Strategic Human Resource Management - Essay Example

Strategic Human Resource Management Table of Contents Table of Contents 2 Introduction 3 Discussion 4 Definition of Performance related pay system 4 Impact of performance related pay systems over the organization 5 Brief understanding of the various types of performance related pay systems 5 Analysis of the objectives of performance related pay systems 6 Analysis of the strengths and weaknesses of performance related pay systems and recognition of any potential conflicts 9 Performance related pay system is directed related to SHRM 10 Conclusion 12 Works Cited 14 Introduction In this age of high complexity and competitiveness, sustainability and improvement of the position in the market is the only desire of each and every organization. This is because; position and brand image act as the only two weapons that may enhance its profitability and effectiveness among others. However, in order to do so, human resource is the most essential requirement. It is the human resource that works in the organization in an effective way thereby amplifying its reputation and brand value. But, the human resources need to be retained within the organization in an effective way by presenting varied types of incentives and performance related revenues (Brewster & et. al. 2011, pp. 234-245). Only then the level of confidence and self esteem of the employees might get enhanced resulting in amplification of its performance and motivation. This might prove worthy for the organization in improvement of its productivity and profit margin among many other rival players. Other than this, performance related payments or rewards acts as extrinsic motivators that may increase the working relationship among the employees. By doing so, the rate of interpersonal conflicts might get reduced thereby amplifying their efficiency and performance. As a result of which, the overall productivity of the organization enhances that improves its ranking and competitive advantage in the market. Due to these above mentioned causes, the concept of performance related pay is offered higher concentration by the entrepreneurs in this age of extreme bargaining power and competitive rivalry (Boxall & Purcell, 2011, pp123-134). This essay is mainly related with the strengths and weaknesses of performance related pay-systems and its overall value for the organization and its employees. Along with this, it also includes a critical understanding regarding the varied types of performance related pay systems. Moreover, it also highlights the objectives of performance related pay systems. Along with this, it also presents a critical understanding of the strengths and weaknesses of performance related pay systems. Discussion Definition of Performance related pay system Performance related pay system is recognised as the amount of revenue offered by the individual or employees so as to improve their level of performance and productivity. Moreover, it also acts as a motivator that encourages the inner skills and talents of the employees in order to improve their level of efficiency and competencies. This might prove extremely effective both on the part of the employees and organization so as to increase its competitive position and profitability in the market among many other existing contenders (Chamberlain & et.al. 2002, pp. 256-267). Apart from this, it is the performance related pay system that enhances the retention rate of the employees that may reduce the switch over costs. As a result, the organization might become able to introduce varied types of inventive products and services to the customers thereby satisfying their taste and preferences to a significant extent. By doing so, the rate of dependency and reliability of the customers over the brand might get enhanced resulting in amplification of its loyalty and consistency (Ganster & et.al 2011, pp. 289-292). Such type of consistency might prove effective for the organization in amplifying its brand value and equity in the market among other rival contenders. Hence, due to these reasons, most of the organizations in this age, are trying to retain its experienced and talented employees by offering varied types of performance related pay systems or incentives. It is done so as to retain its dominance and distinctiveness in the market for a long run (Harris, 2001, pp. 332-343). Impact of performance related pay systems over the organization Performance related pay system is considered as financial incentives offered to the employees, presenting high-level of performance and efficiency in competing the assigned tasks and duties. As a result of presentation of these rewards, the level of motivation and inner skills of the employees enhances to a significant extent that increases its effectiveness. Therefore, due to the presentation of high-ended performance, the productivity and corporate image of the organization increases in the market as compared to many other rival players. Along with this, the supremacy and ranking of the organization increases in the market thereby reducing the threat of new entrants or substitute products. This is extremely essential for an organization to retain its portfolio in this competitive market for a long period of time (Kerr, 1995, pp. 423-434). Source: (Kerr, 1995). Brief understanding of the various types of performance related pay systems Performance related pay systems or rewards are a sort of incentives offered by the management to its employees in order to retain them for longer period of time. By doing so, the level of productivity and profitability of the organization might get enhanced resulting in amplification of its dominance in the market among others. It may be of two types such as monetary and non-monetary incentives (Marsden & Richardson, 1994, pp. 556-567). Monetary incentives are of varied types such as bonuses, incentives, pension schemes, profit sharing, team awards, ownership, gain-sharing, salary supplements, improvement of job stabilities etc. By presenting such type of monetary incentives, the inner skills and motivation of the employees might get enhanced resulting in amplification of their performance and productivity. Moreover, by presentation of these type of rewards, the self esteem of the employees might also get enhanced that may increase their supremacy and reputation in the organization among other co-employees. Other than this, non-monetary incentives comprise of coupons, vouchers, appraisals, award ceremonies etc so as to increase the rate of retention of the employees within the organization. This might prove effective for the organization to amplify its position and brand value in the market as compared to many other rival players (Marsden & et.al. 2006, pp. 656-676). Hence, it might be clearly depicted from the above mentioned points, that performance related pay systems act as motivators that may increase its distinctiveness and market share. Analysis of the objectives of performance related pay systems The most important objectives of performance related pay system are presented in the below paragraphs: Improvement of the motivation of the employees: the prime objective of performance related pay system is to enhance the motivation of the employees. By doing so, the level of performance and efficiency of the employees might get enhanced resulting in amplification of the total turnover and brand image of the organization. Other than this, due to the implementation of varied types of performance related pay system, the experience and talents of the employees gets enhanced. As a result, the level of retention of the experienced employees enhances that is extremely essential for the organization (Redman & Wilkinson, 2005, pp. 676-687). Improvement of the productivity: by offering varied types of performance related pay systems, the level of performance of the employees enhances to a significant extent. By doing so, the level of total productivity of the employees as well as the organization enhances that helps in improvement of its brand image and reliability. Improvement of the retention of the experienced staffs: by offering varied types of performance related pay systems, the level of retention of the experienced and skilled employees increases that declines the rate of attrition. Along with this, retention of experienced staffs also helps in development of varied types of inventive products and services that may cope-up with changing preferences. Improvement of the quality of work: due to the introduction of performance related pay systems, the quality of work of the employees might get enhanced to a significant extent. By doing so, the profitability and dominance of the organization increases that may enhance its growth and market value among others. Improvement of job satisfaction: due to the presentation of varied types of performance related pay systems, the rate of job satisfaction increases. This is extremely essential for an employees as well as an organization in this age of extreme economic downturn. This is because; if the organization becomes successful in retaining the experienced employees for a longer period of time, then the rate of profit margin might get enhanced significantly. Hence, it might be clearly stated that, motivation is also considered as a catalyst that encourages the employees to increase their level of performance in order to achieve the desired results. As per Vroom expectancy theory, motivation acts as a force that encourages the behaviour and presents exact direction to it, in order to achieve the final results. Moreover, motivation is entirely dependent over three elements such as expectancy, instrumentality and valence. The term Expectancy means that the employees or the individual of the organization is to present the required performance to attain the desired results. Thus, it might be stated that the action of an individual or the employee is directly related with the behaviour or decision making power. By doing so, the rate of interpersonal conflicts might get enhanced that may increase the productivity and efficacy of the employees of the organization. Due to which, the rate of conflicts might get reduced that may decline their switch over costs as well. Therefore, due to the retention of the experienced staffs, the performance and inner skills of the junior or weaker staffs might be enhanced that may prove effective in long run. Apart from this, instrumentality leads to desired outcomes. This means, if the individual or the employees presents desired outcomes then it might surely help in attainment of effective results. However, in order to attain the desired rewards or outcomes, the level of encouragement or motivation of the employees or the individual increases to a considerable extent. Therefore, it might be stated that instrumentality is directly related to rewards (Wood, 1996, pp. 53-57). Similarly, instrumentality is also related to valence or individual value. After knowing the effectiveness of the rewards, the level of performance is increased. Only then the individual might become successful in achieving the desired results. Therefore, it might be clearly stated that motivation encourages an individual to take actual decisions or behaviours to attain desired results. For example: the outcomes of the individual or employees of an organization might get enhanced to a significant extent only if the bonuses, incentives or promotions are offered. Thus, it might be clearly depicted that the above mentioned objectives of performance related pay system is directly interlinked with the level of motivation of the employees. Thus, motivation and performance related pay system is directly linked with one another in all its aspects. Analysis of the strengths and weaknesses of performance related pay systems and recognition of any potential conflicts The concept of Performance related pay systems are offered high concentration in this age in order to improve the reputation and market share of the organization in the market. This means, motivation of the employees. If the employees of the organization get enhanced then, the level of productivity and performance might get improved. As a result, the organization might easily tackle the changing taste and preference of the customers by presenting desired products and services. By doing so, the organization might retain the loyal customers that may amplify its brand image and total revenue. Other than this, performance related pay system also reduces the level of abseentism thereby amplifying the total outcome of the organization. Along with this, the level of turnover ratio also gets reduced to a considerable extent that is extremely essential for the organization. Thus, it might be clearly stated that performance related pay system is extremely essential for an organization in this age in order to retain its prosperity. Apart from strengths, performance related pay systems, also comprises of varied types of weaknesses. Due to improper performance related pay systems, the level of motivation and performance of the employees might get reduced. As a result of which, the level of productivity and profitability of the organization might get reduced significantly that may affect its brand position and equity. Other than this, due to de-motivation, the rate of team work and communication among the employees might get reduced that may lead to varied types of inter-personal conflicts and disagreements. Due to which, the rate of turnover of the organization might get reduced that may decline its position and value in the market among many other rival contenders. For example: the reputed organization of Sony Corporation retained its experienced employees and dominance in the market only by offering effective performance related pay systems like bonuses, position, power etc to them. By doing so, the level of satisfaction of the employees enhanced that improved their dedication and commitment towards the assigned duties. As a result, the productivity of the employees increased resulting in improvement of the total turnover as compared to its rival players like Samsung, LG, Philips etc. However, in case of Apple Inc, the rate of commitment of the employees declined due to improper performance related pay systems. As a result, the CEO Steve Jobs as well as the organization had to experience the negative impacts of failure and breakdown. So, in order to retain its dominating power and supremacy, Mr, Steve Jobs implemented the system of performance related pay among the employees in order to amplify their performance and efficiency. This strategy acted as a boon for the organization that amplified the gratification as well as popularity of the organization in the market among others. Hence, it might be clearly depicted that performance related pay system helps in improvement of the inner morale of the employees thereby increasing the supremacy of the organization in the market (Wood, 1996, pp. 56-67). So, it might be stated that performance related pay system is worthy for both the employees and the organization as a whole. Performance related pay system is directed related to SHRM Strategic human resource management (SHRM) is described as a concept or approach that means proper implementation of the human resource strategies as well as business strategies in order to amplify the profitability and growth of the organization. Moreover, it is an approach that enables the ways to integrate the human resource strategies with business policies so as to amplify its sustainability in long run among many other rival players. Thus, the main aim of SHRM is to ensure, whether the organization might achieve its objectives or goals through its human resources or employees. Apart from this, SHRM is also recognised as a process with the help of which, human resources are managed effectively as assets. So that the employees or human resources of the organization, might maintain proper coordination and communication with the other co-members, that may improve their level of knowledge and skills. This might prove effective for the organization in developing varied types of inventive product lines that may increase the range of customer bases. However, in order to retain this strategy, the concept of SHRM also helped the management of the organization in developing various reward or performance related strategies that may increase the involvement and commitment of the employees. Moreover, such type of reward or performance related strategies might also increase the performance of the employees as presented in the below figure. Thus, the productivity and efficiency of the employees and the organization increased that bridged the gap within the management and the employees (Redman & Wilkinson, 2005, pp. 767-789). Source: (Redman & Wilkinson, 2005) Other than this, the SHRM or HRM policies are implemented or devised in such a way that may enhance the behavioural commitment of the employees. This is because; behavioural commitment of the individual employees might lead to achievement of the future goals and objectives of the organization. However, in order to do so, its extremely essential for the organization offer the right to the employees to present the ideas, prior implementing any strategy or policy. So that the employees might become satisfied with the aspects of the policies that may improve their dedication and commitment towards the organization. This might reduce the rate of attrition cost thereby amplifying the range of profit margin. By improving the profitability, the organization might enhance its popularity and position in the market among others thereby augmenting the performance based payments of the employees. Moreover, performance related payment structure is not an easy task but its extremely tough. This is mainly because; it needs to be devised in such a way that acts as a motivator or stimulator for the employees. However, in order to do so, its extremely essential to communicate with the employees in an effective way. Only then, the management or the leader might become able to analyse their inner desires and likings. By knowing them, the management might easily apply so as to maintain a unique cultural environment within the organization. Furthermore, proper implementation might enhance the rate of communication and inter-personal relationships among the employees resulting in amplification of the competitiveness of the organization (Marsden & Richardson, 1994, pp. 772-782). Therefore, it might be clearly depicted that the policies and strategies of SHRM is directly linked with performance related pay systems or employee behaviour. Conclusion Conclusively, it might be stated that motivation and performance related pay system are directly linked with one-another. This is because; performance related pay systems such as bonuses, incentives, promotion schemes and profit margins etc are offered to the employees that ma increase their level of motivation. Apart from this, presentation of performance related pay systems also enhances the inner morale and confidence of the employees resulting in amplification of its level of performance and productivity. Moreover, due to the improvement of the motivation, the level of efficiency of the employees might get enhanced that may enhance the profitability of the organization to a significant extent as compared to many other existing contenders. Not only this, it also helps in amplification of the brand image and reputation of the organization within the minds of the customers that may amplify the inner confidence and loyalty. This is extremely essential for an organization, to retain its portfolio and dominance in long run. Due to which, the inner strengths of the organization might get enhanced that may easily cope up with the fear of new entrants and high bargaining power of the customers. As a result, the rate of switchover costs of the customers might get reduced that may improve the competitive advantage of the organization. Hence, it might be depicted that activities of the employees is entirely related with merit or performance related pay systems that may improve the overall productivity and profitability of the organization. Due to which, the brand image and market value of the organization might get enhanced to a significant extent as compared to many other existing rival players. Works Cited Boxall, Peter. & Purcell, James, “Strategy and Human Resource Management,Third edition, 2011”. Palgrave MacMillan: Basingstoke & New York. Brewster, Chris. & et. al., “International Human Resource Management, (3rd Edition), 2001”. London: Chartered Institute of Personnel and Development. Chamberlain, Rosemary & et.al., “Performance Related Pay and the teaching profession: A review of the literature, 2002”. Research Papers in Education, Vol. 17(1), pp. 31–49. Ganster, D.C. & et.al, ‘Performance-Based rewards and work stress’, 2011. Journal of Organizational Behaviour Management, Vol. 31, pp. 221–235. Harris, Lewis, ‘Rewarding employee performance: line managers values, beliefs and perspectives’, 2001. International Journal of Human Resource Management, Vol. 12(7), pp. 1182–1192. Kerr, Steven, “On the folly of rewarding A, while hoping for B’, 1995. Academy of Management Executive, Vol. 9 (1), pp. 7–14. Marsden, David. & et.al, “Pay for performance where output is hard to measure : the case of performance pay for school teachers, 2006”. JAI Press: London, UK. Marsden, David. & Richardson, Ray, ‘Performing for pay? The effects of merit pay on motivation in a public service’ 1994. British Journal of Industrial Relations, Vol. 32(2), pp. 243–261. Redman, Tom. & Wilkinson, Adrian, “Contemporary Human Resource Management: Text and cases, 2006”. Harlow: Prentice hall. Wood, Stephen, ‘High commitment management and payment systems’ 1996”. Journal of Management Studies, Vol. 33(1), pp. 53–57. Read More