Employee Performance Management Assessment MSC HRM Essay Example

does not necessarily make them work harder once they are there. PRP serves as an additional motivation to perform better and remain with the company. Ultimately, PRP is a motivational strategy that improves performance and productivity (Armstrong 2006). Performance-related pay models include individual, work-group, and organizational models which encompass various types of PRP systems. The individual model is the most commonly used model in which individuals are subjected to an existing PRP system.In this model, one significant form of PRP is piecework, which entails payment for each unit of output. For instance, basketball players may earn bonuses for scoring points, with the bonuses determined by their performance review against contractual criteria. Another variation of the individual model is merit pay, where rewards are based on an employee's performance level. This includes an overall assessment of the employee's contribution to the organization's performance.

On the other hand, the organizational model involves incentives that apply to the entire organization. These rewards are based on values or quantities measured for the entire establishment and often serve as the foundation for contract prices or tender-led schemes in the public sector. For example, share options or bonuses may be linked to the profit performance of the organization, particularly through share options that hold significance for key shareholders in the private sector.

The Individual and workgroup Performance-Related Pay (PRP) model incorporates payment based on team output and offers variants such as time and measured work output or results. Due to slight differences in definitions of output and time, these factors are typically included in a comprehensive payment system (Banfield & Kay 2012). Additionally, Commission is another type of PRP where payments or bonuses

are calculated based on a percentage of turnover or sales (Noe et al.2003).Commission is a suitable approach for sales and distribution channels. PRP can be based on daily work output or variations in individual or group output qualities, which can serve as incentives for performance (Banfield & Kay 2012). IPRP aims to improve the performance of individual employees by establishing a clear link between their efforts and pay (Banfield & Kay 2012). On the other hand, team or organization-based models focus on achieving objectives through collective work. Both models have advantages and disadvantages. According to Noe et al.(2003), performance-related pay systems offer benefits such as cost reduction through increased productivity, less supervision needed, and improvements in quality. The introduction of PRP also promotes a culture of performance and enhances employee morale and motivation. Armstrong (2002) states that PRP effectively aligns employees with an organization's goals and objectives. During appraisals, individual targets connected to the organization's goals are clearly defined, facilitating goal achievement. PRP serves as a direct incentive for employees when supervision is not effective and acts as a tool for personal performance monitoring and career development.PRP systems can enhance job satisfaction and attract talented professionals (Whitley, 2002). When employees are appropriately rewarded, they tend to exhibit loyalty to the organization. It is important to select an appropriate PRP system as it can significantly improve staff productivity. However, there are limitations to performance-related pay. One such limitation is employee demotivation when goals are challenging to achieve (Whitley, 2002). The impact of PRP on staff motivation is uncertain due to the low percentage of bonus payments compared to overall wages. Poor training and communication skills among

management can also have negative effects on staff morale. The dependence of PRP on individual worker appraisals opens the door for biased payment decisions without proper auditing, undermining performance. Additionally, PRP schemes encourage specialization and short-term focus, which undermines teamwork. There is also potential for serious disputes among employees who receive different rewards for perceived equal effort. Measuring performance in PRP systems is complex as group output can surpass individual contributions and accurately computing each employee's contribution to overall organizational performance is challenging.The implementation of individual PRP models in an inconsistent and subjective manner can lead to unhealthy competition and a decline in productivity (Amstrong 2006; Lockwood 2004; Fisher 2005). On the other hand, team or organizational based models have a disadvantage of free riding and loafing, where some individuals benefit without putting in effort, relying on the hard work of others. According to Whitley (2002), motivation is defined as the driving force behind behavior, while productivity is determined by the ratio of output to inputs. Both motivation and ability play a role in performance assessment at personal and organizational levels. However, it is important to note that motivation alone does not account for all aspects of behavior. PRP aims to enhance performance and productivity by increasing output or input if it leads to proportional output growth. Research indicates that PRP systems motivate workers to exert more effort when it correlates with increased pay. These observations are specifically highlighted by Whitley (2002) in his study on motivational functioning.According to Fisher's (2005) study, major corporations like IBM, Cisco System, Ford, Shell, and Alcoa Inc. have invested significantly in high remuneration and employee satisfaction. This investment has

resulted in increased employee motivation, leading to higher profits and improved customer satisfaction. Organizations use various methods such as group-based incentives, rewards, merit pay, piecework, and commission to motivate and enhance employee performance. The management team must carefully select appropriate strategies for long-term organizational performance that meet both individual and organizational needs. Appraisals should be implemented to align goals and objectives for individuals or groups to achieve sustainable performance and overall productivity growth. It is essential to note that there should be a positive correlation between performance-related pay (PRP) and organizational performance as well as sustainable productivity. However, the cost of monitoring should be lower than the productivity gains for PRP to be cost-effective for an organization.