A Study of Effectiveness of Performance Related Pay in National Health Service - Essay Example

Research Proposal: A Study of Effectiveness of Performance Related Pay in National Health Service Table of Contents 0 Table of Contents Introduction 2 Background 3 Organisation 3 Aim of study 5 Research questions 5 Literature review 5 Introduction of Performance Related Pay 6 Objectives for Introduction of Performance Related Pay 7 Reasons to Link Performance and Pay 8 Research methodology 9 Data sources 10 Bibliography 12 Introduction 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”. It is noted that appraisals are inevitable and is universal. People evaluate how well a job is done to set performance standards. The practice of performance appraisal started years ago in the early 20th century. This procedure of evaluation of work dates back to a maximum of 60 years ago, around the time of the Second World War. Performance appraisal can be called an ancient art. Performance appraisal was started as a simple method to provide income justifications, i.e. to explain if the salary drawn by an individual was justified or not based on their performance. This was a consideration since the human tendency to judge others work and performance created a lot of problems related to the motivation, ethics, legal ruling etc. at workplaces (Cannell and Wood, 1992). To ensure that the appraisal systems were just, lawful, fair and accurate, performance appraisal was introduced. The process was linked to the material outcomes, i.e. if an employee’s performance is to less than ideal then there would be a cut in pay, however if the performance was better than the ideal level set by the supervisor, then there would be a rise in pay. In 1950’s United States observed the usefulness of appraisal as a tool for motivation and development. This model was now being gradually recognised and the general model of performance appraisal started on from that time (Strebler, M. T., Thompson, M. and Heron, P., 1997). Background The birth of performance related pay was somewhere in 1980s, when many employers felt it was a great solution to improve performance and enthusiastically embraced the idea. It was then that businesses wanted to move from the service related pay progression to a more result oriented form of pay. Businesses wanted to ensure that the business objectives were met by setting performance goals for employees (Dervon, M. G., 1990). This however did not last for a very long time. In 1990s, employers felt the need to have a more improvised form of the theory as the efficiency of the theory was now being challenged by a lot of scholars and businesses. It was noted during the 90s that the scheme had failed to deliver the expected results and businesses were now looking to develop a better revised approach of performance related pay (Dowling, B. and Richardson, R., 1997). However in the current situation the definition of employee contribution is not only dependent on the output i.e. the end results achieved but also depends on the inputs by the employee i.e. what the employee is willing to contribute to the business. In the recent years however, there have been various developments in the performance related pay and there have been various different types of schemes that have been introduced thus giving companies a choice in accordance with their business models and business performance (Pfeffer, J., 1998). Organisation The National Health Service was started in July 1948, to provide the citizens with a free health care service. The main aim of the service was to provide good health service to all without the patient having to pay for the services. The hospitals were financed entirely from taxes paid by the people in accordance with their financial situation. The health secretary Aneurin Bevan opened a Park Hospital in Manchester which brought together doctors, nurses, pharmacists, opticians, dentist, hospitals and all medical facilities within one organisation. Bevan, a Welsh miner was very passionate about the NHS and wanted to ensure that everybody receives the best treatment at any given point of time in the country, without having to worry about the cost of the treatment. His main aim was to put the welfare of the sick before any other consideration, despite the financial and economic anxieties at that time. The NHS is a collective name that is given to a group of four public health services of England, Scotland, Northern Ireland and Wales. The main aim of the service is to provide free medical service to all including temporary residents and tourists and the services are financed from the central taxation. The group has grown over the years and is now undoubtedly the best medical service available all across the United Kingdom. The group has been established for over 60 years now and is now one of the most reliable treatments free of cost for all. Over the years NHS had seen a lot of changes, the group has made a number of breaks – through like in 1953 the DNA structure was revealed and in the year 1954 a link between smoking and ling cancer was established by Sir Richard Doll. The doctors and all the staff of NHS worked hard towards ensuring a comfortable recovery for the patients and a lot of emphasis was placed on health. The organisation started different medical treatments and were the first to launch the polio vaccinations and to conduct the first kidney transplant. The group also developed a lot of other medical breakthrough like the introduction of contraceptive pills in 1961, hip replacements in 1962, first heart transplant in 1968 and many more over the years. In the year 1962, a plan was developed and the NHS was divided into three groups – local health authorities, general practice and hospitals. The 1970s saw a lot of other developments with the introduction of MRI scan, test tube babies and bone marrow transplant. Over the years the services continued to grow and in 1998 NHS launched the NHS direct which was a round the clock telephonic service provided by nurses. NHS took the next big step in 2000 with the launch of walk - in centres, which aimed at giving patients a treatment without prior appointments and beyond the normal office hours. By the year 2007 the NHS has developed a robotic intervention for patients with irregular heartbeats. The technology used is very safe and doctors are now working on making the process automated. It is clear from the steady growth and the many developments NHS has made over the years that it is the best health service provided over the entire United Kingdom. Aim of study The main aim of this study is to evaluate the effectiveness of Performance related pay for the employees at National Health Service (NHS) in the UK. Research questions 1 – The benefits of utilising Performance Related Pay in NHS 2 – The effectiveness and affects on the employees of NHS. 3 – The impact of Performance related pay on the motivation of the employees of NHS Literature review The literature review will provide a description of the theoretical framework of the study. This includes the history and introduction of performance related pay, the objectives of the introduction and objectives of performance related pay. Introduction of Performance Related Pay 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 labor 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 macroeconomic stability like employment, social economic development, inflation etc (DeSilva, S., 1998). 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. 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 and 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. Objectives for Introduction of Performance Related Pay There are a variety of reasons for introduction of performance related pay. Many authors believe that the pay systems used in a company plays a very important role and can be the driving force of any organisational changes and cultural changes. It is essential to understand that performance related pay alone cannot be a driving force for any cultural changes in the company. It is necessary for the company to have a set culture to ensure that performance related pay can work effectively for the organisation. The presence of performance related pay within a company helps the employees understand the company better and also helps in reinforcing the current values and expectations of the company (Mask, D., 2000). Performance related pay helps setting goals for the company and each individual within the organisation hence making the employees more involved and related to the organisational goals. Another very essential reason for the introduction of performance related pay is the fact that it helps improve the relationship of the management with the employees, and reduces the involvement of trade unions for bargaining purposes. This helps the management to establish complete control over the company and reduces the involvement of trade unions (Marsden, D. W. and French, S., 1997). Researches have shown that the main objectives behind introduction of performance related pay are many. The highest rank being that to improve organisation performance. Other factors back the introduction of performance related pay within an organisation is to reward good performances and recognise the employee efforts. Also performance related pay acts as a motivator for employees and hence helps in increasing the commitment to the company. It also plays an important role in the recruitment of new employees and retention of existing staff and helps reinforce the existing culture, values and expectations within the organisation (Mohrman, A. M., Resnick-West, S. M. and Lawler III, E.E., 1989). Reasons to Link Performance and Pay There have been various researches that have been conducted by various authors regarding the principle of linking performance with pay. The researchers conducted have focused on understanding how well performance related pay has been accepted within organizations. Several surveys have shown that the concept of performance related pay has been well accepted over organizations (Makinson, J., 2000). 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 (Dowling, B. and Richardson, R., 2000). There are a number of reasons why companies decide to link pay to performance. A few of the basic objectives are as follows: a) 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 (Monks, K., 1997). b) 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 (Kessler, I., 1994). It has been seen that if an employee is closely involved in setting the goal, the employee not only accepts the goal but ensure it is completed with perfection like their own. c) 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 (Lawrie, J., 1990). d) 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. Research methodology The chosen method for the research in this study is Primary – Quantitative and Qualitative research. An attempt will be made to interview the managers and the top level management of NHS for the research. Also a survey will be conducted with the employees to gain their views and perspectives on the effectiveness of performance related pay and their levels of motivation at the job. Two questionnaires will be prepared, one for the management while the other for the employees. Collection methods will involve conducting structured face-to-face and telephone interviews for approximately 60 participants. The questionnaire will be standard for each group. This primary data will then be analysed. The advantage of using a structured interview is that it helps to clarify any doubts and also ensures that the interviewer understands all the responses and has a chance to cross question as well (Sekaran, 2000, p. 230). It is also an opportunity to request “more in-depth information about specific variables of interest” (Sekaran, 2000, p. 233). Secondary data will be gathered from books, journals, and online news, general, and government websites, some of which is referred to in the literature review. However, data collected from the internet will be considered with caution. This data needs to be evaluated based on its author which helps to identify whether the site is trusted or not, as the internet is “an open door to nonsense to appear, and one way of checking on this is knowing about the author” (Berry, 2004, p. 32). Data sources For the research, data will be collected from two types of sources, which are primary and secondary (Sekaran, 2000, p. 221). This is referred to as “data triangulation, where data is collected at different times or from different sources in the study of a phenomenon” (Collis & Hussey, 2003, p. 78). Primary data is information gathered from direct observation, conducting interviews, surveys, and questionnaires, from “individuals, focus groups, and a panel of respondents specifically set up by the researcher whose opinions may be sought on specific issues from time to time” (Sekaran, 2000, p. 221). Secondary data on the other hand refers to information published by others and which is already available. (Collis & Hussey, 2003, pp. 53-54). It is also data collected by other people rather than the researcher who is carrying out the study (Sekaran, 2000, p. 255). Secondary data is information available from books, journals and online resources. Bibliography Berry, R. (2004) The Research Project. 5th edn. New York: Routledge. Cannell, M. and Wood, S., 1992, ‘Incentive Pay: Impact and Evolution’, London: IPD and NEDO Collis, J. & Hussey, R. (2003) Business Research: A practical guide for undergraduate and postgraduate students. 2nd edn. London: Macmillan Press Ltd. Dervon, M. G., 1990, ‘The Paradox of Performance Appraisals’, Personnel Journal, Vol 69, February 1990, p 107 – 111 DeSilva, S., 1998, ‘An Introduction to Performance and Skill – Based Pay Systems’, International Labour Office, Bureau for Employers’ Activities Dowling, B. and Richardson, R., 1997, ‘Evaluating Performance Related Pay for Managers in National Health Service’, June 1997, International Journal of Human Resource Management, Vol 8, Issue 3, p 348 – 366 Dowling, B. and Richardson, R., 2000, ‘Performance Related Pay’, Unison, May 2001, Accessed on 18 September 2008, 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 Kessler, I., 1994, ‘Performance Pay’, In Sisson, K. (ed), ‘Personnel Management’, Oxford, Blackwell Lawrie, J., 1990, ‘Prepare for a Performance Appraisal’, Personnel Journal, Vol 69, April 1990, p 132 – 136 Makinson, J., 2000, ‘Incentives for Change: Rewarding Performance in National Government Networks’, London, HM Treasury 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 Mask, D., 2000, ‘A Brief History of Performance Appraisal and the Five Pitfalls to avoid’, Accessed on 17 September 2008, Retrieved from http://www.alliancetac.com/index.html?PAGE_ID=292 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 Pfeffer, J., 1998, Harvard Business review, May/June 1998 Sekaran, U. (2000) Research Methods for Business, A Skill-Building Approach. 3rd edn. New York: John Wiley & Sons Inc. Strebler, M. T., Thompson, M. and Heron, P., 1997, ‘Skills, Competencies and Gender: Issues for Pay and Training’, IES Study, Vol 333 Read More