Pay for Performance Research

Document Type:Dissertation

Subject Area:Finance

Document 1

This reinforces the desired actions and behaviors in the company as more employees strive for the best merit increase. Objectives The aim of this dissertation is to understand the use of pay for performance systems in the United States and the effect that this system has on both employers and the employees. Through understanding this, it will be easier to identify ways of improving financial payment systems in the USA. Understanding the Pay for performance system and its importance Pay for performance plan is a powerful incentive for improving the effectiveness and entire performance of a company. It has its advantages and disadvantages to both the employer and the employees. It is important to know how easy or hard it will be to implement the set down measures and how they will affect the employees, how well they are being implemented and what proportion of employees are demonstrating the necessary performance management skills.

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Doing a frequent evaluation of the organization performance will also help in assessing the effectiveness of a performance plan. This is done by, carrying out a dedicated survey over a selected number of employees and managers on their views and experience of the performance plan and how they have contributed to achieving the desired goals, also by conducting interviews with a sample of employees and managers about their experience of the payment plan, reviewing various samples of objectives and personal development plans for quality and use of focus groups. These are all ways of acquiring a useful performance plan. Once results are summarized and analyzed you should have a clear idea of how effective your pay for performance plan is. More so, pay for performance may cause employees to be resistance to company changes.

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Employees fear changes in operating procedures will cause a decrease in productivity which ultimately determines their payrolls. A decrease in production defines poor performance, and poor performance means fewer earnings. Companies that make change despite employee resistance often accrue a reduction in productivity, because of lack of motivation from some employees. Employers can reduce employee resistance to changes by providing adequate training, continually explaining the benefits of the changes made in the organization and awarding employees with good performance. Using a pay for performance plan does not only affect the employees, but it also has an impact on an employer, more specifically, it has some disadvantages on them. One drawback of pay for performance from the employer’s point of view is difficulty in differentiating the performance of various employees to determine who is more deserving of a bonus and who isn’t.

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Most captivating accomplishment and employee’s contributions cannot be physically quantified rendering the employers’ opinion insignificant in the course of determining the most deserving party. If you consider the measurable items, you tend to undermine the most critical and productive aspect of your employees. Bearing in mind that nothing demoralizes a high performer faster than knowing that the employees contributing much less in the organizations have received the same bonus as a more senior performing employee. Moreover, due to little or no supervision of employees pay for performance disregards employer-employee interaction leading to less sharing of ideas which may affect the organization in the long run. Resistance to changes by the employees due to the fear of a decrease in productivity which may tend reflect on their salaries also is a disadvantage to pay for performance plan.

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