Strengths and Weaknesses Individual Performance Related Pay
Financial Reward Scheme
Introduction
Every job position inside a business enterprise from entry level staff and personnels to management of any industries/higher designations are created with specific function descriptions as well as obligations. Each also follows a hierarchy as one staff and personnel develop seniority and competency. The job descriptions in each level are related to each other as they are all aimed at accomplishing the business aims and objectives and objectives. The relationships in the job levels form the business enterprise’s Internal Alignment. Internal alignment helps shape a pay structure which is devised to support the business enterprise strategy as well as the work flow, be fair to staff and personnels and motivate behavior toward business enterprise objectives.
A business enterprise needs manpower and labor market in order to operate and accomplish its objectives. All staff and personnels are given due payment/payment or financial rewards for their contributions to business aims and objectives. Pay structures are patterned on either the tasks, behaviors and duties and responsibilities of an staff and personnel or how they perform on the job (job-based) or on the skills, knowledge and competencies possessed by the staff and personnel for the particular job (skill- or person-based). For a business enterprise to succeed, it needs staff and personnels who have the ability and skills to contribute to overall business performance. The expectations for effective performance are laid down to them and this consists of explaining among the staff and personnels how much they will be paid for their efforts and works. Companies are considering different payment scheme. Primarily, the aims and objectives of this paper is to analyze e the strengths and weaknesses the payment or payment/payment or financial rewards schemes, such as: Individual Performance Related Pay.
Individual Performance related Pay
The companies define reward as a recognition received through the expression of recognition and appreciation of the work the staff and personnels performed It may also a reward if the staff and personnels are involved in a project or receive a special training. These only emphasize that the labor market want to be valued for their job, perform essential and significant works, treated fairly, have advancement opportunities, and be given a chance to be involved in the business enterprise, aside from good pay and strengths. Financial rewards play a substantial role in attracting and retaining manpower. This kind of recognition boosts the morale in the work environment. Hence, it is exceedingly essential and significant that the management of any business enterprise is included in the design of recognition programs considering that they communicate the agency’s objectives to the staffs and personnel (Armstrong, 2002).
Accordingly, staff and personnel motivation and performance are influenced by an effective financial reward scheme. Designing a successful staff and personnel reward scheme is essential and significant in any business enterprise in order for it to motivate staff and personnel have to use their skills and abilities to obtain effective performance and to contribute to overall business objectives. One motivational theory called Equity Theory explains that staff and personnel’s are motivated to perform well when they perceive that their efforts and the behaviors they show at work are rewarded with just payment/payment or financial rewards. Staff and personnel who perceive that colleagues who execute the same effort are given more payment/payment or financial rewards would react weaknesses and performance might be adversely affected. The business enterprise has to address this issue by ensuring that increases in performance are matched by commensurate increases in pay.
As discussed above, staff and personnel performance is critical to the reward scheme. A business enterprise cannot financial reward performance if it does not have a mechanism for measuring it. A business enterprise needs good-performing staff and personnels to these people should be able to maintain good performance during their stay in the business enterprise and the business enterprise has to constantly monitor staff and personnel performance to determine those who are highly skilled. After the business enterprise is able to accomplish selection and maintenance of good-performing staff and personnels, it can now shift its focus to supplementing the staff and personnels’ skills and competencies through additional trainings. Finally, it can work on the staff and personnel motivation by encouraging the staff and personnels to use both their innate and acquired skills in the performance of their tasks in ways that contribute to business performance. Staff and personnel performance becomes the basis for the pay that the staff and personnel is due to receive.
The pay scheme is usually seen as an entitlement wherein going to work, performing well and avoidance of being fired would merit payment for the staff and personnel. Companies today, however, are trying to consider different approaches to give due payment for their human resources or staffs. These include: Individual Performance Related Pay, Profit Related Pay, Pay Schemes purely related to grade and length of service, and Skills based pay.
The idea behind the individual performance related pay is that human resources or staffs will be motivated if they perceive they will be given rewards for improving and enhancing their contribution to the success of the firm. The advantages of this payment approach are that through the consideration of right behavior among human resources or staffs can encourage individuals to work hard. Individual performance related pay refers to the increments provided on top of normal pay wherein specific target have met or particular competence have shown. According to Thorpe and his colleagues (2000) described IPRP are payments to specific individual at work which are relevant to the performance that they have done. The advantage of this payment scheme is that it enables the organization to attract and retain efficient human resources or staffs and it improves both individual and corporate performance, enhanced motivation, clarifying roles and duties, linking effort explicitly to industrial objectives, enhancing communication, reinforcing management control and determining developmental opportunities. On the other hand, Armstrong (2002) also stated other strengths of considering individual performance related pay. This include the motivation of people to have an improve individual and organizational performance. In addition, this approach also delivers a message that performance generally or in particular aspect is essential. In addition, it also connects and associates reward to the accomplishment of specified results which support the accomplishment of business enterprise aims and objectives, attract and retain individuals by offering financial reward and provide the human need – to be rewarded for accomplishment. For instance, Ryan Air International have been able to use this approach to meet the needs of their staffs and personnel,
Although there are number of strengths by using the individual performance-related pay (IPRP) pay, there are number of weaknesses of this approach. Armstrong (2002) said that the notion of the individual performance-related pay (IPRP) pay needs performance to be measured” (p.263). In this regard, to be able to measure such performance, it also means that the performance output should be quantifiable. For instance, in the hotel industries, , different departments perform various kind of duties and not all duties can be measured by output such as in line with the Housekeeping Department. The number of rooms to be cleaned should be standardized and it cannot compare the performance based on the output.
In addition, it can also be said that It can also be argued that individual performance-related pay (IPRP) pay scheme focus on the quantitative and neglect the result of high quality (Armstrong, 2002). According to Armstrong (2002) it is often not possible to quantify every element of a specific job, and this can create the problem of focusing attention on a few quantifiable objectives while neglecting other essential and significant aspects of the role – e.g. quality and team working” (p. 264). Also, it can be added that some work requirements can only be expressed in qualitative terms (p. 264). The issue of objectivity of the assessors is similarly essential and significant. The problem of favoritism as well as the perception of fairness is the challenged for rating the performance (Brown & Armstrong, 1999).
In the individual performance-related pay (IPRP) pay, it assumes that money or the financial context is the motivator. Weaver (1988) in the concept of Theory M (Money) suggested the direct cash offering for rewards of staffs and personnel demonstrating above-average productivity. In this regard the applicability in industries like hotel companies as the concept of value for money is different depending on the individual backgrounds. Individual performance-related pay (IPRP) was based on naïve assumptions about the instrumental value of money as a motivator without taking any considerations of the lessons from expectancy theory (Armstrong, 2002: p. 269). Besides, individual performance-related pay (IPRP) pay is not the only one motivator as it can positively de-motivate (Armstrong, 2002).
For instance, staffs and personnel of the hotel industries tend to work in teams and most perceive in philosophy of work as team and the idea of being a team member. As noted by Armstrong (2002), individual performance-related pay (IPRP) pay can restrain teamwork. Armstrong (2002) cited Kohn (1988) Extrinsic rewards can erode intrinsic interest. In this regard, higher quality work, specifically on jobs requiring creative thinking, is more likely to emerge when a person focuses on the challenge of the task itself, rather than on some extrinsic reward systems, and feels a sense of self-determination, as opposed to feeling controlled by praise or reward (p. 272). In this regard each individual focus on their own performance and easily disregard the importance of team spirit.
One of the aims and objectives of the IPRP is to interconnect with the individual performance and business objectives. Such pay scheme is normally available on the extent of individual performance through performance appraisal. The performance of the personnel and human resources or staffs should be in line with the mission and vision of the business organization. The weakness of this approach is that it triggers unfriendly competition among the individual human resources or staffs which can lead to workplace conflict. Herein, individuals tend to become depressed if they think that their performance appraisal does not match with what they personally think they have done to the business organization. Giving payment on a favorable performance appraisal is considered as an example of providing positive reinforcement that will impact the attitudes and behavior of human resources or staffs especially in the process of learning. This scheme falls under performance management scheme of the human resource department. . However, there are some strengths and weaknesses of providing Individual performance related pay. Individual performance related pay work as a positive reinforcement when utilize as a motivational factor and financial reward scheme (Champion-Hughes, 2001: p. 287). IPRP tends to motivates employee to work for a common objective, On the other hand, rewards and Individual performance related pay insinuate competition among human resources or staffs, thus, breaking the perspective of teamwork (Burke & Cooper, 2004: p. 26). A payment scheme that only rewards individual performance is not consistent with sustaining teamwork (Lublin, 1995: p. R4) because the payment scheme tells human resources or staffs which behaviors will be rewarded and which will be punished (Salas et al. 2004: p. 95-120). If the payment scheme strictly reinforces individualistic behavior, without any consideration for collaboration or collective aims and objectives, then teamwork behaviors will be inhibited.
Being able to determine and value the needs for highly motivated individuals, the management of an industry has been able to develop different ways in providing rewards on their staffs and personnel. The trends in reward practice include the individual performance related pay. It can be noted that the individual performance-related pay is a common term for various approaches to rewarding discretionary payments to staffs and personnel on the basis of their contribution to the business organization. Among this common approach include the pay rewards for successful meeting work objectives or for showing work-related competences or the combination of both. it can be said that each of this financial reward approach can be helpful for motivating and retaining skilful staffs and personnel (DeWitt & Hamel, 2002).
For rewards to be valued, the management of an industry must see to it that the Payment system and payment system includes the proper scheduling on when would be the most accurate time to give such rewards. In general, rewards received by an individual soon after accomplishment of a specific objective, or soon after attainment of a given targeted performance level, are the most valued rewards and the financial rewards that serve best to install a desire for further achievement or continued good performance, when the financial reward is tied to performance in time that such monetary reward is closely associated with the individual performance. It becomes an extension of the performance.
Conclusion
Different organizations nowadays have come to realize that staffs and personnel are a significant and essential part to achieve competitive advantages. To be able to attain In order to obtain sustainable competitive advantage, the management of an organization should be able to provide sufficient motivation to their staffs and this can be done by providing rewards system. There are two types of reward system which can be used: the extrinsic and the intrinsic reward. Intrinsic reward considers self-generated elements which attempt to influence staffs and personnel to behave in a specific direction. Such elements include the motivation within the personal desires, interests as well as fulfillment which has long term and deeper effect. On the other hand, extrinsic reward is used to satisfy indirectly the staffs and personnel(Reeve, 2001). According to this analysis, this has an immediate as well as powerful impact for the individual but will not last long. Accordingly, the use of individual performance related pay of providing rewards is to let the employee be motivated to work harder to achieve organizational aims and objectives. It cannot be said that the notion of having a payment system should consider the strengths and weaknesses. . It can be said that, it is not only the material value of such reward that staffs and personnel can be motivated, but also the boost in self-esteem that organizational recognition associated with good rewards. (Dawson, 1996).
Staffs and personnel work to achieve not only personal objectives but also monetary objectives. It is noted that industries are trying their very best to find innovative payment system approach which may directly connect with the enhancement of the performance of both staffs and personnel and the entire organization. Accordingly, most staffs and personnel expects and needs to be compensated in line with the work they have done for the company and most staffs and personnel expects that their potential and skills will enhance if the employee receive payment system which are fair and commensurate the skills and expectation. In line with the management of any industry, it is said that having an efficient payment system program can boost job satisfaction and enhance commitment as well as performance of an staffs and personnel. The management of any industry can do this by considering an employee payment system program which provides the staffs and personnel that they deserve payment to the quality of the work that they have rendered in the company.
It has been noted that skills, experience and knowledge represent capital because of the reason that it leads to enhanced activities. The management of any industry should ensure that the payment system and benefits of the individuals should be compensated along with the staffs and personnel’s achievements. To be able to maintain the balance between employee input and payment system, the management of any industry has to set performance measures for their staffs and personnel and each staff should be encouraged to perform efficiently through effective working behavior. The management of any industry should let the staffs and personnel understand that differences in performance and skills would be individually recognised and be given due payment system. On one hand, the manger should stick to their specified pay rate for each employee performance measure to make sure that input and payment system will remain balanced (DeWitt & Hamel, 2002).
Reference
Armstrong, M. (1993) Managing Reward Systems, Great Britain: St Edmundsbury Press Ltd.
Dean, J.W.; Snell, S.A. (1993). "'Integrated Manufacturing and Job Design:The Moderating Effect of Organizational Inertia.
DeWitt, G. and Hamel, G. (2002). alternative Payment system Plan. Legislative Finance Committee. Online available at http://leg.mt.gov/content/publications/fiscal/interim/financecmty_june2002/broadband_report.pdf Retrieve November 18, 2009.
Reeve, J. (2001). Understanding motivation and emotion. 3rd ed. Orlando, FL: Harcourt College Publishers.
Thorpe, R. & Homan, G. (2000) Strategic Reward Systems, London: Prentice Hall.
Weaver, T. (1988) Theory M: Motivating with money, The Cornell Hotel & Restaurant Administration Quarterly, November, 29(3), pp. 40-45.
Williams, L.C. (1995). Human Resources in a Changing Society: Balancing Compliance and Development. Westport, CT.: Quorum Books.
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