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.
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.
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