PAY FOR PERFORMANCE

Pay For Performance- Incentive Programs

Pay For Performance- Incentive Programs

Introduction

Building a performance-pay policy might appear to be an abstract view for few organizations, but this is a key tool to achieve enhanced financial consequences and for more than one reason, an appropriate performance-pay policy may demonstrate the potential of each employee, keep happy “talents” and finally achieve a better outcome. Originally intended for professional salespeople, the pay-for-performance program has proved being effective at each level and at each function within an organization. Most employees become more committed and motivated to understand how their daily activities help achieve the general welfare of the business. This undoubtedly results in the success of the person and company (Chingos, 2002). This paper discusses the Pay-for-Performance- incentive programs in a holistic context.

Discussion

Pay for performance has proven to be effectual in all functions and at all levels of a company. Researchers have shown that organizations, which have consistent practices and incorporated PMS (Performance Management Systems), are capable of achieving double the profit per employee compared to companies that do not have formal practices. These organizations have considerably elevated rates in every key performance indicators in the area of ??Human Resources, from better staff retention more efficient, to increased productivity and financial performance.

The quality feedback and tangible rewards to employees produce a main constituent of employee commitment and job satisfaction. This creates a rewarding association where an employee is inspired to know that management rewards and values ??his / her efforts (Hopkins & Mawhinney, 1992).

A pay for performance, helps the company save money, organizations could squander factually millions of dollars per year to reward those whose performances do not assist in achieving primary objectives of the business. The continuing responsibility developed in a performance pay policy assists to overcome this obstacle (Gratz, 2009).

In order to ensure success, the pay for performance should not be a street that is one-way in which managers establish the systems and the employee simply complies with it. There are emotional and psychological facts to consider. In actual fact, it is common for organizations to formulate a question and construct the systems devoid of considering regarding the “human side” of the programs of pay-for-performance.

In order to successfully adopt a performance-driven culture, it is crucial to measure the employees' attitudes. Generally, an employee must:

Want higher wages.

Possess skills and abilities for improving performance.

Should always trust that the organization is administering the plan fairly and improve their pays when they show performance.

With the implementation of Pay for Performance companies are capable of:

Setting and aligning goals all over the company.

Monitoring the performances at different levels, the corporate goals, the different divisions' goals, the goals of the team and individual goals.

Review the employee performance and link it to compensation and rewards.

Identify areas for improvement and skills gaps and make plans for growth and development (Neely, 2002).

Building a successful Pay-for-Performance program entails integration and discipline in 3 key areas:

Planning for compensation:

The initial step to implement an accurate pay-for-performance system is to develop a plan for general compensation of the ...