Pay for Performance plan

Abstract

This paper looks into the pay for performance plan , how to measure its effectives and its disadvantages to both employees and employers .Measuring effectiveness involves determining whether it’s relevant , controllable, measureable and objective. While pay for performance may have various incentives to employees and benefits to employers it may affect individuals and general organization.

How to Measure effectiveness

Measuring the effectiveness of this plan in organizations should involve collecting information on the practices being used, assessing the effectiveness of the different rewards practices and highlighting the major reward issues that will be addressed. This will make it possible to determine whether plan is relevant, controllable, measurable and objective. When considering the relevance of the plan, the management should ask whether it aligns with the organization in terms of business health. A major issue to consider is whether the reward practices will have a direct impact the performance of the entire organization in the short-term , and whether failure to have positive impact will affect the organization positively (Mathis & Jackson, 2010). For instance, in sales and marketing department, it would be necessary to determine whether parameters set like customer calls can yield the desired results. Will paying incentive for number of customer reference bring results that matter to marketing goals?

Determining whether the plan is controllable will show whether the employee are capable of influencing the final outcome. If the employees cannot, then this is not an incentive plan but a one whose aim is profit sharing. For the pay for performance plan to motivate the employee, they should be able to influence the results either negatively or positively. After determining what is relevant to the relevant to the organization and its business operations, the management should map out how every employee’s role affects the results of the organization (Mathis & Jackson, 2010) .This will be a good way of determining the effectiveness of the plan, which may lead to adoption of good performance measures and discard those that employees cannot affect. A measurable plan is one that whose effectiveness can be tracked. The performance measures that have been adopted should enable tracking for every person and after passing the previous tests (Mathis &Jackson, 2010). It is important to consider the balance in terms of what will be gained by adopting the incentive plan vis-à-vis the cost involved in the process of measuring, tracking and reporting on the final results.

Objectivity of the pay for performance plan involves determining the extent to which it is perceived as upholding fairness. Team management in an organization where there are numerous alternating functions often desire to adopt a subjective evaluation on the basis of performance observation by managers. Subjective measurement that involves an incentive pay can present various challenges since it may lead to discrimination suits in an organization.  While subjective evaluation in small bits can be used in some situations to deliver an incentive plan that is well –rounded, it should be kept as a very small percentage of overall target incentive (Mathis &Jackson, 2010).  If they are used properly, the plan can be a strong motivator and may drive high performance among employees while assisting the management to strike a balance between the risks and reward costs and improve moral.  The evaluation of the plan should follow the already established measures of effectiveness and conduct review of the reward practices. Assessment of the present reward practices or policies against the set criteria while applying specific evidence from a given situation and general research in the work place will help in identification of major issues (Mathis &Jackson, 2010). This will enable management to determine the necessary changes to address the issues and agree on how to implement the changes.

Disadvantages of pay for performance plan to employees

While this plan can have benefits for many ambitious employees, it can bring harms due to various reasons. Such a system tends to favor those employees in those areas that generate revenue such as sales, marketing, development of new products and senior management, and those that are perceived as cost centers like accounting, manufacturing and customer services. The revenue generating operations and activities are normally disproportionately (Kumar, 2015).  Since the rewards are based on certain profit pools, those credited with such performance are given the biggest share of rewards. The plan fails to attribute this success to the entire areas of the organization hence, discriminating against some employees (Snell, Morris & Bohlander, 2015).  In addition, the average worker may feel discriminated against since the senior management are likely to be rewarded than other employees. The senior employees are commonly perceived as being more important and not easily replaceable than junior workers (Kumar, 2015). Some jobs may present a problem while trying to quantifiably correlate between personal efforts and final results unlike other with a distinct edge like sales. There is a problem in determining performance measures.

 A major issue with the pay for performance is the possibility that it will lead to unhealthy competition instead of collaboration among employees. The performance based rewards can stifle the intended results when workers are pitted against each other while trying to earn a paycheck that is more lucrative (Mathis, & Jackson, 2012). Employees may resent others who are given the rewards in case they do not. The final results will be conflict at work and dissention across the organization. Given that jealousies and professional judgments are inherently human, the individuals with high conscience can rise above such a mentality, but those employees with less ambition or morale can feel endangered instead of being motivated. This kind of system does not recognize efforts but end results. 

Employer’s perspective

The plan for pay for performance may lead to unintended results for the employers. To begin with, there may be a deterioration of quality productivity among workers. This is true where the employees focus their energy in product quantity instead of required quality and the organization can end up offering products and services that are of low quality (Snell, Morris & Bohlander, 2015). For instance, in case of teachers, they may embark on dubious practices that ensure students get high scores while less focuses is placed on the learning process which embodies other aspects beyond academic.  Moreover, there may be less benefit from the effect of teamwork in performance due to unhealthy competition that makes it possible for employees to work in collaboration (Snell, Morris & Bohlander, 2015). When workers direct their focus towards achieving personal goals to obtain rewards, they will not be willing to co-operate with others. They may be unwilling to provided necessary assistance to fellow workers who are struggling in their roles because they see it as waste of time which they need in increasing their productivity (Snell, Morris & Bohlander, 2015).  The lack of collaboration or teamwork and a notion that colleagues are hindrances to performance of others may lead to workplace conflict when individuals attribute their failure to obtain goals to co-workers.  The end-results are that an unfavorable working environment is created and this prevents employees from reaching high performance levels and stifling the overall performance of the organization.

References

Mathis., Jackson, J., (2010).Human Resource Management. Cengage Learning. 396-397