of options being offered.

In the view of Barringer & Milkovich (1998), little scholarly attention is being devoted to these developments. The only exception is the recent trend where scholars seem to be interested in surveys that focus on various firm practices. According to Barringer & Milkovich (1998), there is a need for more research to be focused on reasons why some firms are adopting the flexible plans and others are not. Moreover, such research would increase awareness on the objectives that are achieved following the adoption of flexible plans. Of similar importance is the understanding on how the management’s decisions are affected by changes in competitors’ practices, employees’ attitudes, shifting regulatory conditions, and rising benefit costs (Barringer & Milkovich, 1998).

In one study, Cole (2004) discusses the issue of distributive and procedural justice as well as the way it is perceived as far as the issue of employment benefits is concerned. On this basis, Cole (2004) provides a comparison between flexible and traditional benefit plans. Cole (2004) observes that there is a relationship between organizational justice and the type of benefit plan used. In Cole’s study, which made use of the self-interest model, employees who were enrolled in flexible benefit plans exhibited significantly higher perceptions as far as procedural justice is concerned compared to employees who were enrolled in the traditional benefit plans.

Harris (1994) focuses on the relationship between employee benefit programs and organizational performance. In this case, outcomes relating to the behavior and attitudes of employees are discussed (Harris (1994). One crucial observation that Harris (1994) notes during this study is that scholars are directing little energy towards issues of behavior and attitudes of employees, particularly in relation to the introduction of employee benefit programs. Harris concludes that it is important for researchers to focus more on qualitative methods as well as to offer theoretical explanations for providing linkages to different models.

In compensation research, it is important to make a distinction between employees’ level of satisfaction with the level of pay on the one hand and satisfaction with the system that is responsible for determining and delivering the pay on the other. Compensation research has focused a lot on these two aspects. However, as pointed out by Williams & Malos (2002), the research has failed to make a similar distinction as far as employee benefits are concerned. It is on the basis of this shortcoming that Williams & Malos (2002) developed a measure for determining the level of satisfaction among employees as far as the benefit system is concerned. Like Cole (2004), Williams & Malos (2002) also address the issue of distributive and procedural justice in relation to the level of satisfaction with the employee benefit system. Using antecedents and consequences model, Williams & Malos (2002) concluded that if properly implemented, employee benefit plans yield both benefit-level and global-level satisfaction.

In a different study, Lucero & Allen (1994) also discussed the subject of employee benefits, but from different perspective. According to Lucero & Allen (1994), literature on employment benefits shows that the dynamics of employee benefit systems provides numerous opportunities for psychological contract violations. Lucero & Allen (1994) observe that the number of people receiving employee benefits provided in employment settings has continued to increase dramatically since the early 1940s. This has resulted in a proportionate increase in costs associated with these employee benefits.

However, product market competition has continued to intensify, forcing an increasingly high number of organizations to decrease their benefit packages (Lucero & Allen, 1994). The aim of this move is to reduce labor costs. It is unfortunate that at the time when the employers have been reducing benefits, employees have become more dependent on them. This has created conflict between employer practices and worker expectations. Failure to resolve such a conflict in the right manner may bring about a reduction in the level of job satisfaction among employees.

Employees whose expectations fail to be met as far as benefits are concerned may feel that organizational justice is lacking (Tremblay, 2000). According to Tremblay, it is important to take a contemporary approach when addressing this issue. In his study, Tremblay’s sample comprised of 285 employees working in three Canadian companies. Tremblay (2000) found out that employees often make clear distinctions between benefit satisfaction and pay satisfaction. Moreover, perceptions of distributive justice tend to facilitate a more accurate prediction of pay satisfaction than perceptions of procedural justice (Tremblay, 2000). In essence, Tremblay appeared to prefer the use of distribution justice perceptions in determining job satisfaction as well as satisfaction with the company.

Up to this point, the literature appears to focus on satisfaction on different levels. First, there is satisfaction with the benefits provided. Secondly, there is satisfaction with the system used in determining the benefits that accrue to the individual employee. Lastly, there is the aspect of satisfaction with the organization in general. The literature also highlights the relationship between pay satisfaction and benefit satisfaction.  The literature also indicates that employers are increasingly moving from traditional benefit plans to flexible employee benefit plans.

The issue of flexibility in the design of employee benefit plans is no doubt crucial in organizations operating in today’s highly dynamic environment.  According to Barringer & Milkovich (1998), it is also important to explain the decisions by managers to design flexible employee benefit plans using various theoretical perspectives. Some of most relevant theories in this regard include institutional, agency, resource dependence, transaction cost, and equity theories (Barringer & Milkovich, 1998). The insights gained from an analysis of each of these theories is crucial in creating a more comprehensive model as well as derive propositions for use in future research (Barringer & Milkovich, 1998). Such a model would have a lot to do with issues of innovative thinking on the part of human resource managers.

The institutional theory is based on the premise that institutional environments are the ones that shape all organizational structures (Barringer & Milkovich, 1998). The main assumption is that legitimacy is of utmost importance, and that external pressures present significant constraints on decision-making. The main internal factors influencing the design of a flexible plan include the benefit objectives, cost of the existing traditional benefits, employee preferences, and the costs of flexible plans. The external factors include the practices of competitors, legislation, union density, and uncertainty (Barringer & Milkovich, 1998).

From the point of view of the institutional theory, an organization is highly likely to adopt a flexible employee benefit plan if choice is greatly valued by employees, the costs of implementing the current non-flexible benefits remain high, and current legislation is in favor of flexible plans (Barringer & Milkovich, 1998). Moreover, if there is prevalence of flexible plans within the industry and the level of uncertainty is high, an organization is highly likely to be influenced to introduce flexible employee benefit plans. The main shortcoming of this theory is that focus is on conformity.

In the agency theory, the design and implementation of benefit plans is approached from a completely different perspective (Barringer & Milkovich, 1998). The theory is based on the notion that the core aim of establishing organizational structures is to manage agency problems (Eisenhardt, 1989). For this reason, it is assumed that efficiency should be maintained at all times. Whenever there are information asymmetries, decisions are constrained. Elements of self-interest and the need to be risk-averse are also emphasized. In agency theory, there is complete disregard of the social context in which benefit plans are adopted. Monitoring costs are taken to be high and the theorists also put outcome uncertainty into consideration.

The resource dependence theory offers a new perspective in the discourse on employee benefit plans and their appropriateness in contemporary organizations. According to (Barringer & Milkovich, 1998), the basic premise in this theory is that agents who exert control over critical resources are the ones who shape organizational structures. The implication is that for a benefit plan to succeed, the core aim has to be the acquisition of resources. Moreover, proponents of this theory emphasize the need to ensure that the decision-making process is not interfered with by any internal or external agents who are not involved in the resource acquisition process. Such agents are thought to constrain the process.

Resource dependence theorists are interested in determining the extent of unionization within the external labor markets (Barringer & Milkovich, 1998). They feel that this is a major factor as far as threats to the decision-making process are concerned (Barringer & Milkovich, 1998). Critical employees are highly valued and depended on in creating important decisions relating to the design of flexible employee benefit plans. For an organization to succeed in adopting flexible plans, the theory dictates that the labor market should be highly unionized but the employees of the company should be non-unionized. The employees, particularly those who value the flexibility of benefit plans, should also be allowed to exert control over all critical resources.

From the point of view of the transaction cost theory, the rationale for establishing organizational structures such as employee benefit plans is minimization of transaction costs (Barringer & Milkovich, 1998). Like in the agency theory, transaction cost theorists have a high regard for organizational efficiency. Just like in agency, resource dependence, and institutional theories, there is a need to ensure that there are no information asymmetries or goal conflicts since they impact negatively on the decision-making process. In the transaction theory, though, some people are thought to have the propensity for opportunistic behavior (Barringer & Milkovich, 1998). This behavior is of great relevance because it improves the overall value of human assets within the organization. Transaction-cost theorists hold that when such employees are targeted in benefit plans, the transaction cost within the organization is greatly reduced (Barringer & Milkovich, 1998).

Equity theory proposes that the way employees perceive their contribution to the organization and their compensation greatly influences the way they perceive their employment relationships (Gerhart, 1995). Employees are also seen to perceive their employment relationships by comparing their contribution-return ratio to that of other employees within and outside the organization. On the basis of equity theory, employees are expected to take actions that can restore equity whenever they perceive any form of inequality (Gerhart, 1995).

It is unfortunate that some of the actions that employees take to cure these perceived inequalities are not of any help to the organization (Kidwell, 1993). Examples include refusing to cooperate and later on quitting. The actions lead to counterproductive behavior within the organization. Several studies have been carried to determine the counterproductive behaviors that employees can engage in because of perceived inequality. In one of these studies, Greenberg (1990) investigated the method used by a company to communicate employee pay cuts and the impact on perceived equity and theft rates. The reasons for reducing compensation were communicated in different ways to different organizational groups. In one group, adequate explanation was provided for reducing the amount of employee benefits and remorse was also expressed (Greenberg, 1990). In another group, inadequate explanation was offered for reducing the benefits and the employer did not express remorse (Greenberg, 1990). In the control group, no benefit cuts were effect, hence there was no need for any explanation (Greenberg, 1990).

After the reduction of benefits, the company’s rate of theft was 54 percent higher compared to the group where adequate explanation was offered (Greenberg, 1990). In the group where inadequate explanation was offered, the rate of theft turned to be 141 percent higher compared to that of the control group (Greenberg, 1990). It appears that communication had a far-reaching, independent impact on the attitudes and behaviors of employees.

In a different study, Cowherd & Levine (1992) explored the impact of benefit differential between top management and lower-level employees on product quality. The study examined 102 business units of 41 corporations (Cowherd & Levine, 1992). According to Cowherd & Levine (1992) it is normal for lower-level employees to compare their benefits to those who are in higher positions within a company’s organizational structure. Whenever employees feel that they have been treated inequitably, they may reduce their organizational efforts in order to achieve equity.

In the study by Cowherd & Levine (1992), the researchers hypothesized that when pay differentials between top managerial staff and hourly employees are large, it is less likely for lower-level employees to engage in citizenship behavior or freely offer to help other people within the organization. Similarly, it is unlikely for employees to correct errors that would in ordinary cases escape notice (Cowherd & Levine, 1992). Moreover, they would be unwilling to follow the spirit of the job instead of the letter of rules stipulated in their job descriptions (Cowherd & Levine, 1992). The results of the study supported this hypothesis. The suggestion made was that organizations should be aware of the possibility that executive pay might have adverse motivational effects on lower-cadre employees (Cowherd & Levine, 1992).

In each of the aforementioned theories, the issue of distributive justice keeps on re-emerging. It is for this reason that it is appropriate to define the term ‘distributive justice’. Distributive justice is concerned with the way goods, privileges, and duties are apportioned in consonance with the individual’s merit as well as in the best interest of the society. In simple terms, distributive justice is the perceived fairness of the individual’s outcomes. Employee benefit plans constitute one of the major ways through which organizations as well as other stakeholders in society, including the government, are required to contribute to distributive justice (Lambert, 1989). 

Whenever a reward has been allocation, every individual takes time to make a judgment on whether the outcome was fair or not. This so-called distributive justice judgment is based on the assessment the various ways of resource distribution and allocation as far as individuals in society are concerned. For many scholars, interest is on the way individuals make these judgments and the consequences that follow from these judgments.

There are differences in the view of justice for scholars in different disciplines. For instance, for philosophers, justice is the objective truth regarding what is fair. In contrast, social scientists are interested in understanding justice from the point of view of the individual’s perception. In the context of this study, the best approach would be to examine justice from the perspective of the perception of the individual employee.

When the debate on distributive justice started in the mid-20th century, focus was on relative deprivation. In other words, scholars were interested in comparing the outcomes of one individual with the outcomes of other individuals who were chosen as reference points (Cohen, 1987). As the debate continued, focus shifted to social and economic exchanges and expectations on outcomes that the individual should receive (Cohen, 1987). During this time, equity theory emerged as the most candid approach to the issue of distributive justice. The equity theory provided a specific formula for assessing distributive justice on the basis of the output-input ratio (Cohen, 1987). It also highlighted the actions that people take whenever they perceive that inequity has occurred (Adams, 1963). During the 1970s, the debate was on the notion that other than equity, there are other principles that people often use in determining distributive justice (Cohen, 1987). One of these principles is equality. Equality is the practice of ensuring that the same outcomes are provided to everyone. The other principle is ‘needs’, in which case the idea is to provide more favorable outcomes to the individuals who are most in need (Cohen, 1987).

Today, the scholarly debate on distributive justice is still ongoing. Most of the research interest is on procedural justice, that is, the procedures for determining one’s outcomes. There is also a lot of focus on interactional justice, which assesses interpersonal treatment in terms of whether the principles of fairness have been adhered to or not. However, research on distributive justice has not been completely abandoned. Those scholars who still carry out research on distributive justice do so within the paradigm of equity theory. Apart from the equity theory, the scholars acknowledge the need to use other principles, such as needs and equality in understanding distributive justice.

According to Ismail & Joon (2006), distributive justice has a significant impact on the relationship between benefit programs and job commitment.  Ismail & Joon (2006) add that this impact has a moderating effect. For many contemporary organizations, one of the main aims of introducing benefit programs is to improve the way human resources are managed in order to increase their productivity.

Moreover, in introducing benefit programs, organizations appear to be responding to mounting competitive pressures and not the need for distributive justice (Gerhart, 1995). For instance, many companies are forced to raise goals for profits, sales volumes, quality, and innovation. In such circumstances, tight control is exerted on employment growth. In some cases, the companies even go the extent of making substantial employment cuts. In such situations, the goal is normally to achieve more goals with a fewer number of employees. For this to happen, there is always a need to ensure effectiveness in the way human resources are managed. To do this, such companies feel the need to introduce better employee compensation systems for the existing workforce (Gerhart, 1995).

Analysis

From this analysis of literature, it is evident that some models, theories, and principles are more dominant than others in efforts to explaining the issue of employee benefit and education programs. In this case, equity theory appears to be the most dominant theoretical framework for explaining the rationale for employee benefit and education from both the perspective of the employer and that of the employee.

From the perspective of the employer, the theory explains that there are many undesired negative outcomes that arise from failure by the organization to provide the necessary benefits to the employees. The outcomes may take the form of failure to cooperate or quitting from the job altogether. For some of these outcomes, it may be too late for the employer to put in place any corrective measures. For this reason, the best thing to do is to put in place the appropriate employee benefit and education programs at the right time.

In the current literature on equity theory, there is a shift from procedural justice model to the distributive justice model. Moreover, there is a tendency to put into perspective other principles. According to the principle of needs, the intention is to provide more favorable outcomes to the individuals who are most in need. On the other hand, the principle of equality is based on the practice of ensuring that the same outcomes are provided to everyone. These principles are different from that of equity, which measures distributive justice on the basis of the output-input ratio. This means that employees perceive their employment relationships by comparing their contribution-return ratio to that of other employees within and outside the organization. Employees take actions on the basis of any perceived inequities in order to restore equity in their work environments.

The impression created in this literature review is that in the contemporary organizational environment, it is necessary for every organization to put in place an employee benefit and education program. Such a program should be flexible enough to allow employees to have more control on how and when to access the benefits depending on their needs. Companies that continue to use the traditional benefit plans may trigger perceptions of injustice among employees. The employees may feel as if they are being treated unfairly by their employer. This is particularly the case after making comparisons with employees of organizations that have already adopted flexible employee benefit plans. In order to put the appropriateness of employee benefit and education programs into perspective, it is imperative to focus on a case study. In this case, the case study presented is that of Ajman Bank, a UAE-based financial institution.

The case study Ajman Bank

            Ajman Bank is a young, fast-growing Islamic commercial bank that offers a wide range of banking services that are value-driven. The bank operates within the United Arab Emirates (UAE). These services offered are available for individuals, businesses, as well as government clients and are all in compliance with the principles of shariah law. The objective of Ajman Bank is to seek out the best people, products, and technology in the market so as to succeed in delivering what customers want and how they want it. Focus is on delivering real value as well as recreating the human touch that has been lost in modern banking.

            Ajman bank is headquartered in Ajman, one of the seven emirates that constitute the UAE. It is strongly supported by the Ajman administration, thereby putting it in a position to benefit immensely from its growth as well as potential. Ajman Bank remains a key pillar of economic development in the emirate. For this reason, it is appropriate that the bank balances care for the local community and employees by putting in place a business model that delivers value to all its customers and shareholders.

            One of the core means through which Ajman Bank intends to achieve these objectives is through the introduction of an education program for its employees. In September 2010, the bank launched a new education program in collaboration with the Edcomm Group Banker’s Academy. The aim of the UAE-wide program was to promote banking practice and knowledge within the UAE as well as a culture of excellence in the context of Ajman Bank itself.

In announcing the commencement of this program, the top executives of Ajman Bank noted that banking remains a prominent industry within the UAE economy as well as across the gulf region. It is for this reason that the executives felt the need to provide support in the sector in areas of skills, training, and development. This undertaking was also in line with the community objectives of the Ajman Bank.

The program lasts for six months, during which Ajman Bank staff members go through rigorous training in the essential skills and knowledge relating to crucial aspects of business and banking. The program is designed in such a way that the individual employee is exposed to the business of banking, creating dedicated teams that have the knowledge and the capability to deliver quality service. The bank’s management also expressed the view that such a team would be able to manage all the needs of customers.

The most important thing regarding the education program is that the bank’s top executives were convinced that it would bring about increased productivity in the bank. It is because of this conviction that classroom learning sessions and departmental rotations were incorporated into the course. Those employees who pass all the required tests are given certifications.

The introduction of this program by the Ajman Bank is supported by several aforementioned theories. For instance, it is in line with the distributive justice theory which puts emphasis on the perceived fairness of the individual’s outcomes. In this regard, the company’s managers and strategists understand the need to make their contribution to distributive justice by focusing on not only the bank’s employees but also students who hope to join the bank as employees in the near future. This is also an acknowledgment of the fact that the bank is a major stakeholder in the UAE society. Apart from the benefits relating to distributive justice, the bank would benefit from an increased level of satisfaction among employees. With such a program, the likelihood of the occurrence of undesired effects of perceived inequities among employees is remote. As indicated in the equity theory, such undesired outcomes may take the form of lack of cooperation by employees and even quitting.

During the launch of the education program, Mubashar Khokhar, Ajman Bank’s CEO, pointed out that the bank’s foundation has been laid through the efforts of its dedicated staff members. The motivation for this comment should be understood in the context of the contemporary working environments, where major companies are competing to recruit, motivate, and retain the best employees. In this regard, every result-oriented top manager has to put in place all appropriate employee education and benefit plans. Without such plans, the employees would perceive inequities and readily accept offers to work in companies that offer such benefits.

It is also important to note that in the contemporary job market, many companies are interested in maintaining a small workforce that is properly compensated. The aim of this strategy is to reduce transaction costs while at the same time boosting productivity. This explains why many companies are involved in employee lay-off programs. Ajman Bank appears to be in favor of a similar approach as far as the employment policy is concerned. The program exposes the employees to skills and competences that they can apply in any department within the bank. This is in line with the contemporary move towards a lean, small workforce that is able to engage in multitasking.

Throughout the analyses made in this paper, the main question has been on whether a company can survive in the contemporary environment without putting in place any employee benefit and education programs. In order to answer this question, it is imperative to assess the opportunities that Ajman Bank would have missed vis-à-vis the transaction costs of the education program what was introduced in 2010.

Edcomm Group Banker’s Academy, the institution that is undertaking the training program for the bank, had earlier on communicated its intention to start playing an active role across the Middle Eastern region. It was targeting the business community across the region, mainly through delivery of training projects to both Islamic and conventional banks in Abu Dhabi, Dubai, Ajman, Egypt, Bahrain, Kuwait, Iraq, and Qatar. Edcomm Group Banker’s Academy has some 2,000 clients spread across 75 countries. With such a large network of business operations, it would have been possible for the Academy to spread its wings into other companies in the UAE.

This essentially means that if Ajman Bank failed to sign the contract with the Academy, the opportunity would have been seized by a rival bank. Such a scenario would easily have created a situation of vulnerability. Ajman Bank’s employees would have easily perceived inequities simply because of the existence of such a program at a bank across the street. In other words, competition among companies in the provision of benefit and education programs is a reality in the contemporary business environment. Such benefits are crucial in ensuring that employees are satisfied with their work. They also contribute greatly to the reduction in negative outcomes, for example theft rates.

From the point of view of the transaction cost theory, the rationale for establishing organizational structures is to minimize transaction costs. The organizational heads of Ajman Bank point out that they are interested in enhancing efficiency in business and banking operations at the financial institution, hence the decision to introduce the education program. A transaction-cost theorist would point out that the core assumption among these top executives was that the cost of the program would be lower than the transaction costs incurred because of lack of requisite knowledge and skills among the employees. According to transaction-cost theorists, there is a need to ensure that such programs are designed in such a way that the long-term benefits by far outweigh the costs.

Through the education, Ajman Bank also intends to deal with the problems of information asymmetries and goal conflicts within the institution. This is because of the negative impact that they have on the decision-making process. This view is supported by both agency and transaction cost theories. From the point of view of the agency theory, the aim of establishing organizational structures is to manage agency problems. It is for this reason that there is a need to maintain efficiency at all times. This is precisely what Ajman bank intends to do through the introduction of the education program. Agency theorists would be quick to view the decision to introduce the education program as one that is motivated by self interest.

Ajman Bank also hopes to create new opportunities for young employees of the bank. Opportunistic behavior is viewed as appropriate particularly from the perspective of the transaction-cost theory. Most of today’s organizational structures are best suited for individuals with an opportunistic behavior. Transaction-cost theorists hold that when such employees are targeted in benefit plans, the transaction cost within the organization is greatly reduced (Barringer & Milkovich, 1998). This could be the same line of thinking that the bank adopted in order to end up introducing an employee education program. At the same time, the bank’s corporate leaders appeared to moving in tune with contemporary trends as far as the move towards flexible employee benefit plans is concerned. For instance, the program is not compulsory, it lasts for only six months, and one can get certification at any time as long as one has passed all the necessary tests.

Conclusion

            In conclusion, there is abundance of literature on employee benefit and education programs. Different theories, models, and principles are used to explain this issue from different perspectives. The main theories in this case include institutional, agency, resource dependence, transaction cost, and equity theories. The main principles include equity, equality, and needs. On the overall, the discussions of the different theoretical frameworks contributes to a better understanding of the role of employee benefit and education programs for organizations as well as the environments within which they operate. The main theories discussed in this regard include

Much of the literature has focused the model of distributive and procedural justice. Traditionally, most discussions on benefit plans have been anchored on the notion of distributive justice. Today, there is a shift towards procedural justice, although there is still an ongoing debate on distributive justice. Distributive justice is the perceived fairness of the individual’s outcomes. This perception may be nurtured from both within the organization or from without the organization. From within the organization, the best example is when lower-cadre employees perceive inequity in their benefits compared to those of their executive counterparts. External influence in employee perceptions arises when employees of one organization compare their benefits with their counterparts working in the same capacity in another organization.

On the basis of this analysis, this paper concludes that any organization that has not put in place employee benefit and education programs in place will find it hard to survive in today’s highly work environment. This view is supported by the provisions of equity theory as well as the principles of equality and needs, which spells out the negative consequences of efforts by employees to correct perceived inequities in employee benefits. This importance of benefit programs is also supported by the case study of Ajman Bank, which launched an education program for its employees in late 2010.

References

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Barringer, M. & Milkovich, G. (1998). A Theoretical Exploration of the Adoption and Design of Flexible Benefit Plans: A Case of Human Resource Innovation. The Academy of Management Review, 23(2), 305-324.

Cohen, R. (1987). Distributive justice: Theory and research, Social Justice Research, 1(1), 19-40.

Cole, N. (2004). Perceptions of distributive and procedural justice in employee benefits: Flexible versus traditional benefit plans. Journal of Managerial Psychology 19(1), 19 – 40.

Cowherd, D. & Levine, D. (1992). Product quality and pay equity between lower-level employees and top management: An investigation of distributive justice theory. Administrative Science Quarterly, 37, 302-320.

Eisenhardt, K. (1989). Agency theory: An assessment and review. Academy of Management Review, 14(3) 57-74.

Gerhart, B. (1995). Employee Compensation: Theory, Practice, and Evidence. Journal of Management 13(5) 320-405.

Greenberg, J. (1990). Employee theft as a reaction to underpayment of inequity: The hidden cost of pay cuts. Journal of Applied Psychology, 75(12) 561-568.

Harris, M. (1994). Employee benefit programs and attitudinal and behavioral outcomes: A preliminary model, Human Resource Management Review 4(2), 117–129.

Ismail, A. & Joon, C. (2006). Effect of Distributive Justice on the Relationship between the Forms of Benefit Program and Job Commitment. JSB 11(3), 189 – 202.

Kidwell, R. (1993). Employee propensity to withhold effort: A conceptual model to intersect three avenues of research. Academy of Management Review, 18(17), 429-456.

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