Performance Management Systems: Application and Evaluation of Pay-for-Performance - Term Paper Example

Performance Management Systems: A Report on Application and evaluation of Pay - for - Performance Submitted by: XXXXXXX Number: XXXXXX University of XXXXXXXX Tutor Name: XXXXXXX Subject: XXXXXXX Subject Code: XXXXXXX Date of Submission: XX-XX-XXXX Number of words: XXXX Table of Contents Table of Contents 2 Introduction: 3 Performance Related Pay: 3 Research: 6 Analysis: 7 Conclusion: 10 Introduction: This report aims at analysing the research that has been conducted by the clinical operations and programs division at the University of Texas. The article that has been chosen is a research which includes a correlation analysis of how the performance of an employee can be affected by the pay and rewards earned by them. The major areas of interest of the study has been divided into two groups, firstly, the administrators and the managers and secondly, the entire organisation as a whole. There has been a through research that has been carried out by the university which includes surveys conducted with the employees as well. The range of the number of surveys that have been carried out is between almost 3500 to 4500 employees. This report aims at analysing the research and to gain a better perspective on the theories of performance related pay and its affects. Performance Related Pay: As said very rightly by Dulewicz (1989), "' a basic human tendency to make judgements about those one is working with, as well as about oneself". One of the common factors those interest employees, employers and the government equally is the most essential element of employment - Pay. Pay affects the employers because it is an expense borne by the business and employee performance matters a lot to the business. Also this factor affects the employer's ability to recruit and retain labour force of quality. Employees are affected by pay as it is the only source of income it also sets the standard of living and measures a value for the performance and value of service. Lastly the government is affected by this since it directly affects the macro economic stability like employment, social economic development, inflation etc. There are a number of different basis on which pay to an individual is decided. One of the oldest forms of pay is Performance Related Pay this is discussed in detail in the next few parts. Performance Related Pay refers to pay scheme used to measure individual performance in the company (Monks, 1997). It can also be used to measure group or organisational performance. The main objectives of introduction of performance related pay were to increase motivation in employees to perform better, increase the self esteem of employees, provide better understanding of the job description and functions, create better communication amongst the participants, encourage employees to be self motivated, and help improve the institutional manpower planning. (Mohrman, Resnick-West & Lawler, 1989). Also performance related pay helps to contribute to overall performance and productivity, along with motivating employee to work better by linking the pay to the achievements of target rather than the length of service. It also helps recognise the achievements of individuals and identifies the under performers, thus creating fairness in pay (Monks, 1997). It was noted that performance related pay has proved to be useful for managerial staff since it allows them to be able to set goals that need to be achieved. This makes them motivated to work towards the goals as performance related pay ensures them of a reward on achievement of the goals. The principle of relating pay and performance has been very useful and has acted as a good motivator (Kessler, 1994). Linking of performance and pay is mainly based on Improved Motivation. Famous authors and researchers like Lawler, Porter, and Vroom have pioneered psychological theories of expectancy. The theory should a simple relationship between the efforts put in by an employee, the rewards, the motivation of the employee and the possibility of gaining if the required amount of efforts is made. The theory highlighted conditions that are needed for the schemes to be motivating to the employees. These conditions also pointed out the possible failures and pitfalls. It was shown that an employee's efforts may lead to better performance for a lot of reasons like bad management and lack of skills. Similarly if the efforts and performance is not correctly measured by the management it could lead to the employees not receiving what they deserve. Also budgetary constraints played an important role for the rewards to given to employees who put in the efforts. All these and a lot of other factors were discussed by the authors. All the possible obstacles between an employee's performance, efforts and rewards were highlighted by the authors. To understand this better the following figure could be used (Marsden &French, 1998). Figure: Outline of Expectancy Framework (Marsden &French, 1998) Research: The article included an extensive research and included a number of measures like the performance management survey, the employee opinion survey and this was mainly to gain a better knowledge of the linkage of performance and merits. The research was conducted with the use of the Likert's scale. Here the responses were to be provided in terms of Disagree to Strongly Agree. There has bee a use of regression analysis to predict the overall effectiveness of pay for performance program. The research that has been conducted provides for a better view that the pay for performance programs in the healthcare is based a lot on the clinical outcome. It is also noted that since the field of medicine is one with a limited number of qualified workers, there are a number of factors that can be defined. These include, providing a set number of goals to the employees to meet the requirements of the institutional strategies as well. Good communications among the employees and the managers, increased and moir' focused training for the employees, and last but not the least, an increased link between the performance of employees and the rewards that are given to the employees. The research however has not been able to provide a determined solution to the elements that would provide for better performance and application of the performance for pay systems. The following section will provide for an analysis based on the research that has been conducted in the article. Analysis: The article shows a clear and well thought out plan that has been used. This when linked and considered in light with the various theories that have been developed over the past, provides for a clear number of factors that could be used by the companies to improve performance based on the pay. Although looking at a few surveys that have been conducted over the past few years, it is noted that people do not take pay as a motivation as much as the jobs that pay top salaries for top performances. This factor increases the motivation of employees to work better and strive to be amongst the top performers. Improved Goal Setting: Another approach is that for the reasons of relating performance and pay is provided from the Goal Setting theory. It has been studied that the setting of goals has proven to be a sure shot method of improving performance. It is essential that each employee is set with a goal to be achieved to ensure full commitment and contribution from the employee. However it has also been noticed that how an employee's goal is set influences the level of contribution of the employee to the company. Improved Hiring: Performance related pay is a different approach to paying employees, thus it also attracts different kind of recruits to the company. It has been noted in recent studies that a large portion of the improved productivity is based on output based pay. The employees who fit into this category of people are often applicants who have a urge to produce more to be able to earn a higher pay. Renegotiating the Effort Bargain: Every organisation and all managers have a fair idea o what a fair day's work would comprise, the total number of hours a person can work. While setting goals for an employee this needs to be kept in mind by managers. Even though this is unwritten, it is still a very powerful force which regulates management control for pace and nature of work being assigned. There are various factors that affect a pay system. The factors that are seen in all performance related pay schemes are Motivation of staff and moral, fairness, discrimination and gender bias. Moral and Motivation: Most of the time this system failed as different people have different levels of motivation and performance, but might have the ability to work on roughly the same level. It was noted that this method of setting the salary based on performance did not help in increasing the motivation levels of employees, but sometimes did cause employee motivation and self esteem to reduce. It has been studied that poor training for managers, inadequate communication with staff affects the moral of the employees to a great extent. A study conducted on NHS managers during 1997 - 1998 showed that performance related pay did not improve the productivity of the employees but did cause a lot of issues like jealousy among the employees and lead to reduced moral among employees (Dowling and Richardson, 1997, Marsden and French, 1998). Authors observed that even though pay rates were an important factor for employees however there were other factors which played an important role as well. Factors such as morale and self esteem had a major influence on the employee performance. Due to these factors, the emphasis on rewards based on output was rejected. Fairness of pay: This is a very essential part of performance related pay. It is noticed that there are several cases where even though the employees contribute to the company's performance it goes unrecognised. This can be due to bias from the line managers or even personal favouritism. This does not help motivating the employee but causes the employee to loose interest and motivation towards the job. In cases like this performance related pay can undermine the performance of the individual and the company due to lack of team work and cooperation within the organisation. This can also build the belief that pay is not based on performance but is based on the relationship with people within the organisation and maintaining a pleasing personality. Discrimination and Gender Bias: There have been various studies that have been conducted and it has been found that performance related pay schemes often discriminate against women. There is a clear gender discrimination, due to which women's skills are often not valued and their contributions do not receive the kind of recognition they deserve for their contributions. The needs for training are not correctly identified by managers in case of women. It is also notice that almost two third of the employer do not have any means to check for racial and sex discrimination in companies which follow performance related pay systems (Strebler, et. al., 1997). Researches have shown that there are various other drawbacks of performance related pay. Managers believe that it is difficult to measure performance of employees with performance related pay. It has also been noticed that the scheme emphasises on short term goals rather than long term issues hence making the involvement in short term goals more and neglecting long term issues. Also even though employees do get motivated to perform better, the amount of pay payable to employees is not enough to substantiate the change in performance. Also this method places too much emphasis on money and assumes that money is the best reward. This however is not the view of the employees hence it fails to improve the motivational levels of the employees. Conclusion: The health care industry is one which requires a good response from the employees and hence, it is essential that the employees are motivated and provided with a pay which could be relevant to the amount of work that is put into the job. The clinical procedures and the outcomes of these will be the mode of the calculating the working of employees and this can be used as a basis for the correct evaluation of the amount of pay that employees should be provided with. Paying an employee based on the performance is thus a very good method of ensuring that the employees work harder and there will be clear motivation that will be seen in every employee. Also it is essential to understand that the number of certified and qualified medical staff is quite low and hence it is essential that the employees are kept motivated at all times to ensure that they stay on in the job and also find complete job satisfaction. This will also ensure that the employees do not jump and shift jobs as there is a potential risk of loosing the good and highly productive employees. Bibliography Dowling, B. and Richardson, R., 2000, 'Performance Related Pay', Unison, May 2001, Accessed on 11 May 2009, Retrieved from http://www.unison.org.uk/acrobat/B871.pdf Dulewicz, V., 1989, 'Performance Appraisal and Counseling', Assessment and Selection in Organizations: methods and practices for recruitment and appraisal, John Wiley and Sons, New York, p 645 - 649 Helm, C., Holladay, C.L., Tortorella, F.R., & Candio, C., 2007, 'The performance Management System: Applying and evaluating a Pay - for - Performance Initiative', Jan /Feb 2007; 52, 1; PreQuest health and Medical Complete p. 49 Kessler, I., 1994, 'Performance Pay', In Sisson, K. (ed), 'Personnel Management', Oxford, Blackwell Marsden, D. W. and French, S., 1997, 'Performance Management and Performance Pay at the Inland Revenue: 1996', Centre for Economic Performance, London School of Economics Mohrman, A. M., Resnick-West, S. M. and Lawler III, E.E., 1989, 'Designing Performance Appraisal Systems: Aligning Appraisals and Organizational Realities', San Fransisco, Jossey - Bass Monks, K., 1997, 'Performance Related Pay: What makes a Successful Scheme', DCUBS Research Papers, 1996 - 1997, No. 18 Strebler, M. T., Thompson, M. and Heron, P., 1997, 'Skills, Competencies and Gender: Issues for Pay and Training', IES Study, Vol 333 Read More