Similarly an employee may view helping their fellow staff as a waste of time

Similarly an employee may view helping their fellow

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task because of the view that the individual might outperform them. Similarly, an employee may view helping their fellow staff as a waste of time that they could instead use to improve their own productivity. Moreover, it is also important to note that rewarding employees individually makes others feel that their contribution is not being appreciated and this discourages teamwork. In some instances, disagreements between employees might arise due to lack of cooperation (Weibel et al., 2010). As a result, the work environment becomes hostile, and this hurts productivity. Pay-for-performance reduces staff motivation especially if employees perceive the amount of the incentive as too low (Weibel et al., 2010). Employees in a PRP system strive for a higher rating by working smarter and harder. However, after receiving the incentives, the motivation to meet the standards reduces and this introduces one of the challenges of P4P
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PAY-FOR-PERFORMANCE PLANS 8 from an employer’s point of view. Furthermore, employees might even develop the feelings of resentment against the employer for not giving them a more meaningful PRP system (Gillam et al., 2012). Another problem of P4P from an employer’s perspective is that it can make employees to hold back their ideas for fear of the unknown. Consequently, workers are only motivated to perform to the minimum standards and views putting in more effort as a waste of time. Merit pay can also cause deterioration in the quality of the goods or services offered by employees. The reason for this is that employees are more concerned with quantity rather than on quality since most P4P plans use quantity and not quality as a measure of employee performance. As a result, there is deterioration in the products offered to customers (Solmon, & Podgursky, 2000). For instance, salespeople could be more concerned with making more sales and fail to check if the product is actually in stock before order placement. Consequently, the customer ends up waiting for a longer time for the good to be delivered by the sale personnel. Another problem of performance-related pay is that it can make employees resistant to company changes. When an employer comes with changes that can improve productivity, there are high chances that workers will resist such changes and this will cause a decrease in productivity (Weibel et al., 2010). In a situation where the company goes ahead and implements the changes despite resistance from employees, there is a decline in production due to demotivated staff which might also result in a turnover of the company’s top performers. In today’s competitive business environment, organizations have recognized and realized that aligning rewards with the performance of employees helps to create a more productive workforce. Most importantly, it is important to execute correctly on a pay for performance strategy to ensure its effectiveness. The effectiveness of a performance-related
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PAY-FOR-PERFORMANCE PLANS 9 plan can be measured in terms of hard dollars and soft dollars. Hard dollars include an
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