Performance and Management - Case Study Example

Name: Institution: Title : Performance and Management Tutor: Course : @2011 Pay linked performance and organizational effectiveness Introduction The main aim of rewards is performance improvement. A complex relationship exists between pay and performance (Beardwell, 2010, pg 125). Various quarters see it as a straight forward. However, various factors affect its success. Organizations are made up of individuals. Each has a different personality. In addition, individuals work in different levels in the organization. These combinations make reward related performance difficult to implement successfully (Huselid, 1995, pg 642). Various conflicting forces make it difficult to implement this program. Despite these challenges, these programs help much in the success of organizations. Improvement in performance helps increase the competitiveness of the organization. This occurs because of a motivated work force. This is achieved mainly through performance incentives (Beardwell, 2010, pg 125). These increase the efforts that the workers put into their activities. The improved performance leads to capture of new markets. The incentives offered by such a structure, help retain the organization’s workers. This system of linking pay to performance is mostly applied to managers (Huselid, 1995, pg 663). Most companies value it much. They make it known their pay for performance policy. This helps in attracting top managers. Due to competition, this policy is being extended to other levels in organizations. Junior workers are also awarded incentives commensurate to their performance. This increases competition in all levels of the organization. This leads to improved effectiveness in the overall organization (Bratton, 2007 pg 89). A pay-based performance scheme operates on three fronts. They are the inputs, process and outcome (Beardwell, 2010, pg 125). Inputs refer to the efforts made by the worker. These efforts should be applicable in achieving the structure requirements. If not, the structure will fail. The process refers to the behavior of the worker in an attempt to meet the structure (Randle, 1997, pg 193). It improves the efforts of the workers. The outcomes refer to the achievements of the organization because of the plan. These occur because of a good combination of the efforts and the process. Outcomes define the success of the plan. Effectiveness of pay-based performance affects six areas of an organization (Becker, 1996, pg 787). These areas are discussed below. Performance motivation Research has found out that pay-based performance improves the motivation of workers (Becker, 1996, pg 787). This benefit has long been used as an incentive in top management positions. Most companies provide such schemes for their managers. Recently, managers have found this incentive as a good option for improving the performance of even the junior workers. When the three fronts of this scheme are well thought out, it becomes easy for the company to improve performance. Workers feel appreciated and feel part of the company. They are motivated to perform better in order to earn more. Performance based pay takes into account individual performances (Becker, 1996, pg 782). Workers on the same pay scale earn differently. This is because the performance of a worker sets him apart from the rest. Other workers are also motivated to perform better when they realize the achievements of their colleagues (Randle, 1997, pg 193). This improves the overall performance of the organization. It also helps the management in controlling the organization. This is because each worker is motivated towards achieving the benefits that come with performance (Huselid, 1995, pg 657). This reduces the time the management spends on supervision of workers. Every worker has a drive towards good performance. This greatly improves the company’s effectiveness in performance. However, care should be taken when reviewing performance. The person in charge of reviewing performance should not be biased (Becker, 1996, pg 787). If not carefully done, bad taste may occur among workers. This affects the morale of workers who feel their performance is not recognized. This affects the effectiveness of the organizations performance. Worker attraction and retention Rewards lead to high self-esteem. Workers in addition to meeting organizations goals, have their personal goals (Bratton, 2007 pg 89). These goals are usually linked to a better life. Every work puts efforts in ensuring his personal goals are met. People want to live in conditions, which reflect their social standing. A manager will strive towards leading a life that reflects his position as a manager in the society. If the pay offered, does not meet his expectations, he will leave. He will take up another position in another organization, which is more lucrative (Torrington, 2005, pg 92). As a result, a company, which does not reward its workers, will lose its workforce to its rivals. To prevent this, top companies offer rewards to its workers in terms of performance (Bratton, 2007 pg 89). The workers feel their efforts are appreciated. They are able to meet their needs and feel their position is respected. The company is therefore able to fend off competition from its rivals. This helps the company retain it top workers. This help the company maintain performance. It also helps improve performance since these workers add experience to the organization. In addition, a performance pay strategy helps companies attract workers (Torrington, 2005, pg 78). Workers will leave organizations which do not recognize the importance of performance. They join organizations which value performance of workers. Through such strategies, organizations are able to attract the best employees. This improves the performance of the organization. This improves the productivity of the company. In turn, it gives the company a competitive advantage over its rivals (Huselid, 1995, pg 684). Every worker is proud to be associated with a top company. This builds the brand of the company. It helps market the company. Each worker will strive to improve the company. Skill development and retention Skill is the most essential requirement in a worker. It has a direct impact on productivity. Each company strives to improve productivity. To achieve this, an organization must have skilled workers. This usually comes at a cost. Skilled workers are rare to find. This situation occurs because of the cost involved in skill development (Torrington, 2005, pg 73). Companies are forced to put workers into programs to develop their skills. This leads to the company incurring high costs. Performance based payments have been found to enhance skill development (Torrington, 2005, pg 78). Workers work hard to improve their skills. This in turn improves their performance. This is driven by the incentive offered for their performance (Bratton, 2007 pg 45). Workers readily attend training programs to improve their skills. The sole aim is usually to benefit from the rewards on offer. Motivation is high in the company and skills are put at the forefront. Everybody aims at improving his skills. This leads to increased performance in the company (Randle, 1997, pg 193). The productivity in the organization is improved as a result. Rewards based on performance also help in retention of skilled workers (Randle, 1997, pg 199). The field of skilled workers is very competitive. This due to the cost associated with it. Some skills are almost irreplaceable. Loss of such workers has adverse effects to companies. It may even lead to competitors accessing your production secrets. When workers are offered payment according to their performance, this predicament is avoided (Beardwell, 2010, pg 125). Workers will not see a reason to join other companies since they are offered better terms in their company. This helps retain skills within the company. The company continues performing well due to the skills at its disposal (Muller-Carmen, 2008, pg 203). This enhances productivity of the company and fights of competitors. Organization culture An organizations culture has much impact on its success. This culture is cultivated in many ways. Performance based pay is a great tool for cultivating an organizations culture (Muller-Carmen, 2008, pg 191). Workers in an organization develop attitudes and behavior unique to the organization (Beardwell, 2010, pg 125). This defines the culture of the organization. A culture of striving to perform is developed. This is occasioned by the incentives offered by the organization. Each worker strives to meet the performance targets. This is driven by the reward for such a performance. Because of this, every worker emphasizes on performance. Every activity in the organization is based on performance (Bratton, 2007 pg 89). This culture runs down the organization. Each worker who joins the company adapts to this culture. Performance is enhanced at all levels. It becomes easier for the management to promote performance. Due to this culture, the company’s reputation grows. Workers pride themselves in the company. It also helps attract workers to the company. They are keen to be part of the culture. The productivity of the company improves. Performance is placed on the forefront (Muller-Carmen, 2008, pg 213). This leads to sustained success of the organization. A culture of success is hence developed. Every person in the organization revels in the success of the company. This further strengthens this culture of success. This helps the company in the management of its workers. This is because the workers are mainly driven by this culture and less supervision is required (Bratton, 2007 pg 89). This cuts down on management costs. It also helps the company in maintaining a competitive advantage over its rivals. Cost reduction It is usually the aim of each organization to cut on management costs. This challenge usually lies with the management. In most companies, the labor accounts for more than half of their costs (Bratton, 2007 pg 67). It is a great loss on the company to incur such costs without a corresponding productivity. To tackle this, managements of companies employ different strategies. Performance based payments are an effective way of cutting on these costs (Bratton, 2007 pg 89). At face value, such payments are perceived as adding on to the cost burden. However, actually they reduce these costs in a big way. Labor cost takes various dimensions. These include wages as well as training costs. Performance based payments reduce the rate at which an organization loses its employees (Beardwell, 2010, pg 125). This occurs since workers feel contented with what they are offered. This reduces the hiring costs incurred by the company. Loss of employees, more so the skilled ones comes at a great cost for the organization (Huselid, 1995, pg 657). This result in loss due to money spent on their training. Performance based payments reduce the rate of employee loss (Muller-Carmen, 2008, pg 235). This minimizes the training cost of new employees. In addition, employees in organizations that employ this strategy have increased performance. This in turn increases the productivity. This leads to the realization of improved returns for the company. Employees are paid commensurate to their performance (Bratton, 2007 pg 131). This motivates workers and put more effort towards improved performance. This ensures workers actively engage in the activities of the organization. The money paid as wages is hence not lost. This occurs since the reward ensures maximum productivity of the workers (Muller-Carmen, 2008, pg 213). This cuts on costs since less money is spent on underperforming employees. Structure of the organization This strategy is effective in ensuring an effective organizational structure (Bratton, 2007 pg 112). Effective management depends on the structure of the organization. Lack of a proper structure leads to confusion in management. This leads to misunderstandings in organizations. These can lead to collapse of companies. People should understand their role in the organization. This leads to smooth management of the organization. Performance based payment strategy helps much in realizing this goal (Beardwell, 2010, pg 90). The objectives set out help people understand their roles well. This occurs since it states what is expected of each individual. Individuals work within their scope. This is because reward is based on their performance. People have not time in interfering with other people’s work. This is because they are preoccupied in efforts to improve their performance (Beardwell, 2010, pg 125). Clear distinction also exists between the various levels in the organization. With such a well-defined organizational structure, effective management is achieved. Thus, this strategy helps in improving the organizational structure. Conclusion Performance is core in any management system. To achieve effective management, various methods are employed. Among these, is the performance based payment strategy (Bratton, 2007 pg 89). This system rewards employees in accordance with their performance. It is an effective tool in management of employees. However, this occurs if proper care is taken in its execution. A sense of fairness should exist for the strategy to achieve the desired success (Muller-Carmen, 2008, pg 213). Failure to do this, leads to workers sabotaging the organization. A well-implemented strategy helps the management in several ways. This improves the company’s productivity. It also cuts down on costs of the company. The profitability of the organization is thus improved (Huselid, 1995, pg 657). In the long run, the company is able to maintain a competitive advantage over its rivals. This is the core aim of any organizations management. This is achieved through effective management. A performance based payment strategy ensures attainment of this goal through its effective management abilities (Beardwell, 2010, pg 103). Bibliography Beardwell, J. and Claydon, 2010, Human Resource Management: A Contemporary Approach, Harlow: Prentice Hall Becker, B. and Gerhart, B., 1996, ‘The impact of human resource management on organizational performance’ New York: McGraw Hill Bratton, J. and Gold, J., 2007, Human Resource Management: Theory and Practice, Basingstoke: Palgrave Macmillan, Byars, L. & Rue, L., 2006, Human Resource Management. Boston: McGraw-Hill Heizer, J., & Render, B., 2005, Operations Management,. Chicago: Pearson Education Gregory, R., 2006, Psychological Testing, Chicago: Pearson Educational Heneman, R.L. & Gresham, M.T., 1998, "Performance-Based Pay Plans" in Smither, J.W., Performance Appraisal: State-of-the Art Methods for Performance Management, San Francisco: Jossey-Bass Huselid, M. A., 1995, ‘The impact of human resource management practices on turnover, productivity, and corporate financial performance, New York: McGraw Hill Kelley, C., 2000, "Making Merit Pay Work", New York: National School Boards Association Kessler, I., 2001, ‘Reward system choices’ in Human Resource Management: A Critical Text, London: Thomson Milkovich, G. & Newman, J., 2005, Compensation, Boston, McGraw-Hill Muller-Carmen, M., Croucher, R. and Leigh, S., 2008, Human Resource Management: A CaseStudy Approach, London: CIPD Randle, K., 1997, ‘Rewarding failure: operating a payment by results system in pharmaceutical research’ in Personnel Review, London: Cengage Seltz, S., & Heneman, R., 2004, Linking Pay to Performance, Scottsdale, AZ: World at Work Torrington, D., Hall, L. and Taylor, S., 2005, Human Resource Management, Harlow: Prentice Hall Read More