Performance Related Pay And Employee Rewards Management Essay

capital punishment Related chip in And Employee Rewards Management EssayPerformance Related Pay (PRP) has been defined by several(prenominal) scholars including Armstrong (2002261) and CIPD (2009). They suggested that PRP is a method of remuneration that provides individuals with financial reenforcements in the form of increases to basic present or exchange bonuses which atomic number 18 link to an assessment of performance, comm further in intercourse to agreed objectives. This definition captures what performance link up ramp up is all about. In order to understand how PRP works in practice in relation to theories, it is been analysed with the help of the current practices which argon prevalent in the organisations of repute. The organisation mentioned here is Mc Donalds which is too referred to as McD, which is a private sector fast food chain with 31,000 centres in 118 countries around the globe, McD uses performance related be in order to motivate their mental fac ulty, and similarly has different repair structures. The main aspects of performances related ante up aims have been identified as the nature of performance measures, assessment of the performance against fixed standards and how this is related to establish schemes (Kessler Purcell, 1992 cited in Thorpe Homan, 2000).PRP started becoming popular by the early 1980s and have been a major constituent in the grant and support scenes for many organisations. PRPs effect is much than just motivation alone it is a signifi ga unsex phenomenon in the change counselling philosophy of the modern organisations. Now they have much much expectations thrust upon them uniform improving quality and skills, changing the work culture and promoting co-operation apart from the normal roles like recruit, reward and decl ar employees (Cannel Wood, 1992).In recent years people have been the key source to competitive advantage and it is not surprising on how employers try buying employee comm itment. However the question of if the methods adopted are successful is still debated. Motivational theories post be traced back to the time of Taylorism and the theories have evolved from scientific guidance to Hawthorne, Maslow amongst other(a)s. However the report forget focus on Vrooms 1964 expectancy theory on which PRP is establish.According to CIPD (2009) thither are three main objectives of PRP carcasss. Firstly it motivates employees to give their best performance by linking performance to the pay scales. Secondly PRP advocates the organisation to build up a strong high performance based organisational culture. thirdly the fact of fair-trade policy. The better performed employee in the organisation gets the best monetary reward.The Expectancy Theory points out that management involve to communicate and disseminate information to employees that causal agencys will be recognised and rewarded also it is managements responsibility to establish schemes to reward the be haviour they want. Furtherto a greater extent, the theory also implies that money is a significant motivator for well-nigh, and will usually alter our behaviour either by increasing or directing effort in specialised directions to secure a higher salary or bonus payment. Also, it suggest that money is important not simply for its own sake, but because it is a means to achieve other ends (Taylor 200019).The theory has three cardinal beliefs. The first is Performance Outcome Expectancy which implies employee running(a) in a particular way will yield foresee adapted consequences while the Concept of Valence is the second. It examines the value derived from the outcome of behaviour and the final concept is Effort Performance Expectancy which examines employees perception of the likelihood of achieving a desired objective (Marchington and Wilkinson 2005).However PRP can not be discussed without looking at the overaged pay and impertinent pay. The old pay was to a greater extent co mpatible with traditional organisations structures and employment blood in the 1970s and 1980s. The concept was characterised to be bureaucratic, based on incremental progression, lacks horizontal integration with other HR activities and it detached pay from the strategic objectives of the organisation (Philbeam and Corbridge 2006231). The system faced lot of challenges because pay had become a form of entitlement to employees, was not motivating and does not labor change. In contrast to the above, the main concerns of the old pay were fairness, consistency, equity and transparency but was criticised for inhibiting organisational study in the twenty first century (Philbeam and Corbridge 2006231).Lawler (1971) developed the new pay system which was in response to the issues embossed in the old pay. It was the opposite of the old system which sets out to achieve challenges faced by the old system. The new pay was supposed to replace the old pay, he however stated that the new pay doesnt necessarily mean implementing new reward policies or abandon the traditional ones it means identifying new pay practices that enhance the organisations strategic effectiveness (Lawler 19951). It was also suggested that the new pay helps link the financial success of the employee and the organisation, shows a connection between employee pay and performance and suggests that employee are rewarded when they exhibit a desirable behaviour (Tropman and McAdams 2001, Philbeam and Corbridge 2006). However, the new pay has since evolved giving birth to various forms of pay such as squad based pay, readiness pay, skills based pay et cetera.Performance related pay varies between sectors and the 1998 IPD research shows that PRP is employ by 72% of employers in the financial services and 41% in the public sector (Armstrong 2002266). Furthermore, the idea of linking a great deal of pay directly to performance appraisal and to the achievement of specific performance objectives has prove d particularly beautiful to employers and such approaches are becoming popular in two the private and public sector (Taylor 200019).Moreover, PRP has a beneficial effect on employee performance and the achievement of organisation objectives and goals (Lawson 2000 311). A typical example is when the wedge introduced PRP in 2008. Here, monthly targets were given to employees and those who met their targets at the end of the month were rewarded in cash to encourage them, this is also applicable in the trust but the competition is between doctors. This worked for sometime but led to disbelieve between employees. Employees began functional on customer relationships that were not assigned to them and blacklisting of fellow colleagues with customers and senior management became the norm. This is support by Marc Thompson (1992) who stated that new forms of pay can have a damaging impact on trust and working relations (Armstrong 2002268).Similarly, PRP motivates and de-motivates employe es at the same time. This is supported by Marchington and Wilkinson (2005) who identified from their research that 83.4% of the warning believes that PRP de-motivates while the others believe otherwise. Employees who meet their target are motivated to put in more effort some who have not met their targets will try keeping up with the drive however in a situation where a staff has met 99% of its target and their effort is not rewarded will breath to de-motivation and this will have a ripple effect for other staff will take up the attitude of why put in more effort when the organisation will not reward a colleague who met 99% of their target and this is applicable in both organisations. This also star topologys to lower chore satisfaction on the part of the de-motivated employee and vice versa ( outlay 2007484). However, the employer prefers PRP because it enables them pay few people more money kinda than promoting the hardworking staff who has not met their targets thereby savin g cost. Again it depends on how effectively it works as a motivating tool to reflect organisational performance, employee development, loyalty, responsibility and the sand of achieving the organisational goals (LGE, 2008). .However employers use PRP to attract and retain people to their organisations by offering them competitive financial rewards. The basic boldness of employment is that services are exchanged for benefits which could come inform of money. Moreover, in an industry such as the financial services where PRP is a norm and the pay is competitive, staff retention is substantially important because it may lead to the loss of agate line when the employee is recruited by a competitor and is offered higher pay. At the present situation of credit crunch to the highest degree of the organisations are looking to reduce the number of employees as well as attract and retain only the employees who are high performing and multi skilled employees. Again high performing employees eight out of golf-club times is most likely to agree with the system of pay for performance and the organisations wishings to put this scheme in order to attract and retain high performing employees (Thompson, 1992). In simple, establishing a standard for measure and rewarding for high performance can assist in retaining the most industrious employees. On the other hand it causes unfairness to the other employees because they get to share the target of the staff that leaves the organisation. This leads to the employer requiring the employee to put in more effort to achieve the new target under the same scheme. The doctors in the trust are not faced with this pressure because their targets are not financial and it lies more towards overtime hours and on call visits. unrivaled of the key concerns of the old pay was to promote fairness in the workplace. However PRP could lead to unfairness. PRP in both organisations is based on performance appraisal where the manager will recommend a staff for reward at the end of an appraisal period. In a situation where the manager recommends an average performer for PRP and does not recommend a top performer because the manager believes the employee has not done enough while it is sheer to other managers and team members that it was the recommendation was a case of favouritism. This highlights a key issue affecting PRP which has been argued of not having a consistent method of judgement (CIPD 2009). The difference with the process in the bank is the entitlement of the employee to fill in their comment at the end of the appraisal and decide if the appraisal was fair or not based on listed reasons. This also cements the fact that PRP leading to difference of opinion and in this case a rocky relationship between the appraiser and the appraise.Furthermore, CIPD (2009) suggest that linking of pay awards to performance review process may inhibit an blunt and honest discussion of an individuals training and development needs. Th is statement could be interpreted as PRP identifying developmental needs of the employee during appraisal process. Using the trust as an example the PRP scheme requires employees with the exception of doctors to present their continuous development plan (CPD) during appraisal period to show how they have developed, their future plans and the manager helps identify where the employee is lacking and how they can develop those areas. When compared to the process in the bank, there is no CPD presented during appraisal but the manager and employee identifies the areas where there is need for development to remedy performance and make recommendations to management. However, both organisations only review the staff development at the next appraisal.It is assumed that team working yields better results. UNISON suggests that efficient and effective service depends on cooperation from staff Labour Research Development (19945). However PRP undermines team working because it does not put into condition group efforts but it rather promotes individual working. The practice in both organisations promote team working but staff are only rewarded individually, which leads to uncooperativeness from team members, poor service delivery, de-motivation and it generally promotes poor performance.Marchington and Wilkinson (2005341-342) states that with vehemence PRP places on individual performance-leads to a short-termist approach whereby individuals look for quick returns from small scale projects rather than addressing more fundamental problems. This shows PRP motivates better in short term compared to long term. The McDonald company lives up to the philosophy of Pay for Performance when it comes to rewarding their employees. While examining the situation in McD, it was noted that the organisation keep broadband pay data both internally and externally of the employees base salary after screening their performance which truly helps the employees to review their performance. McD offers TIP or Target Incentive Plan which is an bonus pay plan offered at corporate and regional employees helping them to link their pay to the performance in the sector they work. Kohn (1993) states that by and large, rewards heed at securing one thing only temporary compliance. When it comes to producing lasting changes in attitudes and behaviour, however, rewards, like punishment are strikingly ineffective.. there is no firm basis that paying people more will encourage people to better work or sluice in the long run, more work (Armstrong 2002272).PRP is introduced to organisations to ameliorate performance and maybe promote staff development during the process. However, it has been noted that with the existence of PRP in an organisation, there is a lesser drive for self development. People want to develop themselves initially to get be able to earn more money while a lesser percentage wants to improve their knowledge. PRP ensures people get the money, but de-motivates the sta ff on the long run while not accomplishing the initial goal which is to improve performance. Kohn (1993,1998) suggests that extrinsic rewards can erode intrinsic interest and that there is no firm basis for the assumption that paying people more will encourage people to better work or even in the long run more work (Armstrong 2002272).Critique of the Performance Related Pay trunkHaving examined performance related pay as a motivational legal document, it was noted that it is a widely used instrument in private and public sector organisations both nationally and internationally. It has proved overtime as a valid instrument for motivation but it has been criticised by various authors CIPD (2009) inclusive which states it has proved in some circumstances a rather crude instrument and the 1990s witnessed a number of challenges to the theory. It was also criticised of not been the only or even an effective motivator.According to Brown Heywood (2002) PRP increases the stress grammatica l constituent among the employees. most of the line managers having the view that staffs tends to put more pressure on themselves as they get motivated by the rewards and incentives which are put forwarded for individual performances and achieving set targets. The employees feel pressurised by the fact that their promotions and appraisals are heavily linked by the performance based approach. Because of this the workers tend to feel more stressed and can even lead to the breakdown of a staff member.Beer (1984) corroborates this while suggesting that when pay is tied to performance, it reduces the intrinsic motivation which comes when individuals are impromptu involved in work because they are given freedom to manage and control their jobs also, it signals that it is management that is in control which reduces the individuals feeling of competence and self determination (Armstrong 2002272). Several academics have criticised PRP as an instrument which promotes jealousness among staff which can lead to organisational conflict. However, Oswald (2002) disagrees with this and suggested that if salaries were confidential, then there s no way it can lead to conflict also he suggested that people should be paid on merit and effort (Wright 2004122).PRP is measured use performance appraisal systems but the decisions of line managers makes reduces the viability of the process. PRP undermines team working and works more as a de-motivator rather than a motivator this is supported by Thompson (1993), Marsden and French (1998). While Pfeffer (1998) states that it is time consuming, undermines team working and it undermines the performance of both the organisation and individual in reality (Wright 2004118).ConclusionThe search for a affirmatory relationship between PRP and performance as been described as looking for the holy grail (Fletcher and Williams 1992, Price 2007) while CIPD (2009) said it was the holy grail of the 1990s. Having examined PRP has a motivator, on refle ction it shows it is a motivating instrument which is more applicable and effective in some industries compared to the others. Also, even though it has been criticised by several authors for its weaknesses, it shows that each theory has a weakness and its weakness has given birth to other forms of performance related pay thereby giving hope to more research on how performance can be ameliorate in an organisation. The Labour Research Department (19992) quoting a personnel manager who stated money is really a de-motivator and a company that states the constant measuring of people against each other fed into staffs sense of job insecurity by generating evidence of failure to meet jobs. However, with its negative effect on performance, motivation, team working and the fact that the process could be subjective and expensive organisations are still applying it and trying to transform appraisal methods in order to get it right. Likewise the manager employee relationship is considered the main important factor in determining the success of PRP in an organisation (Thompson, 1992).However, Armstrong (2002287) states that PRP has a limited power to provide incentive through financial means alone should be recognised, but that does not mean it should be spurned out of hand. It does work as a reward process in some circumstances and it does punish the basic principle that it is equitable to reward people who do well more than those who do badly.