Human Resource Management - Pay-for-Performance - Essay Example

? Human Resource Management Mod 4 Case Assignment Pay-for-Performance Pay for performance refers to a pay strategy adopted by firms involving the use of performance as the basis for making payments to employee services. In this case, it means that organizations evaluate individual performance in determining the amount of compensation or bonus rewards. There are three consequences related to the pay for performance compensation strategy and they include: i. Employees with outstanding performances have the potential of getting the greatest rewards. This is based on the fact that the organization is acknowledging their superior contributions or services. The rewards are aimed at motivating them towards sustaining or even improving their superior performances. ii. Employees with average performances get substantially smaller rewards or bonuses. This is aimed at encouraging them to improve their efforts by working harder so as to achieve greater rewards in the succeeding periods. iii. Employees with poor performances do not receive any increase in pay or bonus. This is to indicate that they need to improve their performance or seek alternative positions by leaving the organizations. Pay for performance strategy has been noted as one of the best motivating strategies for organizations that seek to enhance their overall performance. However, experts warn that organizations should support such a strategy using other alternative options because money is not the ultimate motivating factor. For instance, organizations are advised to also include promotions, improvements in working environments or even involve employees in making decisions in addition to the pay for performance system (Chen & Hsieh, 2006). This will ensure that an organization addresses all the factors that motivate employees. Alternative Payment Approaches to Pay for Performance Lockstep pay The most common payment approach among legal firms is the lockstep pay. The payment approach involves an organization using the length of time on the job when determining the ultimate level of compensation for its employees. As noted earlier on, the payment system is common among law firms where lawyers are paid based on the amount of billable hours spent serving clients. Research studies indicate that lawyers earn their income as if they were independent contractors. What this means is that their level of payment varies depending on the amount of revenue generated from the clients that they have served at person levels. However, the lock step payment system involves attorneys with the same level of seniority receive the same level of income. The level of income is entirely determined by the overall performance of the organization. There are exceptions to the system whereby the organization may make adjustments as an exception rather than a rule. Total Reward Compensation The total rewards system of compensation involves more than just the basic pay and benefits. It involves the entire remuneration system that consists of all the direct and indirect payment packages (Reynolds, 2005). The system incorporates pay with all the necessary factors that motivate and are valued by employees. The system also offers numerous approaches to reward other than pay and benefits. It does not rely on a single method of rewarding employees. The system closely resembles the pay for performance system in the sense that the total reward system is based on the level of competency and performance of staff. Reward is solely based on merit rather than experience or job position (Berger & Berger, 2008). The higher the performance the higher the reward and low performance is highly condemned. However, total reward is different from pay for performance because it incorporates all the elements of employee motivation rather than monetary rewards. In fact, research studies on employee motivation indicate that the system motivates and influences the behavior of workers to a larger extent than the pay for performance reward system. The total reward system focuses on the intrinsic function of both motivation and enticement. However, the system also focuses on the intrinsic function by offering payment and benefits to employees as a reward for performance (Graham, Roth & Dugan, 2008). Under the system, rewards are made on a continuous basis throughout the working period of the organization. This is because the system responds to regular changes in the environment such as changes in economic factors including recession and inflation (Mathis & Jackson, 2010). The system offers an opportunity of discussing the performance of employees in frequent periods and rewarding them on weekly and monthly basis. Drawbacks to a Pay-for Performance Plan for Beginning Law Associates Beginning law associates experience a lot of drawbacks under the pay for performance compensation plan. This is because they are new in the organization which translates to less experience. Research studies on employee performance indicate that there is a direct relationship between employee performance and the working experience (Mathis & Jackson, 2010). On the basis of such findings, it is evident that beginning law associates have less experience in handling the affairs of the organizations hence resulting in low performances which eventually determine low pays for their efforts. In most cases, the pay for performance plan does not consider the fact that an employee may be new and less experiences. It overlooks such factors and concentrates on the output of the employee. This creates a situation whereby less experienced and beginning law associates get less rewards for their services to the organization compared to more experienced associates. The pay for performance plan does not act as a motivating factor in the career of most of the beginning law associates. This is based on the fact that the plan serves to motivate moderate and super performers. Moderate performers are motivated through some low bonuses and pay rise whereas super performers are compensated with the highest rewards. The rewards have the effect of enhancing the performance of the two groups of employees unlike the beginning law associates. Beginning law associates are likely to record poor performances because they have little experience and this translates to no rewards for their efforts. The situation may get worse in instances whereby the new associates takes a lot of time to improve his or her performance. The implication is that they will last for a longer period of time before they start receiving any rewards from the organizations. Factors Necessary for a Successful Pay-for-Performance System a. Continuous system evaluation The success of a pay for performance system depends on the ability of an organization to evaluate the system. This is to ensure that there is an evaluation of the impact of the system on overall organizational performance. The analysis provides a comprehensive perspective of the effects of the systems in terms of employee motivation and achieving organizational objectives. This offers the organization an opportunity to make changes and align the system to employee needs as well as the goals of the organization (Berger & Berger, 2008). b. Adequate supervisor and employee training A training system for supervisors as well as employees ensures that they understand the mechanics of the pay for performance process. It also ensures that they understand the philosophical underpinnings of the system hence increase the level of cooperation from supervisors and employees (Mathis & Jackson, 2010). Training of supervisor is essential because the success of the system depends on the ability of supervisors to effectively communicate issues such as performance targets and providing performance evaluation feedbacks to employees. c. Transparency The pay for performance system should be transparent in order to enhance its effectiveness. The fast aspect of transparency is that the system should be orderly in terms of its progression. The second aspect is that the supervisor should tell the employee what is required including behaviors and outcomes in order to obtain a pay rise or bonuses (Graham, Roth & Dugan, 2008). Making clarifications with regards to expected performance and subsequent rewards ensures that employees are motivated to achieve the set targets. References Berger, L & Berger, E. (2008). The Compensation Handbook. Chicago: McGraw-Hill Professional. Chen, H & Hsieh, Y. (2006). Key trends of the total reward system in the 21st Century (compensation and Benefits review). New York: ABI/INFORM Global. Graham, M, Roth, T & Dugan, D. (2008). Effective executive compensation: creating a total rewards strategy for executives. New York: AMACOM Div American Mgmt Assn. Mathis, R & Jackson, J. (2010). Human Resource Management. New York: Cengage Learning. Read More