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Performance pay is a vital means of compensation that is widely used in many companies primarily in the sales and marketing sections. The approach entails salaries and wages that are awarded to an individual or a team in an organization based on the outcomes as outlined on the job standards (Cooper, Gulen, and Rau 2016, p. 6). For instance, a salesperson for cars would be a beneficiary to commissions after reaching an established target. Among the perceived drives for performance, payment entails the desire to motivate staffs to continue achieving higher in the company, boosting employees’ confidence, and increasing commitment of the workforce for the success (Shields et al. 2015, p. 345). Nevertheless, performance payment has been subjected to a series of criticism including the existence of conflict and disagreement between the highest paid personnel and low-income earners. While the bottom line for Performance-Related Payment (PRP) is to inspire recruits to increase efficiency, a similar thought is objected on the ground that workers’ motivation is dependent on many factors including the nature of working atmosphere (Cooper, Gulen, and Rau 2016, p. 9). As a result, introducing PRP in an organization must be undertaken with a lot of care, precautions, and cautiousness after considering many issues. This write-up explores the extent to which a manager would wish to encourage the performance remuneration.
Surety and Contention that Performance Pay would Motivate Employees to Adjust on their Output
Performance Related Payments (PRP) improves the employees’ efforts in accomplishing organization’s duties, an instance that boost the efficiency (NAS 2018, n.p). PRP usually instil a positive mind and determination amongst the workforce to achieve the goals of a company. Cascio (2018, p. 12) argues that P2P make labour to develop the positive mind and self-inducement to undertake the chores that would lead to an improvement. For instance, a salesperson would be focused and self-driven to realize more transactions to continue benefiting from the PRP rewards.
In support, the expectancy theory suggests that individuals may act in a specific manner upon realizing or imagining that there is a reward attached to a given behaviour (Purvis, Zagenczyk, and McCray 2015, p.5). As proposed by Victor Vroom, the model affirms that organizations must strive to incorporate rewards and performance while ensuring that the recompenses are accepted by the receiving parties. Additionally, Victor Vroom complements that workers would be motivated to support the establishments’ aims upon believing that there is a positive correlation between input and performance (Parijat and Bagga 2014, p. 3).
Eli Lilly Company, the world’s ninth largest pharmaceutical company reports the unique HR practices as the premier reasons behind the competency level (Duggan 2015, n.p). From the management’s perspectives, Eli Lilly organization has considerably inspired the workforce to achieve the best for the company through PRP offers that has also improved the staffs’ level of trust. On the other hand, Cargill Company became a trend-setting institution in 2012 following the introduction of daily performance programs (Duggan 2015, n.p). As a result of performance payment, the company managed to overcome other stiff competing firms in the food production and distributing channel.
In light of the expectancy theory, performance should be related to the rewards that are well accepted to organizations. However, the model is categorical that the pre-requisite of availing such incentives is acceptance by the workers (Parijat and Bagga 2014, p. 5). On the other hand, the administration must conduct prior survey research on the perception of labors to be very sure if the PRT can motivate the workforce (Gerhart and Fang 2015, p. 499). Therefore, as a manager, I would only encourage incentives having evaluated the attitudes of the team, positive response to the inducements, and certainty that given offers would lift the overall efficiency and outcomes.
Low Level of Commitment by Employees
Apparently, many performance payment programs succeed in low commitment companies (Connelly et al. 2016, p. 865). Whenever any of the recruits is attached to an organization for short period contracts and casuals, introducing PRP would be perceived as a more significant way of making extra money. In turn, the productive of the employees improve. Conversely, high commitment companies where workers sign a permanent and long-term deal with employers takes another approach. Recruits in high commitment organizations are loyal to the executives and can accomplish the tasks in time. According to Mone and London (2014, p. 246), permanent labors are usually offended with the inclusion of performance-based pay. The team views the program as merely an unnecessary expense as opposed to a motivational aspect.
Expectancy theory undergoes a criticism of lacking values (Nimri, Bdair, and Al Bitar 2015, p.73). In this essence, the model appears to be inherently rational with the generalized assumption that all employees are self-cantered and able to crave for the rewards. A similar scenario occurs in the situation of low and high commitment establishments. While low committed recruits become enthusiastic and motivated by the PRP, the notion is objected by the high committed counterparts who view the practice as baseless and needless (Parijat and Bagga 2014, p. 13). Concerning the weaknesses of expectancy principles, I would encourage PRP procedures only if the company is a low commitment setup.
Existence of a Significant Benefit after Incurring Cost of Performance Payment Programs (Costs vs. Benefits)
Some irrational institutions have committed gross mistakes by promising the workers unrealistic incentives that never balance with the inputs (invested capital). Nyberg, Pieper, and Trevor (2016, p. 1755) argue that many institutions overestimate PRP’s paybacks while undervaluing the cost associated with the practice, an instance that has plunged the companies into several cases of financial crisis. The performance pay system requires a keen step with a comprehensive Cost-Benefit Analysis (CBA) to correct the anticipated challenges on the company’s revenue (Gneezy and Rey-Biel 2014, p. 64).
Before proceeding to approve the performance-payment practices, managers are expected to address several concerns (Nyberg, Pieper, and Trevor 2016, p. 1759). For instance, the estimated number of employees who will be the beneficiaries of the PRP, actual compensation increment and affordability of the organization, practical returns to an establishment after commissioning PRP activities, and the duration in which the company will sustain the program. Other facets of CBA entails the total length required to implement the PRP, and whether there are an alternative means to solve the predicted merits of adopting PRP or lacking (Gneezy and Rey-Biel 2014, p. 66). Upon ascertaining that the purported performance payment plan will never constrain our institution financially, I would encourage the performance pay packages to the staff.
Similarity of Management’s Expectations with Employees
The management-employees expectation is essential before the assent of performance pay mechanisms (Bandiera et al. 2015, p. 626). A manager is required to indulge in deep communication with the staff, thus promoting a mutual understanding between the parties (Jensen 2015, n.p). Before approving the PRP plan, specific considerations must be put in places such as the overall timespan for the procedure, critical reasons for the PRP adoption, and the influence of outside factors to the company. For instance, harmonizing what would happen if an external firm that is supplying materials to a specific department delays with the stock, thus affecting the completing time and quality of the section (Lim, Sensoy, and Weisbach 2016, p. 880). Indeed, all the parties to performance payment system must have a full understanding of all issues that are involved.
Poor conversation and explanation of basic terms of performance pay systems have resulted in unexpected results (Jensen 2015, n.p). In a case where the management proceeds to deny a department daily PRP rewards due to the delay of the materials that is caused by the outside distributing companies, a series of whining would follow from the affected parties. Equity theory suggests that workers perceive the fairness of their job relationships when the company is committed to giving a uniform contribution to both insiders and external stakeholders of the institution (Cappelen et al. 2015, p. 15370). From the equity model, managers should be categorical to explain that universal incentives will apply to all the employees. However, when a section of the team or a branch within the setup flops to meet a condition that gives warranty to the stated remunerations, the labors must fully comply to the equity approach by accepting a universal consequence (Cappelen et al. 2015, p. 15371. Therefore, I would only encourage the introduction of payment performance schemes upon the satisfaction that all the personnel has fully understood the basic terms, rules, and applications of the PRP inducements.
When the Performance Payment Program is to be undertaken for a Specified Duration
The length of performing payment programs significantly determines the success of PRP inducements. According to Wang, Lu, and Siu (2015, p. 1249), many of the PRP programs are prosperous in the organizations that are undergoing a temporary and the short-term implementation. At the onset of PRP pay system, workers gladly welcome the approach with more euphoria (Jensen 2015, n.p). However, the whole exercise becomes meaningless in the long-run when personnel become accustomed to the increased remunerations. Moreover, a severe implication would be ascertained where the management opts to reduce the rewards due to the staff’s failure to accomplish the target (2015, p. 1250).
In the social work setting, the system theory classifies the human behaviour as complex systems. The model affirms that organization’s administrators must be entirely responsible for meeting the varying demands of the stakeholders' needs, expectations, and rewards amongst others (Turne 2017, p. 457). However, since the anxiety differs amongst the recruits, executives must be ready to initiate more programs that would create an impact and inspiration for the employees to become more productive. Sometimes, the company’s best remunerations and offers to the person would appear senseless and of low impact after a long time. Doran (2014, p. 348) reiterates that temporary PRP deals remove the notion of viewing pay increases as an obligatory and guarantee but as a bonus. Following the dangers of implementing a long-term performance pay, I would recommend for the PRP procedures in the setup if it will only occur for a shorter period.
Surety that Performance Payment Mechanisms Act as the Main Tool for Attracting and retaining the new Employees
Performance payment has continuously lengthened the stay of highly productive workers in the organization. According to Martin and Ottemann (2015, p. 91), inducements and other offers of the employer to the staff enhance the trust and promoting the positive attitude that is essential for increased efficiency. Furthermore, worldwide employees are highly concerned with the incentives they are entitled to such as disbursements that are given by the bosses concerning the ability, skills, and expertise (Nyberg, Pieper, and Trevor 2016, p. 1759). While choosing the best institutions of engagement, new workforce prioritizes the amount of performance pay alongside other factors including job environment.
Similarly, the existing workers conduct an assessment of the progressive incentives that are offered by the management relative to the inputs (NAS 2018, n.p). Since the personnel is well acquainted with the compensation and reward strategies of the competing organizations, labors in the setups with minimum inducements often imagine of joining the companies with better payments. As a result, an establishment would risk losing some of the potential team members who resort to looking for greener pastures.
The Hertzberg’s Two Factor model that was depicted from accountants and engineers unearthed that motivators and hygiene factors were the primary driving reasons for workers retention (Alshmemri, Shahwan-Akl, and Maude 2017, p. 11). Motivators incorporate the values that arouse the team to add more inputs including favourable working conditions and atmosphere, feeling recognized and the career development. On the other hand, hygienic elements entail salaries and benefits, as well as the existing policy of the organization (Jensen 2015, n.p). Performance payment is a technique that employees use in evaluating how the bosses are concerned with their wellbeing. In case a given firm fails to abide by the Hertzberg’s Two Factor model, there are increased possibilities of losing the link with the topmost productive team.
Before introducing the performance payment practices, I would consider the trends of remunerations from the stiff competing firms. If the rate of our rivals is higher, we would suggest for an adjustment regarding the benefits on offer. Suppose we confirm that higher PRP allowed by the entrants to the taskforce makes our key stakeholders-workers to join such organization, we would become flexible and avail a significant compensation to increase exclusiveness and turnover ratio.
When the Performance Pay is for a Specific Group with Various Reasons (Group Incentive Plans)
Group incentives plan is a premier means of accommodating the job interdependence and other complexities (Bushman, Dai, and Zhang 2015, p. 29). On the other hand, the approach could facilitate the cooperation of the cluster as well as a significant motivation whenever PRP is used. In the quest for introducing new systems changes, and project, companies usually task a special team to spearhead the process. Conroy and Gupta (2016, p. 43) complement that PRP improves the commitment of a group and inducement to perform according to the initial goals.
In support, the expectancy theory elucidates why the team would be more focused to realize the success (Parijat and Bagga 2014, p. 6). Since every member is aware that an incentive is attached to the efforts at the end, there will be joint cooperation and unity as well as information sharing that promotes the outcome (Howard, Turban, and Hurley 2016, p. 10). With the performance pay such as bonuses, a team is likely to be dedicated due to the reduction of laxity. As a manager, I would consider the PRP techniques if there is an urge to empower a specific cluster to undertake the crucial activities in the establishment or general teamwork to promote the cultural diversity and inclusivity.
Overall, performance payment is a crucial aspect of many organizations. However, the Performance-Related Payment must be implemented in an organization after in-depth scrutiny of various factors. As a manager, the extent of encouraging PRP would be dependent on many facets. Upon the surety that PRT would motivate the workers and improve the quality, I would introduce PRT practices. The low commitment workers that comprise of labours under casuals and short-term contract programs would also create an urge to consider the PRP. Other reasons for allowing the PRP entails when the approach has a cost benefits (CBA) returns, the normal expectation of management and employees concerning the PRP, undertaking PRP for a specified period, and when PRP is directly associated with the retention and acquisition of personnel. Apparently, performance payment is a sensitive step that must never be undertaken by the irrational motives. Instead, administrators must engage the experts while seeking for better pieces of advice to know where, when, and how to implement the PRP.
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