Pay for Performance
HRMT 407
Pay for Performance
Positive or Pitfall?
Andrew Ray
In an ever changing economy where competition to perform at the highest levels is required for individuals and companies to succeed, how are companies to ensure that they hire, promote, as well as retain the highest quality employees? One method of enticing employees to perform at the highest levels is the theory of Pay for Production. The basic concept is to offer employees the ability to increase their salary by meeting and or exceeding benchmarks set by the company. In an article written for SimpleHR Guide. Com., pay for performance is described as “not just a pure compensation and benefits concept. The pay for performance is a right mix of the HR Process, which supports the optimal performance of the organization and it pays the most performing employees significantly differently, includes special compensation schemes for the selected groups of employees and gives career opportunities o the best talents in the organization” (HRM Guide, 2014). By offering incentive pay for higher production, organizations hope to entice their employees to strive for higher salaries through increases in output, in turn creating a situation where the organization sees and increase in profit. In numerous studies conducted, the implementation of a pay for production plan is the key to success. A well planned and organized pay plan is developed with the expectations of management as well as one that ensures that the employee fully understands the scope of the plan has traditionally had the greatest amount of success. Martha Lagace discusses in her article Pay for Performance Doesn’t Always Pay Off; “Scholars have argued that the real problem is that incentives work too well. Specifically, they motivate employees to focus excessively on doing what they need to do to gain rewards, sometimes at the expense of doing other things that would help the organization” (Lagace, 2003). Unless employees understand that the pay
Pay for Performance
Positive or Pitfall?
Andrew Ray
In an ever changing economy where competition to perform at the highest levels is required for individuals and companies to succeed, how are companies to ensure that they hire, promote, as well as retain the highest quality employees? One method of enticing employees to perform at the highest levels is the theory of Pay for Production. The basic concept is to offer employees the ability to increase their salary by meeting and or exceeding benchmarks set by the company. In an article written for SimpleHR Guide. Com., pay for performance is described as “not just a pure compensation and benefits concept. The pay for performance is a right mix of the HR Process, which supports the optimal performance of the organization and it pays the most performing employees significantly differently, includes special compensation schemes for the selected groups of employees and gives career opportunities o the best talents in the organization” (HRM Guide, 2014). By offering incentive pay for higher production, organizations hope to entice their employees to strive for higher salaries through increases in output, in turn creating a situation where the organization sees and increase in profit. In numerous studies conducted, the implementation of a pay for production plan is the key to success. A well planned and organized pay plan is developed with the expectations of management as well as one that ensures that the employee fully understands the scope of the plan has traditionally had the greatest amount of success. Martha Lagace discusses in her article Pay for Performance Doesn’t Always Pay Off; “Scholars have argued that the real problem is that incentives work too well. Specifically, they motivate employees to focus excessively on doing what they need to do to gain rewards, sometimes at the expense of doing other things that would help the organization” (Lagace, 2003). Unless employees understand that the pay
References: Delisio, E. R. (2014). Education World: Pay for Performance: What Are the Issues. Retrieved from Education World: http://www.educationworld.com/a_issues/issues/issues374a.shtml HRM Guide. (2014). Pay for Performance. Retrieved from HR Management Guide: http://wwwsimplehrguide.com/pay-for-perrmance.html Lagace, M. (2003, 04 14). Pay for Performance doesnt always pay off. Retrieved from HBS Working Knowledge: http://hbswk.hbs.edu/item/3424.html