• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Does performance related pay motivate or de-motivate employees?

Extracts from this document...


Veit Muerz CB 519 HRM Assignment No. 2 Deadline 14th January 2002 Does performance related pay motivate or de-motivate employees? Performance related pay schemes aim at linking pay to a measure of individual, group or organisational performance in a company. Motivation can best be defined as the willingness to undertake certain kinds of action. Performance related pay (PRP) has three aspects to it. Paying the employee for output is an objective method of assesing performance. Likewise, paying the employee for input is a subjective method, since it is hard to value the effort. The third method is a hybrid of the two, where both in- and output are measured. "PRP schemes attracted considerable attention in Great Britain in the 1960s and 70s. At the firm and workplace level the focus was on eliciting effort and ensuring that the payment system was appropriate for the activities of the organization." ( Fernie, S. & Metcalf, 1999) The objectives of PRP schemes should ideally be laid out in a specific, measurable, achievable, realistic and time related manner by the management to stimulate performance (Fernie, S. & Metcalf, 1999) The financial rewards are basically of three types: 1. ...read more.


(Dublin City University 1996 - 1997) Another factor why a performance related pay system might be demotivating is the danger of discrimination, when operating such a system. Recent research found that performance based pay systems often discriminate against women because: the appraisal process is subject to gender bias and stereotypes; women's skills are often undervalued by their managers (and by women themselves); women - especially those working part-time have fewer opportunities for training, and managers are less likely to correctly assess women's training needs. (M.T. Strebler et al.,1997). Performance pay may run counter to the development of objective, gender-neutral job evaluation schemes, which are being introduced to achieve equal pay for work of equal value. (Unison Trade Union - Public Services union - Fact sheets 2001) Most managers are aware of Herzberg's (F. Herzberg - Work and the Nature of Man, 1966) view that the job itself is the source of true motivation, not the pay or even the conditions of work' (Dwyer, 1994: 17). A study by Kovach (1987) reported a mismatch between managerial and employee views concerning what motivates. While managers attributed high financial needs to employees, staff cited pay as fifth on a list of ten factors, while the other four were concerned with intrinsic motivators. ...read more.


The objectives of the business need to be translated into effective and meaningful performance criteria. PRP schemes must offer differential levels on performance rating, so that high, medium and low performance levels are adequately rewarded. The new PRP scheme needs to be communicated to all the employees, with clear reasoning as to why the PRP schemes are being introduced. PRP schemes, should, like any other pay structure needs to be reviewed regularly to ensure its appropriateness to the needs of the business. The goals and rewards must be; known, understandable; and attainable. Reward must be distinctly and directly related to performance" According to Beer et al. (1984:124), `the motivational and satisfactional value of a reward system is a function of the perceived equity of the reward system'. Without the presence of this perceived fairness, trust in the system is likely to be low and there is the distinct risk that the contingent link between performance and pay will not be accepted. In addition to the issue of fairness, problems associated with PRP include a tendency toward a short-term focus on quantifiable goals to the neglect of more long-term issues, such as financing PRP in times of adverse economic climate. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE People in Business section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE People in Business essays

  1. Hagar Cohen's work, Glass, Paper, Beans.

    This need to know how things will turn out rules us in every way so that we must create predictable settings. In the workplace this works by creating predictable settings for employees an example of this would be the creation of the assembly line.

  2. Performance management - Tesco's needs to mange the performance of its employees effectively if ...

    Essentially, this focuses on the process of the job, on what an individual actually does. 3.6b Employee motivation Motivation describes the extent to which an individual makes an effort to do something. Tesco's are likely to improve performance in terms of customer care, attendance rates, cooperation and quality of tasks

  1. "Managers who rely on pay to motivate their employees to higher levels of job ...

    (Herzberg, 1959). Criticisms of Herzberg's theory note that Herzberg's methodology of research (critical incident technique) is flawed, because workers asked about experience of motivation often shift blame of bad experiences, on to their employers. As a result, the characterisation of hygiene, and motivator factors is flawed.

  2. how HRM orperate within any oraganisation

    It is very important to get the performance result right to achieve the company's targets. 4.6.3 Number of employees in particular job categories This figure will give an over all numbers in an organisation that already have certain categories of skills.

  1. Of the many decisions a company must face to achieve success is how to ...

    Large businesses were leading and performing well financially but by early 80s they were displaced as market leaders as competitors vie through quality, innovation, etc (Anthony 1998; cited by Kleiner and Gautreau 2001). Managing intellectual capital or Knowledge Management, is vital to gain competitive advantage at this era.

  2. Performance-related pay (PRP) is a method of payment adopted by organizations to correlate employee ...

    PRP is also based on process theories of equity and expectancy. * Expectancy theory is based on the notion employees will be motivated if direct correlation exist between effort, performance and reward (Kessler & Purcell, 1992). PRP satisfies this notion by rewarding employees on basis of their effort and performance.3 (Pilbean & Corbridge, 2006:248).

  1. management & enterprise

    Hussein shop Cadbury Schweppes Hussein will need to decide what time to open the shop how long to open the shop. Cadbury Schweppes will prepare schedule for the employees. Motivating employees Another role of a manager is to motivate his or her subordinates and employees to perform better.


    Infosys invests heavily in its programs to recruit, train and retain qualified employees. Further management believes that Infosys has established a reputation as one of the most preferred employers for software engineers in India. Elsew here in the software industry around employee attrition rate is around 30%; Infosys boasts an employee attrition rate of only 9.8%.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work