evaluate the arguments for and against linking pay to assessment of individual performance

Running Head : PERFORMANCE MANAGEMENT

Performance Management and Reward Systems

Name

Tutor

University

Course

Date

The need for results - oriented pay reform is one of the pressing human resource issues facing organizations today . To implement a result - oriented pay reform (performance management and reward system , the organization must have modern , effective , credible and validated performance management systems that are capable of supporting pay and other personnel decisions ( Mayne , John and Eduardo Zapico-Goni (eds 1997 . Performance management and reward system , works only with adequate safeguards , including reasonable

transparency and appropriate accountability mechanisms in place to ensure its fair , effective and responsible implementation (Morley , Elaine , Scott

. Bryant and Harry

br Hatry 2001 . This has created a lot of controversy with some arguing for while others arguing against it

Arguments For

Empowers employees to make decisions and prioritize their work in the best interest of the company because they know what is most important to the organization and how their actions contribute to these goals

Improved organizational profitability - the essence of any organizational existence is to maximize their shareholder 's value . This is enhanced by profitability of the firm . Improvement in productivity and quality of work of each employee contributes significantly to profitability (Heinrich , Carolyn I . 2002

Increased employee responsibility - communicating practical but demanding job expectations and making employees responsible for their decisions and actions result in noticeable improvements to employee lateness , absence , and commitment to organizational goals (Heinrich Carolyn I . 2002

Equity and fairness : this refers to equal treatment of employees . All employees are treated fairly by implementing uniform procedures that promote consistency throughout the organization

Enhanced quality of work life - employees experience greater job satisfaction because they become more successful . Employee 's conflicts are also kept to a minimum

Arguments Against

Single mindedness- employees are confirmed to only one course of activity . The activities that are rewarded get done , and those which are not rewarded are not done

Control - factors external to the organization can control the outcome in a positive or negative way . Windfall effect can improve the stock value of all stock options . This is a positive effect . Recession lowers the value of all stocks impacting negatively on the organization Employee performance results may be magnified or diluted by these effects (Mayne , John and Eduardo Zapico-Goni (eds ) 1997

Measurement error - some measures can be manipulated hence reflecting a wrong performance . Sales representatives can result to multi-period reporting so that they are not panelized by a cap on sales commission Managers who are also subject to individual performance can falsify the financial report to impress the share holders by reporting greater reports than those achieved by the organization (Heinrich , Carolyn I 2002

Resistance to change - managers or employees may be reluctant to a new system because they are contented with the current pay system and want to avoid risks of taking reductions in earnings in the new systems

Relevance of goals and incentives - some goals may be no longer relevant those goals will continue to be emphasized until the pay system places emphasis on a different objective . For instance , managers may place great emphasis on short term goals at the expense of long term ones which are more relevant . The work force will continue to lobby until these goals are emphasized to a greater extent than short term goals

Line of sight problem - this relates to division within an organization and the organization in general . The divisional and cooperate performance should be reflected in the pay system . If division performance is independent of cooperate performance then the emphasis should be on rewards for meeting division goals

Conclusion

There is no doubt about the fact that motivation is the key driver of achieving good performance within an organization . This is coupled by the fact that we are also living in money - centered world and therefore any amount of human relations cannot pay off for a lack of monetary reward . The idea of giving incentives for individual with outstanding performance has been sought by many organizations . This strategy has for a long time proven successful in optimizing individual performance dedication and quality of output within a firm . A system that rewards equally regardless of performance and dedication does little to motivate and stimulate effort and achievement (Mayne , John and Eduardo Zapico-Goni (eds ) 1997

References

Mayne , John and Eduardo Zapico-Goni (eds (1997 . Monitoring Performance in the

Public Sector : Future directions from international experience Transaction , New

Brunswick , NJ

Heinrich , Carolyn I (2002 . `Outcomes-Based Performance Management in the Public

Sector : Implications for government accountability and effectiveness Public

Administration Review , 62

Morley , Elaine , Scott

. Bryant and Harry

. Hatry (2001 . Comparative Performance

Measurement . Urban Institute Press , Washington , DC

PAGE

PAGE 5 Performance Management ...