Managing Personnel and Human Resources - Essay Example

Personnel Management NAME: COURSE: HR2050: Managing Personnel and Human Resources TUTOR: DATE: Pay Linked Performance Pay linked performance is also known to many as pay for performance scheme. This is whereby an employee is paid according to his level of performance i.e. your pay is commensurate to your output. This has been experienced in many sales and marketing companies. They allocate a commission per every sale and this increase as your sales increase. They may have a permanent salary for the employee but it is not revealed at first until the employee has shown considerable effort. This kind of system has really worked in many organizations because an employee will put all his energy to achieving his goal of making as many sales as possible, just to increase his commission. But this is just an example of pay verses performance, we therefore need to go deeper and assess other applications of thee same especially to companies dealing with permanent employees. In an article by Jim Heskett, he makes reference to one Renat Nadyukov who said that “Sometimes we forget why we pay people”. In my view Renat was looking at remuneration from another angle that employers sometimes pay their employees just because the end of the month has come. But we forget how important it is govern an organization through pay for performance system. Heskett quotes one Sivaram who says that “in the compulsion to stay at par with other players, we lose track of real value and performance. In this essay I wish to assess how pay verses performance affects the output of a company. This is because every aspect has its two sides of the coin. There are limits to which pay can actually produce performance and this is what brings the two sides of the coin. There are some cases where the more an employee is paid rather if there is an increase in an employee’s salary then his performance is expected to go up. While on the other hand, is the reason why pay may not necessarily reflect performance. Some high pay packages are not for employees from within the company but from people hired from outside. These people tend to negotiate for their pay regardless of how they perform in the organization later. This is because many pay packages are controlled by what other people, in the same position, in other companies or comparable jobs, are being paid (Heskett 1). This is done regardless of their performance. A company may do so just stay ahead of the rest by getting the so called the “best” in the industry without necessarily assessing their performance. A good example may be derived from Kenya’s Citizen TV. The chairman of the TV station (S K Macharia ) is said to have brought back to the country an average news presenter from a South African TV station (ETV) at what many have termed as an unjustifiable cost. The presenter is currently ranked as the highest paid media personality, earning 800,000 in Kenyan shillings. It is also said that the Citizen TV had to pay ETV channel an amount 4.5 million in Kenyan shillings, just to free her from the station (Career Point Kenya). In this Kenyan case here, the news presenter is earning a total of KShs 800,000 while the women behind the camera and who support her to look as she does on screen earn only KShs 44,000. The article raises the question whether, are some employees more valued than others? At this point pay verses performance brings out a negative impact on the employee performance. Most of the underpaid employees will feel that they are not appreciated for what they do and they therefore end underperforming. One Xu Jian a Human Resource Manager at the Timken Chengdu Plant, comments in Heskett’s article and says that it is very easy to talk about pay for performance but what criteria do we use to measure individual performance. The question asked is whether an individual’s performance can contribute to the organization’s goal. Jian explains that performance is a mixture of personal competence, motivation and the environment. A person may be a poor performer not because of any other thing but the environment, but if exposed to better conditions then he performs better than before. It could be just a little increase in his salary. One author and a business consultant, Dan Pink, notes that pay for performance models do not work especially for tasks that require creativity and unfamiliar solutions (Vivian 1). That was just one dark side of the pay linked performance strategy but it does not mean that it is all a wrong idea. This is because some organizations are now looking at it as the better option. These organizations are hunting for the pay linked performance model with an aim of increasing or rather intensifying the link between plunder and performance in such a way that there is a good profitable sense and handsome booty for the employees who have given the company the boost to reach to those great heights (Vivian). There are so many pay for performance models today but most of them pick their lines and guidelines from Victor Vroom’s Expectancy Theory about motivation and management (Vivian). Vroom observes that an individual can be motivated if he takes four factors into consideration. First, that the reward being given will settle a dire need. Secondly, that the desire to settle the need is strong enough to make the effort worthwhile. Thirdly, that there is a positive relation between effort and performance and finally that favorable performance will yield into a desirable reward (Isaac et al). Just to lay more emphasis on what Vroom asserted and for clarity, an individual will put all his effort in a certain task if he has the conviction that there is a high probability that his effort will contribute greatly towards the success of his organization and that the success of his organization will contribute greatly to his success (Werner 335). It would therefore be prudent to conclude that an employee’s places his organization’s goals first before his goals and at this point the use of incentives and rewards would come in handy (Isaac et al). In the world today we talk of compensation in the place of wages or salaries. Most people today are in agreement that pay linked performance is the way to go, but with the economic trends today, an organization ought to be very careful to put a balance between the cos of compensation and employee motivation (Bhaumik 1). This should not be used as a way to put down employees, they should be fairly compensated. Scholars say that compensation is the outcome of productivity (Bhaumik 2). While handling compensation one requires to have a compensation plan with objectives which should be able reflect the needs of both the employer and employee fulfilled. Bhaumik lists the objectives as: internal, external and equity, to attract and retain talent and ensure equity, to bring aboard new and desired behavior, control costs and finaly ease operations of the organizations. Bhaumik has identified four objectives of compensation that any company should embrace. They include: Equity, Efficiency, Macro-economic stability and Optimum allocation of labor (Bhaumik 8). Of major concern here are equity and efficiency because they are closely related and are concern the pay linked performance issue. Equity will be discussed in four aspects; first is the distribution of income by narrowing inequalities, secondly is increasing the wages of the lowest paid employees, thirdly is to protect the purchasing power and finally it is the concept we have been discussing and that is equal pay for work of equal value (Bhaumik 3).Efficiency which is closely related with equity attempts to link part of the compensation to productivity. It also touches on the performance acquisition of either individual or group and the application of their different skills. It is advisable though for companies not to base their motivations on money. They should know that some individuals are motivated by other factors like their personal desire to make contributions and thus the company should have a way to recognize such efforts to motivate such an individual. But our main concern is pay for performance, so we may tend to dwell a lot on monetary awards. First and foremost the company must know the criteria to follow when rewarding because we have poor, average and top performers. Poor performers receive no rewards so that they are encouraged to perform better next time. The average performers will receive substantially smaller rewards or pay raises so that they will be motivated to get those high increases or better rewards next time. The top performers should get the highest rewards or pay rises for their exemplary performance. This will act as a target set for the other employers who will work even harder to get such awards. The top performers will also work extra hard so that they will never fall from their standards and that none of the employees below them will beat them (U.S. MSPB 1). A company may decide to put in place pay for performance for different reasons. They may decide to do so to woo others to join their company and this will put them in a good position to vet and get the best of performers. They also may do so to improve individual effort and in the end improve the company’s performance. This could also act as a way for the company to be fair in the way that they pay their employees because high performers should get good remuneration and poor performers should be encouraged. Research has shown though that this is easily achievable because of the complexity of the process and the expense involved therein. So a company should be ready to spend for this to come true. Most companies have objectives laid down towards pay linked performance. Some may wish to lure and maintain high performers while others wish to improve their individual employees’ performance which in effect improves the company’s performance. Other companies may wish to use pay performance in order to bring equity during salary payment. They wish to reward according to an individual’s performance so that the top performers are rewarded accordingly, which in the end is a fairer way of remuneration. But one may wonder why pay performance is not easily achieved. This is because of the complexity of the process and the amount of investment that a company has to get involved. In the article by U.S. MSPB, the authors identify some elements that could also delay the implementation of pay for performance. These factors include blemishes in the design, implementation and operational phases. For a company to put in place its model of pay linked performance, it has to consider some key points before making that decision. This is according to a guideline from an article presented to the US president by the MSPB. These key points include first and foremost the question whether the company is ready for the pay linked performance. In getting to know whether a company is ready the key issues addressed are: organizational culture, supervisors, performance evaluation, funding, fairness, training and finally system evaluation. The second key point to address are the goals that the company has laid down towards pay for performance. Most companies’ goals are recruitment retention and motivation. But it is advisable to include more goals. The third key point to address is who should be paid for performance. On this point, the MSPB says that pay for performance can be either inclusive or exclusive. Some companies may wish to include all of its employees in a single pay for performance plan to unify its workers. Others choose a pay for performance plan that only covers those who have made large contributions to the company. The next point to consider should be what should be the timing for implementing the pay performance. This means that a company can choose whether to implement the plan all at once or in stages. Implementing it in stages means choosing a certain section to be the pilot point and then moving on to other sections (Sacht et al). The next thing to consider is what should be rewarded. In making these considerations some criteria that may be used include: the use of multiple measures, alignment of organizational goals and measures, organizational verses individual criteria, individual verses team verses organizational performance, possession verses demonstration of competencies, short term verses long term goals, external constraints and last but not the least, should the performance based pay be tied to the performance appraisal system. Another key point to be looked at is how employees should be rewarded. Some suggested ways, which carry their advantages and disadvantages, are: bonuses, performance-based pay increases and finally combination strategies where you combine both strategies. The other key point is how much pay should be dependent on performance. Pay for performance strategies should carry a higher amount to ensure that whoever is receiving it and whoever witnesses the reward get a good notice of it. The company should also address the question how performance-based pay should be funded. This should help in avoiding unnecessary strain to the company’s finances. The other points that should be addressed include: how can costs be managed, who makes performance rating and pay decisions, who provides input to performance ratings and finally how can agencies pay system integrities. All these points are points that were brought up for approval by the MSPB to the president and have been used widely as a base for making pay for performance plans. They have been of great use and value to many companies. Conclusion Companies that afford to stay ahead of others recognize the power of employee empowerment increases productivity in the organization (Isaac et al). Employees need to feel that they are valued for whatever production they achieve and for whatever extra output they make. A gardener who makes sure that the compound round the company is neat and looks inviting, should be appreciated for that effort because were it not for his contribution then the company compound would look very untidy. Employee motivation is organizational improvement. References/ Bibliography Beardwell, J. and Claydon, (2010), Human Resource Management: A Contemporary Approach, (6th ed.), Harlow: Prentice Hall, chapter 13 Mora, Vivian L. Making Pay-for-Performance Models Work Werner, A. 2002. Leadership. In: Nel, P.S., Gerber, P.D., Van Dyk, P.S., Haasbroek, G.D., Schultz, H.B., Sono, T & Werner, A. Human Resources Management and Leadership. London:Oxford Citizen TV Paying Janet Mbugua Ksh 800,000, Cameramen Ksh 44,000, 2011. http://www.careerpointkenyajobs.co.ke/2011/10/citizen-tv-paying-janet-mbugua-ksh.html Isaac Et al. 2011. Expectancy Theory and its implications for employee motivation http://www.academicleadership.org/article/expectancy-theory-and-its-implications-for-employee-motivation Heskett Jim, 2007. How Should Pay be Linked To Performance? Harvard United Kingdom Sacht, T. 2003. The Beehive model. Equity Skills News and Views, 2(14). 15 September 2003. Bratton, J. and Gold, J., (2007), Human Resource Management: Theory and Practice, (4th edition), Basingstoke: Palgrave Macmillan, 2007, chapters 8 and 9 Kay Ira T, Putten Steven Van, 2007. Myths and realities of executive pay. Cambridge University Press 32 Avenue of the Americas, New York, USA Corporate Leadership Council, 2003. Linking Employee Satisfaction with Productivity, Performance, and Customer satisfaction www.corporateleadershipcouncil.com Guest, D. 2002, Human Resource management, Cooperate performance Employee wellbeing: building the worker into HRM. The Journal of Industrial Relations, Vol. 44, No. 3, pp. 335-358. Farrell, Paul, 2010. Human Resource Devolution: A local Authority perspective. A Dissertation Chester Business School June 2010 Read More