MOTIVATION AND COMPENSATION IN ENTREPRENEURIAL ORGANIZATION

Motivation is regarded as “the inner state that energizes activities and directs or channels
behavior towards the goal”.
Motivation is the process that arouses action, sustains the activity in progress and that regulates
the pattern of activity.
Entrepreneurial motivation is the process of transforming an ordinary individual to a powerful
businessman, who can create opportunities and helps in maximizing wealth and economic
development. It is defined as various factors stimulate desires and activates enthusiasm in
entrepreneurs which make them attain a particular goal. Entrepreneurship is the process of
identifying strengths and opportunities which help in the realization of one’s dreams for
designing, developing and running a new business by facing threats and risks effectively.

To become an entrepreneur one should identify their strengths and opportunities from the
external environment. Here motivation plays a major role in identifying their own strengths to
become strong leaders or powerful entrepreneurs which make them accept risks and face
uncertainty for the purpose of reaching their goals.

Motivation makes entrepreneurs by fulfilling higher level needs such as recognition, esteem, and
self-actualization. Various theories explain motivation as an influencing concept, it can bring out
hidden talents and creativity, and it contributes to the individual goals and society development.
Maslow’s need hierarchy theory, Hertzberg’s two-factor theory, and David MC Clelland’s
acquired needs theory proved that motivation can bring energy, enthusiasm, creativity and
efficiency in fulfilling the desired objectives.

Motivation activates innate strengths to achieve a particular goal.entrepreneurial motivation is a

psychological process in which all the motives may not influence with the same intensity, it
varies with the perception levels of the individuals and factors responsible for the motivation.
Sometimes a single motive can influence to become strong and powerful entrepreneurs, these
motives may come from various factors as follows.
 ● Internal factors

● External factors

Internal factors
1.Need for self-actualization
It is explained by Maslow and it is the top level need that refers to the desire for self-fulfillment.
Need for freedom and self-fulfillment makes the individuals or employees of the organization
make them become powerful leaders or entrepreneurs.
2.Optimism
Individuals having a positive mindset get motivated by finding opportunities during critical
situations also. Positive attitude and perception motivate an individual to work out for the best
even during unfavorable and tough situations also.
3.Positive attitude
The positive attitude is the most important factor which motivates the individuals to become
successful entrepreneurs. Habituating positive attitude can lead an individual to develop
constructive thinking; it motivates them to become powerful entrepreneurs, and finally, the
positive attitude can prove how valuable they are.
4.Self-motivation
Most of the successful and powerful entrepreneurs are self-motivated; here they fulfill the
desired objectives by motivating themselves. Though many individuals have ideas but they
cannot put those for business development; however self-motivated people can take decisions to
implement ideas.
5.Enthusiasm
Enthusiasm motivates in finding better solutions, finally, it stabilizes the ideas and makes them
become creators and innovators which result in successful entrepreneurs.
6.Commitment
Commitment towards a goal can make you achieve success. It motivates entrepreneurs by
inspiring and developing emotional attachment towards an objective.
7.Education
Education is the most important factor that motivates a person to innovate and create new
products, this results in establishing an organization or a new business venture. The knowledge
acquired during the course of time and innate skills highly motivates a person to become a
successful entrepreneur.
8.Background
Family background, occupational background and a person’s own experience in a job motivates
him/her to become an entrepreneur. Having an entrepreneurial background acts as a clear path to
becoming a successful and powerful entrepreneur.
9.Financial background
Finance is the scarce resource which motivates and enables a person to become an entrepreneur.
Money can make many things. It is the major thing in deciding one’s status and development,
strong financial background facilitates to start a business.
External factors
1.Influence
Influence of family members, friends, and society motivates the individuals to become
entrepreneurs. The extent of influence shows an effect on the character, behavior, and
development, it comes from the external environment. Here people get influenced by seeing
successful entrepreneurs or by the words of others.
2.Availability of resources
Resource availability motivates at a high extent to become entrepreneurs, availability of land,
labor, money, machinery, and materials make individuals start a new business. Though there is
creativity, intelligence, commitment and enthusiasm in the individuals, the unavailability of
resources becomes an obstacle for new entrants or entrepreneurs.
3.Product’s demand
Higher demand for a particular product motivates entrepreneurs to produce innovative and value
added products, here product’s demand motivates the individuals to become entrepreneurs. The
hope of success makes them produce innovative products or substitute products, some
entrepreneurs fulfill the market demand by producing complementary goods also. So the increase
in product demand highly motivates entrepreneurs.
4.Government policies
Subsidies and benefits given by the government motivate entrepreneurs to produce new products
or motivate individuals to become entrepreneurs. Government policies show higher influence on
establishing new firms and it leads to economic development. In the case of small scale
industries, rural people are encouraged by the various training programs, financial support, and
subsidies; it is one of the main reasons for the establishment of new firms and arrival of new
entrants.
5.Information availability
Market knowledge and information motivate individuals to enter into the markets and to become
entrepreneurs. If there is abundant information then it automatically creates interest in the minds
of enthusiastic people to become entrepreneurs. Availability of information facilitates research
and producing innovative and value added products, and it creates a scope to become
entrepreneurs.
6.Technological advancement
Technological advancement acts as a path to transform ideas into products, feasibility in
production and expected success rate highly motivates to become entrepreneurs. It reduces errors
and cost of production and maximizes success rate, this is the reason why people are interested in
becoming entrepreneurs with the increase in technology.
7. Changing tastes and preferences
Changing tastes and preferences of the customers maximizes the chance to produce substitute
and complementary goods, it creates a scope to innovation and establishment of new ventures.

COMIn financial terms, the salary and wages you pay to your employees for the work they do.
Other, nonfinancial forms of compensation can also be offered to attract and retain staff.
Compensation is the remuneration awarded to an employee in exchange for their services or
individual contributions to your business. The contributions can be their time, knowledge, skills,
abilities and commitment to your company or a project or entrepreneurial business. In simpler
words, compensation is the money received by an employee from an employer as a salary or
wages.
Types of Compensation
Compensation doesn’t mean only paycheck, although that’s part of it. Compensation comprises
of a number of different elements that may be cash and non-cash payments.

Here’s a list of some of the most common and commonly overlooked types of compensation:
  Base pay (hourly or salary wages)
 Commissions
 Overtime Pay, shift differentials and longevity pay
 Bonus
 Profit Sharing distributions
 Merit Pay or recognition
 Incentive plan or achievement award
 Tip income
 Benefits including Dental, insurance, medical, vacation, leaves, retirement, etc.
 Stock options
 Travel/Meal/Housing Allowance
 Child care and tuition assistance
 Gym memberships and free lunches
 Employee assistance programs that provide counseling, legal advice, and other services.
 Health and wellness benefits
 Other non-cash benefits

Importance of Compensation
Smart entrepreneur know that keeping quality employees requires providing the right compensation and
benefits package. Compensation includes wages, salaries, bonuses and commission structures. Employers
shouldn't ignore the benefits portion of employee compensation and benefits, because the benefits sweeten
employment contracts with the priorities that most employees need.

1. Attracting Top Talent

People are always looking to put themselves in the best possible position financially. Those who
are worth a specific salary amount often know their value and will seek a position that pays
accordingly. Do research on what your competitor's compensation and benefits packages look
like. Make sure you offer a similar package to your potential employees so that you attract the
best candidates for your company. Hiring the right candidate the first time reduces recruiting
costs and helps free up business owners for other tasks.

2. Increased Employee Motivation

Properly compensating employees shows you value them as workers and as human beings. When
people feel valued, they feel better about coming into work. Overall company morale increases and
people are motivated to come to work and do a good job. Additionally, when employees know there
are bonuses or commissions, they are increasingly motivated to deliver grander results. Bonus and
commission compensation plans become a focal point for success.

3. Boost Employee Loyalty

When employees are paid well and are happy, they're likely to stay with the company. Proper
compensation is one factor why employees remain with employers. Loyalty means that business
owners don't need to continue to spend time, money, and energy on recruiting new candidates.
Employee retention and low turnover rates are great for employers who cultivate a team that knows
what to do. That team is also motivated to be part of the team, and they get the job done well.
4. Increased Productivity and Profitability
Happy employees are productive employees. Productivity in relation to compensation starts with
employees feeling valued which increases motivation and loyalty. Not only are employees more
motivated to do a good job, but also, the longer people are with the company, the more they know
and the more efficient they become. All of this leads to increased productivity.

5. Job Satisfaction So People Stay

Creating the right compensation plan leads to stronger job satisfaction. The right compensation
plan includes benefits, along with all the other bonuses available. Employees often boast about
holiday bonuses or they keenly watch how the company stock performs because they have stock
options. The right compensation program invests employees in the work being done, which gives
them a stronger sense of satisfaction when the company succeeds. They know they will be rewarded
for their efforts; everyone likes to be appreciated.