Measuring the effectiveness of pay-for-performance plan

            There exist arrays of ways through which an organization can measure the effectiveness of pay for performance plan. The common way an organization can apply is carrying out income – expenditure analysis (Maloy, 2002).   The plan can also be measured by observing employee turnover. Whenever an organization experiences high employee turnover, it becomes evident that the system is not favorable to them, the opposite of it being true.  

 The inability of an organization to retain employees for a long period will reveal the plan’s effectiveness. Quality in production is also critical in measuring the effectiveness of pay for performance plan.  Whenever the organization realizes high production with poor quality low production with high quality or any nature of production, the trend can be scrutinized versus the system. This process can help top de determine if the system is promoting quality and quantity.

            Feedback both from the employees and the customers remain critical in measuring the effectiveness of this plan. Positive, as well as negative feedback from customers, can be used in a studied manner to reveal the effectiveness of the pay plan.  Workers feedback can also be utilized by the organization to see its effectiveness. Complaints, as well as compliments from employees, can be analyzed by the organization to reveal a measurable trend of the plan. Competency and professionalism among appraisers are also important in measuring the effectiveness of the plan. The organization can determine the quality of the performance appraisals to determine if employees are getting what they deserve. The organization can also measure the effectiveness of pay-for-performance plan by a critical examination of policies as well as procedures.   Organization must ascertain if the functions of the policy work as intended as well as seeing if employees and supervisors know how to use the plan. For instance ,  the organizations must measure the accuracy of steps necessary in closing out the performance period against steps taken in the setup to see if the system is efficient and effective.

            The organization cans were also scrutinizing its performance Objectives. From the fact that performance objectives remain ultimate means of determining employee’s compensation, determination of clear, relevant as well as measurable performance objectives remains a cornerstone in measuring the effectiveness of the pay-for-performance plan.  The organization has, therefore, look at the objectives of the organization are effectively attained for the pay system to be successful. Organizations can, therefore, establish a bar for performance at the start of the performance period to make a meaningful measurement for pay for performance.

            An organization can also carry out evaluations in the system itself. Many distinct components in the implementation of pay-for-performance plan exist. For an organization to measure the effectiveness of the plan, it is critical to look at the quality of supervisor as well as the employee written evaluations that determined the pay (Gonring, Teske & Jupp, 2007). The organization can also critically look at processes used in adjudicating final assessments to see if there was bias in the pay for performance process to prevent bias. The organization must evaluate the pay-for-performance plan to determine if the programmatic goals are met. The organization must locate clear evidence showing the plan’s ability to promote performance, rewarding right employees. The organization can also measure the plan’s effectiveness by identifying feedback from both the employees and the customers.

Disadvantages of Using a Pay-for-Performance Plan from Employee’s Perspective

            As a disadvantage to the employees, the pay-for-performance policy can become very detrimental to an organization proper implementation lacks. For instance, if this policy gets introduced in a group situation, many employees end up picking up the slack of workers who contribute little in the work responsibilities. One of the greatest disadvantages of pay-for-performance initiatives to employees is that it can create contention among the employees. Workers sometimes may feel as if the manager shows favoritism in determining employees to assist them in achieving bonuses as well as higher salaries. Employees who do not earn bonuses can develop jealousy towards those earning the performance bonuses. Pay-for-performance as payment policies also increases jealousy in the working environment whenever the employees that that they are not being compensated justly for efforts sacrificed in their duties.  In the end, this jealousy coupled with contention generates hostile working environments among the employees that in the end reduce productivity.

            Pay for performance plan is also disastrous among employees from the fact that it discourages teamwork.  Therefore, employees who need mentorship from their co- workers end up not surviving in organization impressing such policies. Employees who are well experienced will not be willing to help other as they will take it as a waste of time (Chingos, 2002).   This policy, therefore, leads to ‘every man for himself and God for us all situation’. Such situation is very unhealthy among employees as it causes working environment unbearable to some employee who need colleague assistance. In the end, this policy becomes vulnerable and increases new employee turnover who get discouraged by the unwillingness of the experienced employees to contribute to their on-job training. Pay for performance will also encourage unhealthy competition among employees. Some employees will take advantage of the situation by working on all duties to ensure that he earns alone or he earns triple than his colleagues.  The policy, therefore, pits employees against each other in the search for heavy paychecks.  Such negative competition will stifle enmity among employees by discouraging fairness at the workplace. The policy also promotes biases and favoritism. Employees who do not perform well will be disliked while top performers get favored instead of developing teamwork to develop others. This policy is also disadvantageous in that it elevates mistrust between workers and management. Employees will rarely get satisfied with the management whenever pay differences arise.

            Because of some reason such as sickness and emergencies, the employee may be unable to perform well. As a consequence, pay will be low. Pay for performance, therefore,   becomes disadvantageous to such employees in that the pay is unpredictable especially when the employee faces some personal challenges. Employees will also lack a sense of job security when this policy is implemented.  Employees will never be promised of tomorrow unless they determine it.   Such situations do not, therefore, take care of critical situations that may face the employees.  For instance, pay for performance policies makes employees feel less secure especially if scheduled full-time for less than 40 hours. While their managers earn unchanged amount pay regardless company’s slowdowns, employees in this pay policy suffer whenever they work for fewer hours. The company ends up saving money by not giving them any pay when there isn’t work to do while at the same time taking the chance that another company will hire away its talented workers.

Disadvantages of Using a Pay-for-Performance Plan from Employer’s Perspective

            One of the disadvantages of pay-for-performance policy to the employers is that employees often become resistant to changes in the company even when the changes aim at the wellness of it. Workers end up fearing any changes in the operational procedures with the perception that they will decrease their productivity and consequently their pay. Employers who make changes despite the employee resistance always experience a decrease in the production because the changes lack motivation from the employees (Caruth & Handlogten, 2001).  Therefore, this pay policy negatively affects the employees when the employees resist changes that aim to improve the organization.

            The incentive makes it difficult for employers to determine merit. There is always no 100% accuracy in the differentiating performance of some employees to ascertain pay merit deserves. The most critical   accomplishments, as well as contributions, are always never measurable. Therefore, the supervisor's or manager’s opinion often remains constant in determining the merit pay. This situation can present the employer as unjust and as a consequence, the employer may lose his good employees.

            Another main disadvantage of pay-for-performance to employers is that it can lead employees to fear to provide employers their input for good changes. Many employers value and depend on input from their employees to come up with decisions regarding company improvements. Employees end up holding back their input even when their ideas are critical.  The reason for this is that they always concerned with the reduction in earnings.The time as well as the energy that organizations invest in attempting to make the performance measurable in merit pay, as the development of competencies, measurements and performance baselines,  get better spent on delivery of service to customers. From the limitations of metrics, the ability of the employers to communicate to every employee value of his contribution, and the superior performance worthy of the pay policy entails remains an ongoing challenge. Some employers may communicate better compared to others and the communication on what entails superior performance is simple in some jobs compared to others. The situation, therefore, may affect performance. The other disadvantage is that parts of the job responsibilities that can't  get measured suffers since employees find no incentive to put in more efforts to working hard in such areas. As a result, the employer will continue getting poor outputs from such areas at all times. Pay for perforce policy is also disastrous to employers from the fact that it compromises on quality (Caruth & Handlogten, 2001). Employees will focus on quantity and forget quality in the efforts to earn more. Poor quality production can negatively affect employers through the process of losing trusted customers.

            From the fact that the policy encourages selfish huge paycheck attainment at workplaces, employees may violate rules or use any shortcuts to get much pay.   Cunning employees may end up violating the standards with a focus to earn than others. This situation can put the employer in trouble especially with quality assurance sectors. Payment based on performance will make the employer experience high employee turnover.  The reason is that the employees will work while at the same time applying for other jobs in different organizations that offer guaranteed pay.   From the fact that this policy finds employee retention difficult, it will as well affect production that may end up discouraging the customers and in the end, the employers will experience loss.

  References

Caruth, D. L., & Handlogten, G. D. (2001), Managing compensation (and understanding it too): A handbook for the perplexed. Westport, CT: Quorum Books.

Chingos, P. T. (2002), Paying for Performance: A Guide to Compensation Management. New      York: John Wiley & Sons.

Gonring, P., Teske, P., & Jupp, B. (2007), Pay-for-performance teacher compensation: An inside view of Denver's proComp plan. Cambridge, Mass: Harvard Education Press.

Maloy, J. A. (2002), the effectiveness of pay-for-performance plans with administrators: A qualitative study of two Illinois school districts.

 Sherry Roberts is the author of this paper. A senior editor at MeldaResearch.Com in article critique writing service if you need a similar paper you can place your order for top research paper writing companies.