Transcript Organization Structure: Strategic and Tactical

MEASURING PAY FOR PERFORMANCE
Jayendra Rimal
INTRODUCTION
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Although increasing productivity is the aim, managers also
know that simply paying employees more will not result in
increased output or improved quality.
Previously workers were of the opinion that they had
ownership rights to their jobs and were entitled to the pay.
Due to the changing landscape of employment, organizations
are looking for ways to reduce the fixed part and increase
the variable part of the compensation package.
The variable part comprises of the short-term and longterm incentives and awards linked directly to employee
behavior, contributions or results achieved – these are
regarded as pay-for-performance (PFP) programmes.
PFP IN THE KNOWLEDGE ORIENTED SERVICE SECTOR
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History shows employment has moved from the agrarian to
the manufacturing to the service sector.
In many developed countries the service sector is
responsible for a major portion of all jobs while the
manufacturing sector holds most in the developing areas.
The gold collar worker is used to describe the modern day
knowledge worker who make much use of their intellectual
faculties within a problem solving, decision making work
environment.
Due to the nature of these jobs it is difficult to identify,
recognize or quantify the quality of contributions/outputs.
But there are barriers that block the design of incentives
for these kinds of jobs.
APPLICATION OF MOTIVATION THEORIES
It is important that those involved in designing reward
systems or PFP programmes understand the human behavior.
The goal being to design programmes that direct the
behavior of employees that benefits both the worker and
the organization. Hence the motivation theories:
1. Content theories of motivation: This focuses on the needs
of the individuals attempts to satisfy through various
kinds of behavior or actions. The primary contributors are
Henry A. Murray, Maslow, Herzberg, DeCharms, Deci etc.
These theories sought to understand intrinsic and
extrinsic motivators. DeCharms and Leci stated that if
the pay does not have a strong relationship to the work
performed, behaviors demonstrated and results achieved,
the compensation can act as a demotivator that reduces
motivation and blocks improved performance.
APPLICATION OF MOTIVATION THEORIES
2.
Process theories of motivation: These expand on the
content theories by describing how the motivation theory
works. This has been more useful in designing rewards.
Expectancy theory has been more popular as this
represents ideas or thoughts an individual develops about
the consequences that may result from a certain action.
It provides these guidelines for designing incentives:
The need to identify certain desired actions
 The need to relate outcomes to the demonstration of certain
actions
 The need to provide the consequences within an established
schedule
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Other theories are Operant Conditioning by B.F. Skinner
and Reinforcement Theory. These theories state that a
reward will have motivation when employees recognize
link between activities performed, results achieved and
rewards gained.
USING INCENTIVES
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Pay for performance have little positive effect when:
There is less trust in the program and how it operates
 Lack of communication about the procedure to be followed
 No link is seen in the specific pay increases with particular
levels of performance
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Although there are unlimited number of factors available
to motivate employees, no one is sure how motivation
works, how much motivator is required, and when it works.
 Incentives ought to be designed to relate to a different
set of behavior than do wages or salaries. The major
reason for the relationship between incentives and
improved performance is ownership.
 Another reason for the success of incentives may be the
human desire for recognition.
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PERFORMANCE APPRAISAL: ISSUES AND OPPORTUNITIES
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Performance appraisal is the formal process, normally conducted
by means of completing an instrument that identifies and
documents a jobholder’s contributions and workplace behaviors.
Rewarding employees for effort reinforces their behavior in a
manner that increases the likelihood that they will also achieve
their own goals. Some compensation decisions based on
performance appraisals are:
Is the employee eligible for a pay increase?
2. Is the employee eligible for a grade/step increase in the pay
grade?
3. Is s/he eligible for a superior performance increase?
4. Is s/he eligible for a bonus?
5. Are employee pay increase determined by some merit chart?
6. Must the employee achieve specific goals to gain bonus?
7. Are profit sharing distributions tied to performance ratings?
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DESIGNING A JOB CONTENT BASED PA PROGRAM
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Performance Dimensions: These are those qualities or
features of a job or the activities that take place at
work that are conducive to measurement. These
dimensions integrate the requirements of the job with
knowledge, skills, efforts and desires including demands
on the job and resources available.
Rating Scale Design: It should be easy to administer,
translate to quantitative terms, permit standardization
and relate to various kinds of qualities or rating items.
Performance standards: It is a criterion used to measure
an employee’s performance of a job.
ANY QUESTIONS?