Pay for Performance
You have been asked by the organization’s senior leadership to explore the practicality of implementing such a program for your organization.
Questions to Research:
How could an organization measure the effectiveness of their pay-for-performance plans?
From an employee’s perspective, what are the advantages and disadvantages of using a pay-for-performance plan?
From an employer’s perspective, what are the advantages and disadvantages of using a pay-for-performance plan?
Sample Solution
Pay for Performance
Pay for performance is a model where employees are paid based on productivity as opposed to a set of salary or wages paid based on hours worked. An organization can measure the effectiveness of their pay for performance plans by: bench-marking best performance management system practices; defining organizational goals and objectives; establishing their success measures; evaluating the results; and taking action on results. Advantages of pay for performance to employees include: it allows employees to increase their earnings because they are in control of their wages; employees who possess the ability to earn bonuses based on performances usually have high morale because they feel as though the company is rewarding their effort. Disadvantages include: it can create contention among employees; can cause employees to fear giving managers their input changes, fearing to get a reduction in earnings if the idea is bad. Its advantages to the employer include: improved productivity, lower unit costs, and reduced supervisor oversight.
