• 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


    This can be a valuable way of motivating employees to be more productive if done correctly. Financial rewards are varied according to the situation and money available to a company and as the four financial rewards-salary increases, profit-sharing, incentive travel, and paid time-off-suggest, creativity is a major part of employing effective financial motivation.

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

    selling fifteen stereo systems and ten television sets with a built-in video player and if this was to be achieved Tesco's may offer the employees of that department a bonus or seasonal gifts. Therefore employees become further motivated by such incentives and begin to work with greater effort individually and as a team.

  1. As a short-term business Consultant, I have been hired by Alton Towers PLC to ...

    Adding value to products is through quality. A way of identifying if a product has quality is through the way that it looks, feels, its features, if it is suitable for the place that it is being sold in, the size of the product, the after sales service, image and repretation of the company.

  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. The human resource function

    Other results show that 59% of the total unemployed in Swansea have been so for six months or less as compared to the 61%of West Wales unemployed, this is a good point for Swansea as it shows that the majority of people, must try to get work as soon as they lose it in one way or another.

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

    turning her fingers so black she'd go home at the end of her shift and scrub them with bleach to get the residue off.(Hager-Cohen 1997:30) Ruth is a victim of McDonaldization whether she realizes it or not. In order to make the process more efficient and cut costs, factories lay

  1. Study and compare the wage incentive schemes prevalent in the service sector.

    Inevitably there are good schemes and bad ones and a man's opinion of them, whether on moral, technical or economic grounds, must be largely tempered by his personal knowledge and experience. When the word 'incentives' is used most people think of money and usually money in addition to wages or salaries.

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

    Maslow's use of "armchair theorising" resulted in often-contradicted evidence. His theory explains what motivates staff, but what does it motivate staff to do? Hopefully increase standard of work, output, human relations, resulting in completion of manager objectives. (Cullen, 1997). Herzberg's Radical, and widely used Two-Factor Theory, avoids using the term "need", and divided the work environment in to two main groups: "hygiene factors and motivators."

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