Pay-for-performance plans

Measuring the performance of any compensation plan should be a continuous process but not just a quick win. The process of assessing the plan should consider important changes needed in the process while putting up performance measures and then monitoring how the process is progressing against such measures. For this to be done effectively for pay-for –performance plan focus should be placed on major measures of human capital , which should then be integrated into the reporting processes (Mathis & Jackson,  2010). A major factor to consider is whether the plan is relevant to the health of an organization. A balance should be sought, on how the firm will gain by implementing the pay-for-performance against what the cost of this measure will be to both the employees and the organization. This involves considering whether the plan will have a direct impact on the performance of the employees and the organization at large both in the long-run and in the short run (Mathis & Jackson, 2010).

In assessing the effectiveness of this plan, it is also important to consider whether it can be controlled, so that the employees can have an influence on the outcome of the plan. For this plan to be effective it should be motivational, so that employees’ efforts can negatively or positively affect the results. In order to measure the employees’ performance, it is important to consider whether other factors that may influence the performance of employees have been considered in the plan (Mathis & Jackson, 2010). It would be difficult to defend the use of the plan pegged on performance if the working environment hinders the employees from maximizing their performance. Hence, the objective of the plan should be to motivate the employees while being geared towards fairness and achievement of overall organizational goal.

The performance based pay may end up not benefiting many of the employees but can harm be harmed by it for various reasons. To begin with, this plan seem to favor those who are credited with revenue generation mostly the senior executives , sales and marketing teams and other areas in organizations that are considered to be cost centers while ignoring the average workers. In addition, the revenue generating activities may be offered rewards in a disproportionate manner so that fairness is not observed across-board (Solmon & Podgursky, 2001). A good reasoning behind this notion is that profit pools on which bonuses are based is relate directly to the generated revenues but indirectly related to costs and hence those who facilitate the top line should be offered the biggest share of such bonus. Moreover, in case of public schools teachers cannot control the class-size, mobility and language proficiency of students and these factors are known to influence significantly the performance of the students in any learning centers.     

A major problem is that an organization’s cost centers play a major role in sustaining the foundation that ensure revenue generation is possible, a fact which is not likely to be due share than others like sales. Another disadvantage is that the pay-for-performance results to unhealthy competition since it is assumed that humans respond to such rewards and work very hard to attain them.  Research has, on the contrary, shown that such a plan can pit workers against one another and create a very unhealthy competition environment (Kumar, 2015). While this doesn’t mean that personal achievement should go unrewarded, but when using the bonuses based on performance as the key tool of employee motivation , team spirit can be destroyed which is needed for an organization’s success and  may leave many workers behind. Another disadvantage is that functions performance may not be measured in a clear cut manner since some have distinct edge where efforts vs. results can be quantified while others may not be quantified (Snell, Morris & Bohlander, 2015).  

From an employer’s perspective, the use of performance based pay plan can results to unintended results. Firstly, the quality of employee productivity may deteriorate significantly. This plan of compensation can make employees to place their focus on products quantity instead of quality which can lead to production of low quality services or products (Mathis & Jackson,  2010). For instance, teachers can engage in dubious activities that make it possible for students to obtain high scores while placing less focus on the overall learning process that includes other aspects apart from academic.

In addition, employees may not benefit from the impact of teamwork on organizational or institutional performance.  Employees whose focus is on attaining personal goals can be less willing to work as a team. Such employees may fail to offer required assistance to colleagues or co-workers who are struggling in their functions since they perceive this as wastage of time which they could use to improve their productivity. Conflict can also arise among employees due to lack of cooperation or a perception that co-workers are obstructing others performance preventing them from attaining their goals(Snell, Morris & Bohlander, 2015). This creates a nonconductive working environment which prevents employees from attaining their best performance and thus stifling the performance of the whole organization.  

Reference

Solmon, L., Podgursky, M.,(2001).The Pros and Cons of Performance-Based Compensation. Retrieved from: https://faculty.missouri.edu/~podgurskym/wp-content/uploads/2001/art2001-10.pdf