Under what conditions is a group performance related pay scheme likely to fail? Should organisations employ only individual PRP schemes?
COURSE TITLE: MN 207: Human Resource Management
Under what conditions is a group performance related pay scheme likely to fail? Should organisations employ only individual PRP schemes?
Performance related pay (PRP), or merit pay, as it is often called, can be defined as the explicit link of financial reward to individual, group or company performance, or any combination of the three. In simple words, this means that the better the individual, group or company performs, the higher the financial reward will be for the worker. This reward can be in the form of a pay-rise, bonus, benefit such as a company house or car, or any such financial incentive that will in effect, motivate the employee to work even harder, and produce even better results. There are also different fixed types of PRP schemes, such as commission, profit-related pay, piece-rate (which is a more primitive method, as compared to the now modernistic methods that have been incorporated into management).
PRP schemes are often categorised into three stages; The nature of the performance criteria, how performance against such criteria is assessed, and how this assessment is linked to pay. In accordance to these three approaches, it is possible to differentiate between individual schemes, and group approaches.
This brings us to the focus of the discussion, which questions what could bring about the failure of group PRP schemes. This could come about due to many reasons. Some of the more basic ones being that particular members of the group might not be motivated, or hard-working enough to put in that effort in order to reap the benefits. Thus, due to certain individuals, the whole group could end up losing out on that financial gain. Normally when employing group schemes, it is specifically aimed at project completion, or some other such activity. The incentive normally given to the group in these situations, is in terms of either profit-sharing, or share ownership schemes. These normally provide the workers with a sense of producing enhanced performance, or showing strong commitment to the completion of the project. Other ways in which group PRP may fail is due to workers not getting along well together, or not communicating well with one another. This could be due to reasons such as some of them getting higher profit shares than others, or along other lines, some of them wanting to lead the group, or show their leadership abilities in order to impress their superiors. Also, it can divide the workforce into those supporting the plan, and those against it, which can then go on to create adversarial relationships. High levels of competition can be formed within the group. Offering financial incentives is a motivational tactic employed by the managers of firms, however, as Maslow's hierarchy suggests, workers have other needs as well. Once their financial needs are satisfied, they move on to needs such as social, esteem, and self-actualisation. They need to feel that they belong, and they need to feel comfortable in their work environment. Offering them these financial rewards might make some of them feel as though they are robots, working just for money. This brings in Taylor's theory of Scientific Management. He said that workers are robots, and as long as you pay them and satisfy their basic needs, they will work. However, this brings about dissatisfaction. In this sort of scenario, PRP could fail as well.
Under what conditions is a group performance related pay scheme likely to fail? Should organisations employ only individual PRP schemes?
Performance related pay (PRP), or merit pay, as it is often called, can be defined as the explicit link of financial reward to individual, group or company performance, or any combination of the three. In simple words, this means that the better the individual, group or company performs, the higher the financial reward will be for the worker. This reward can be in the form of a pay-rise, bonus, benefit such as a company house or car, or any such financial incentive that will in effect, motivate the employee to work even harder, and produce even better results. There are also different fixed types of PRP schemes, such as commission, profit-related pay, piece-rate (which is a more primitive method, as compared to the now modernistic methods that have been incorporated into management).
PRP schemes are often categorised into three stages; The nature of the performance criteria, how performance against such criteria is assessed, and how this assessment is linked to pay. In accordance to these three approaches, it is possible to differentiate between individual schemes, and group approaches.
This brings us to the focus of the discussion, which questions what could bring about the failure of group PRP schemes. This could come about due to many reasons. Some of the more basic ones being that particular members of the group might not be motivated, or hard-working enough to put in that effort in order to reap the benefits. Thus, due to certain individuals, the whole group could end up losing out on that financial gain. Normally when employing group schemes, it is specifically aimed at project completion, or some other such activity. The incentive normally given to the group in these situations, is in terms of either profit-sharing, or share ownership schemes. These normally provide the workers with a sense of producing enhanced performance, or showing strong commitment to the completion of the project. Other ways in which group PRP may fail is due to workers not getting along well together, or not communicating well with one another. This could be due to reasons such as some of them getting higher profit shares than others, or along other lines, some of them wanting to lead the group, or show their leadership abilities in order to impress their superiors. Also, it can divide the workforce into those supporting the plan, and those against it, which can then go on to create adversarial relationships. High levels of competition can be formed within the group. Offering financial incentives is a motivational tactic employed by the managers of firms, however, as Maslow's hierarchy suggests, workers have other needs as well. Once their financial needs are satisfied, they move on to needs such as social, esteem, and self-actualisation. They need to feel that they belong, and they need to feel comfortable in their work environment. Offering them these financial rewards might make some of them feel as though they are robots, working just for money. This brings in Taylor's theory of Scientific Management. He said that workers are robots, and as long as you pay them and satisfy their basic needs, they will work. However, this brings about dissatisfaction. In this sort of scenario, PRP could fail as well.
