pay for performance will produce better results than a program where everyone

Pay for performance will produce better results than

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pay-for-performance will produce better results than a program where everyone gets the same pay despite their performance in the organization. In the recent years, Pay for Performance plans has grown significantly mainly in the public sector. According to Weibel et al. (2010), over 90 percent of organizations in the United States tie their salary increases to performance. This reflects a 12 percent increase since 2009. A 2011 study conducted by Institute for Corporate Productivity also established that approximately half of high-performing US organizations indicated that the main driver of
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PAY-FOR-PERFORMANCE PLANS 5 their pay-for-performance plans was recognizing and rewarding top performers (Gillam, 2012). Even though the performance-related pay is a means of determining employee promotions and pay rises, it also offers a number of disadvantages to employees. In industries such as sales, it is easier for an employer to measure employee’s performance through sales revenue and quotas. However, in certain jobs, it is difficult to measure performance (Hays, 1999). For instance, how can one measure the performance of a teacher or a doctor? Similarly, it is also difficult for a manager to tell whether or not a customer service representative is meeting his or her objectives unless the manager is there to observe what the employee is doing all day long. The intuitive thought is that best performers should always be rewarded more and those who are performing worse should be rewarded less. The assumption, in this case, is that it is possible for the pay-for-performance to quantify job performance. However, this is not always the case because most companies execute poorly on a pay for performance plan (Solmon & Podgursky, 2000). Therefore, the fact that performance-related pay makes it hard to measure performance, it causes feelings of inequity at the place of work. Another problem with pay-for-performance plans is that they reduce employee morale especially if the goals set are too hard to achieve. One of the reasons why employees feel de- motivated is because of managers who set unrealistic demands and workload with the idea of getting a lot of work done. Although it is a good idea for a manager to set the bar high, it becomes a bad thing when the manager overburdens employees with tasks (Gillam et al., 2012). Some managers are too demanding and usually ask employees to carry out impossible tasks or insist that they complete projects over the weekend. Such kind of actions invites low morale among employees especially if they are being used as a benchmark to measure employee’s job performance. As a result, employees are always worried about meeting the set
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PAY-FOR-PERFORMANCE PLANS 6 standard for the plan because failure to meet the set standards will result in poor evaluation (Weibel et al., 2010). Another disadvantage of a pay-for-performance plan is that it can hinder employees from moving up quicker in leadership positions or getting regular pay rises.
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