Human Resource; Pay-For-Performance
It is critical for top performers in any organization to be appreciated and rewarded.
Various firms have different techniques to reward their best employees. It is almost impossible
for companies to have employees who are committed and loyal to the business without having in
place a performance management policy that lauds exemplary performance. Therefore, it will be
important for entities to evaluate their pay for performance system from time to time. The
evaluation and improvement of the pay for performance policy is a continuous process and
should not be taken as a one off quick fix (Weibel, Rost, &Osterloh, 2010). It is important to set
assessment processes once changes have been made. Firms that have successfully implemented a
reward evaluation technique are not only keen on data, information, and metrics but also focus
on negligible figure of manpower measures to into their management reporting cycle. The human
resource team make good use of this information to improve the plans and designs. Additionally,
the line managers have access to the same information hence they factor the data in improving
the rewarding experience of their juniors.
To achieve a good pay for performance scheme, the organization must set a reward
strategy goal that defines what effectiveness, efficiency, and performance are and how they plan
on measuring it. For instance, a firm might focus on clarity and transparency, business linkages
and reinforcement, external market focus, performance related and differentiated pay, fair and
equal rewards, personal choice and flexibility, among other arrangements. These form the basis
of employee evaluation and reward system. Further, conduct an honest reward review whereby
the management seeks to assess the current reward policy practices against the already
determined criteria. The organization can opt to use both general research and situation evidence
to agree on key issues that might need some changes. After this step, it is prudent to pilot and
make improvements from the earlier policy that was in place. Then finally, continue to measure,
monitor, review and adapt to the new improved reward system.
As an employee, having in place a pay on performance can easily cause contention and
bitterness among employees (Mehrotra, Sorbero, &Damberg, 2010). For instance, a worker may
feel as though the line manager does not like him or her and hence favoring another worker to
earn the bonus instead of them. When the same employee earns a higher salary twice or more
times, it may cause the other staff members to feel jealous. Jealous and contention creates an
unhealthy work environment which can significantly reduce productivity in the firm.
Furthermore, since workers are competing for the bonuses, it encourages lack of team work
(Campbell, Campbell, & Chia, 1998). More often, the struggling employees may not get help
from their colleagues as they view this as time wasting.
Additionally, when creating a pay for performance line managers and board members
require employee feedback and input on how to improve their reward systems. This approach
can easily cause employees to shy away or make the workers feel intimidated and therefore may
not cooperate in making the changes. Most businesses rely on their employees’ input to make
decisions concerning the company and therefore, it is not a good sign when employees fear to
share their input for fear of getting pay cuts.
Another disadvantage is that as an employee it’s not always when you enjoy changes
within the company. Most workers fear change especially those that affect their operating
procedures and if not handled well might significantly affect the overall productivity. Drastic
changes are prone to employee demotivation and it is the role of the line manager to help their
juniors by offering training and explanations on some of the benefits of the changes.
One disadvantage of a pay for performance policy is that the staff might end up
focusing more on the quantity of the work as opposed to quality. For instance, a salesperson who
is under pressure to deliver more business may forget to do a thorough job in paperwork as their
focus is more on closing deals. As a result, the client ends up having the wrong order delivered
or have to wait longer than expected and promised by the salesperson.
Again, as a manager unless the policy offers you a performance standard it becomes very
difficult to objectively determine who deserves to receive the incentive bonus. This gives the
managers more pressure especially during performance appraisals to accurately determine the
performance of any employee (Beer, et al, 2004).
Further, a pay for performance policy may discourage the spirit of team work cultivated
amongst the employees replacing it with jealous and contention. The bad spirit of being
uncooperative amongst the team may make the work of a manager very difficult and ultimately
lowering the team’s overall productivity. The workers who might be new or slow may also
struggle too much because they have no one in the team to support them which can be very
demotivating and demoralizing for them.
Besides the above mentioned concerns, employees who choose to hold their input in
setting up the pay for performance plan makes it difficult for both the policy and the managers to
accurately make a judgement on how to reward the teams. This further compounds the
contention between manager and their employees. The system itself may not be a true reflection
of what the company would want or should attain hence making it difficult to make practical the
use of the policy. For instance, if the management uses the inputs of the few who were open to
the idea of the plan, it would ultimately not portray the complete image of the other workers.
This aspect might encourage favorism by the managers or resentment from the staff.
Beer, M., Cannon, M. D., Baron, J. N., Dailey, P. R., Gerhart, B., Heneman III, H. G., … &
Locke, E. A. (2004). Promise and peril in implementing pay‐for‐performance. Human
Resource Management: Published in Cooperation with the School of Business
Administration, The University of Michigan and in alliance with the Society of Human
Resources Management, 43(1), 3-48.