Pros and Cons of Employment of University Workers on Contract - Literature review Example

Pros and Cons of Employment of Workers on Contract According to Kube, Maréchal, & Puppe p. 1646), companies are concerned about the nature of employees’ motivation plan that may produce desirable results in their businesses. This is due to the facts that the employee’s motivation can increase the companys performance and result to better employees’ satisfaction if well implemented. There is a great challenge in balancing personal input in the business and incentives given to the employees because unfair incentives may result to poor performance of the business (Nalbantian & Schotter, 1997, p. 3117). The study focuses on how the university design motivation plan for their employees and the consequences of such motivation plans. Although employee’s motivation is meant to increase performance of the company, poorly designed compensation plan may discourage workers and result to decline in performance. London (1995, p.37), uses tournament theory to elaborate how the size of the prize, players’ chances of winning the prizes and the cost of players’ effort to implement the undertaking influences the achievement of the players’ objectives and performance of the game. The first prize for the players was independent of the result of performance, the second incentive involved single large prize for the first winner only while in the third category, there were different prizes for different winners and this depended on individual performance. The analysis of the result depicted that the workers’ output was maximum when there are various prizes for different winners (Dohmen & Falk, 2010. P.152). Tournament theory is the most suitable mechanism of incentives for recruiting university workers as it forces workers to distinguish themselves through their research and quality of work rather than quantity. Therefore, the goal congruence is achieved through aligning the incentive mechanism to the nature of university business. From the game theory, the productivity of the workers is greater if the incentive plan gives all employees equal opportunity of sharing revenue of the group (Nalbantian & Schotter, 1997, p. 3119). The workers’ effort is dependent on the anticipated prizes, the effort involved in pursuing promotion and a chance of being promoted (Fehr, Kirchsteiger & Riedl, 1993, p. 441). The main reason for renewable contracts of employment at the university is to encourage employees to work hard with the hope of getting a promotion in the future. This plan is beneficial to the company because it increases performance of the company. In the university employment, the employees are uncertain of who is going to be promoted. The motivation for work is the expected promotion, and since the university management is likely to consider several factors before perform the promotion, the employees will pursue energy that will lead to promotion. According to Nalbantian and Schotter (1997, p.3116), setting performance goal for the employees should not be based on their previous performance because the workers have a tendency of becoming discouraged. The university management has to set higher goals for employees in order to encourage them to step-up their effort. However, due to the competitive nature of the business at the university the employees compete with one another instead of working for specific target. Individual worker has to double their energy in order to outperform others and get promotion (Neezy & List, 2006, p. 1376). The approach used by the university management results to increased output and quality of work that makes those organizations competitive in terms of performance. The university employees are motivated by the fact that all employees have equal chances of being promoted. According to the tournament theory, the game is likely to result to sabotage or collusion. Collusion of the employees is health for the company when all workers choose pursue common goal (Harbring & Irlenbusch, 2005, p.17). However, if the workers collude at the expense of the business, this will be detrimental to the business and may result to decline in performance. The university employees devote their effort to achieve better performance of the company in order to increase the chances of promotion after the specified time. This relates to the tournament theory which suggests that collusion of workers is beneficial where the prize is based on relative performance (Harbring & Irlenbusch, 2005, p. 27). Another issue with tournament theory is the chance of the players to engage in sabotage. Competition is health for better performance of the company if all members focus on intensifying their efficiency and increase competitiveness (Freeman & Gelber, 2010, p. 162). The players tend to become more creative in order to outperform other members and win the prize. However, engaging in unhealthy competition may be detrimental to the business if it occurs at the expense of the company (Miguel, p.34). For example, the workers may choose to misuse company’s resources in order to curtail other members from achieving their objectives. This scenario is likely to arise in an organization where the prizes are based on individual performance (Muller & Schotter, 2003, p. 11). In the university, the promotion of workers is dependent on the individual performance thus employees may misuse resources or curtail other employees from being promoted. According to Freeman and Gelber (2010, p. 17), the work skills and awareness about the reward affect the output, therefore, performance of the employees significantly. Although, in some situations, it is not easy to associate performance to a particular person, the employers should establish a means of recognizing different inputs in the company and reward them adequately. Earning a fixed amount of wages does not result to a significant increase in the output. Therefore, the university employees may fail to perform up to the expected standards since they have to wait for a long before they are promoted. If employees are aware of the reward they will get and the time they will get it may motivate them to pursue the opportunity to achieve that promotion (Miguel, p.39). The employment contract of the university workers shows the time when promotion takes place (Harbring & Irlenbusch, 2005, p. 6). Therefore, the employees are likely to work tirelessly until such as a time when the promotion is conducted in order to increase their chances of being promoted. However, the management should be careful because those who miss the opportunity of being promoted are likely to get discouraged and may even resign from their jobs or may perform below standard (Dohmen & Falk, 2011, p. 584). According to Bandiera, Barankay & Ras, 2006, p. 31), “Incentive Achievement Motivation Theory is conceived as a capacity for taking pride of accomplishment when success at one or another activity is achieved.” The workers are motivated not only by the rewards they anticipate from the management, but also the joy doing their work because it improves self-esteem. In an organization where employees are motivated by the pride of achieving their goals rather than rewards, workers tend to improve personal performance and that of the company (Miguel, 46). This mainly happens in the banking industry where distorted incentives lead bankers to take excessive risks and practice short sighted behaviour rather than focusing on the long term functionality of their companies (Nalbantian & Schotter, 1997, p. 337). However, the university the motivation of workers is the probability that a subset of the hired workers expects to get a promotion after working for some time. The workers find pride in the performance of their tasks in the company and personal performance after which they hope for promotion. The university employees are assigned different tasks; therefore, it is unlikely for an individual to establish what other employees are doing in a different department or job (Freeman & Gelber, 2010, p. 155). The management conducts evaluation of the employees’ performance in order to determine what each person has achieved in the assigned task. The performance record is kept by the university management to help in making decisions such as promotion, retrenchment of redundant workers, hiring of more workers, training of workers and so on (Dohmen & Falk, 2011, p 558). The management conducts subjective performance appraisals that often give employers an incentive to give poor reviews for cost control purposes. In addition, favouritism occurs and rent seeking behaviour from employees is a common symptom. In conclusion, hiring university workers on a contract basis helps to increase personal input, therefore, improves the performance of the business. The employee’s appraisal is subjective and dependent on tasks assigned to an individual. Employees’ performance is dependent on a set goal, size of the reward and personal effort. The university workers perform unrelated tasks whose output cannot be attributed to a specific employee. Universities are able to achieve better performance because different employee input is relative to the performance of the business thus no risk of sabotage or defective collusions. However, the management should be careful in order to avoid discouraging employees who may have shown a lot of committed, but are rated poorly. Bibliography Bandiera, O., Barankay, I. & Ras, I. (2006). An Incentives for Managers and Inequality among Workers: The Evidence from a Firm Level Experiment. Discussion Paper No. 5649. Centre for Economic Policy Research. Pp. 1-64 Dohmen, T. and Falk, A. (2011). Performance Pay and Multidimensional Sorting: Productivity, Preferences, and Gender. American Economic Review, 101. 556–590. Fehr, E., Kirchsteiger, G. & Riedl, A. (1993). Does Fairness Prevent Market Clearing? An Experimental Investigation. Quarterly Journal of Economics, Vol. 108(2). The MIT Press. Pp. 437-459. Freeman, R. B. and Gelber A. M. (2010). 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