Performance-Related Pay (PRP) has become a growing trend in the last two decades in many organisations (Cadsby, Song & Tapon, 2007). The concept of performance-related pay was designed as a way to motivate employees and encourage desired behaviour due to individuals being different in terms of their own levels of motivation, drive and initiative. Organisations need to take this into account and set overall targets clear to individuals which are also in line with organisational goals to make sure incentive plans work effectively. Numerous researches have been conducted regarding the issue of the effectiveness of incentive plans. Some management experts suggested that incentives can be a powerful tool to motivate employees (Bennett, 1993) and Vroom’s (1964) expectancy theory indicated that pay for performance provides a direct and explicit link between performance and outcome, which fixed salary compensation does not. However, Author Kohn (1998) contends that money does not motivate employees and is not a substitute for good management. The aim of this essay is to examine the benefits and the costs in implementing performance incentives.
The benefits of implementing incentive plans
Managers have to be familiar with how to use the power of incentives to drive for individual motivation and organisational effectiveness. It can be a highly efficient motivational tool and should be employed under the appropriate circumstances (Bennett, 1993). Most notably, performance-related pay plays an important role in economy downturn. Since companies generally have a smaller amount of capital to allocate for compensation during an economy slowdown, offering salary increases or bonuses in varying amounts to the best performers or the most esse...
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..., May-June, 38-40. [Response to Kohn]
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When employees were asked, what factors could be changed at USAA to help maintain employee motivation levels, a couple of them answered with, “higher wages” and “more money”. This response corroborates other studies regarding pay which state surveys will more likely under emphasize the importance of pay relative to other motivational factors. (Rynes, Gerhart & Minette, 2004). “Financial incentives had by far the largest effect on productivity of all interventions. For example, pay was four times more effective than interventions designed to make work more interesting.” (Rynes, 2004). One reason for this phenomenon is social desirable responding. It should be noted, that although pay may be under reported, the results indicate other factors are also important for employee
The company Steel Co, which has been established for around 30 years, has been in a steady decline during the current recession and although a Divisional Director has been employed by the owner the fortunes of the company have not improved. The staff is unhappy, unproductive and unimpressed by the Human Resource system that currently exists in the company. The pay structure that currently exists within the organisation has been much debated among employees who feel it is unsatisfactory. The Business Adviser will research Performance and Reward management tools in order to help the company develop a more suitable Performance and Reward system to use. A variety of sources will be used in order to evaluate the system and tools against other organisational frameworks. The pay structure within the company will also be looked at in order to identify any possible changes that could be made.
Mathis, R. L., & Jackson, J. H. (2010). Human resource management (13th ed.). Mason, OH: Thomas/South-western
Noe, Raymond A., et al. Human Resource Management: Gaining a Competitive Advantage. 7th ed. New York: McGraw-Hill/Irwin, 2010. Print.
Many of Harrah’s employees deemed the goals set by Winn’s current incentive program to be unrealistic; on the other hand, others felt a sense of entitlement for bonuses. Therefore, Winn’s job is to provide a recommendation to Gary Loveman, on how to motivate and get employees energized. In order to motivate the employees, Winn had implemented an incentive pay plan to rewards Harrah’s employees in all of its properties for improving customer service. The company’s purpose for incentive program was to implant a competitive mindset in its employees as well as to show the employees that they are core of the...
Noe, Raymond A., John R. Hollenbeck, Barry Gerhart, and Patrick M. Wright. Human Resource Management: Gaining a Competitive Advantage. 7th ed. Boston: McGraw-Hill Irwin, 2010. Print.
Incentive reward engagement offers a win-win situation for the employees and the company. Kelleher believes that incentive is a form of recognition and builds engagement through company’s and employee’s obligations towards a common goal (2014). The company has a “Growth Incentive Scheme” for the production workers. Special monetary incentives are provided should the workers achieve the monthly output target. Through the rewards, employees feel motivated towards their work and thus, contribute towards the company’s
...e “ The reward system of the organisation guides the actions that generally have the greatest impact on the motivation and performance of individual employees”. Similarly, Wah (2000) argues that companies which treat their high-performing employees significantly better than those that don't are the best-performing companies around and they reside in the upper quartile of shareholder returns. In addition Lawler (as cited in, Readings In Contemporary Employment Relations, 1998) states that if all the psychological rewards are removed employees will grudgingly remain at work, however if all the financial rewards are removed they would most likely leave.
Research has shown that motivation in an employee is an important factor which determines his performance. Motivation is the “driving force within individuals” (Mullins, 2007, p. 285). It is the concerned with finding out the reasons which shape and direct the behaviour of the individuals. The people act to achieve something so that they can satisfy some needs (Gitman and Daniel, 2008). It is important for the manager to understand this motivation of individual employees in order to inspire them and devise an appropriate set of incentives and rewards which would satisfy the needs that they have individually (Kerr, 2003). Once these needs are expected to be met in return for some specific behaviour or action, they would work more diligently to have that behaviour in them and to achieve that objective (Meyer and Hersovitch, 2001). Since it would lead to early and fuller achievement of the company objectives as the individual would work more diligently, it would lead to better organizational performance (Wiley, 1997).
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