The Value Of Hrm To Business Organisations Commerce Essay Example

principle of PRP, which states that "the individual who is hardworking and competent should be rewarded more generously than others who provide poor performance." He even claimed that PRP systems were advocated in many areas of white-collar employment such as local authorities and financial services. Indeed, the PRP wage system has several benefits. For example, Lewis (2001, p. 106) indicated that "PRP was introduced in many organizations to change the culture and it reflected the 'new' values which senior managers considered necessary."

According to Armstrong (2004), organizations that implement a PRP system expect various benefits, including improved individual and organizational performance through employee motivation. The system also acts as a benchmark for change and reinforces management control through objective-setting. Emphasizing the connection between payment and good performance, PRP supports the achievement of organizational goals. Furthermore, PRP facilitates the recruitment and retention of a better workforce by fulfilling the basic human need for recognition and reward. In terms of job performance, PRP is a variable pay system that closely relates employees' wages to their systematic evaluation. While job performance is an abstract concept, it contributes to achieving organizational objectives (Redman and Wilkinson, 2009; Rotundo and Sackett, 2002).Companies are increasingly using performance-related wage strategies to assess employee contributions and achieve organizational goals. This makes occupational performance a critical criterion in the assessment of rewards. Employees are motivated by performance-related wage contracts, leading them to focus on their job performance to generate profitability for organizations. The relationship between organizations and employees is symbiotic, and performance-related wage is positively linked to employee job accomplishments. This effectiveness of the performance-related wage system is related to both employee job performance and the

perception of procedural justice. Procedural justice becomes a key factor in implementing performance-related wage strategies, as wages are seen as an external resource to be allocated. Failure to consider procedural fairness can make it difficult for organizations to appropriately distribute resources such as rewards.The perceived procedural fairness can potentially reduce the impact of assessment on political relations (Maheshwari and Singh, 2010). Additionally, employees seem to prioritize the fairness of wage agreements over their actual salary (Armstrong, Thompson, Brown and Cotton, 2006). Ultimately, procedural justice is an essential component for organizations and employees, as it moderates the effects of PRP strategy. It is important to note some limitations and weaknesses in the implementation of PRP reward systems. Despite the numerous advantages it offers in organizational and managerial functions, there have been criticisms regarding its execution and limitations. Procter (1993, cited in Lewis 2001) highlighted concerns about potential discrimination in PRP, leading to arbitrary management standards and distribution. Gielen, Kerkhofs, and Ours (2008) explained that PRP may result in employees focusing solely on rewarded activities and neglecting others. They also noted challenges in measuring individual work for certain professions such as teachers and artists. Armstrong (2004) emphasized the need for experienced managers throughout the process.The unqualified individuals can demotivate employees by perceiving the implementation of performance-related pay (PRP) as subjective and incompatible. Additionally, placing excessive emphasis on incentives can have negative consequences for teamwork, potentially leading to jealousy among team members. Moreover, it is undeniable that there can be instances of sexual activity favoritism. For example, a study by the Trade Union Congress and the Association of First Division Civil Servants (Armstrong, 2004) found gender bias in

salary and training during the assessment process, particularly affecting women. Thompson's study (1992) suggested that implementing PRP requires a substantial financial investment, imposing a significant burden on the organization's finances.

2. Case study

Case study 1: Teacher Performance Incentives And Student Outcomes

This case focuses on the implementation of a performance-related pay (PRP) system in US school education in 1996. The authors highlight how the PRP system has been increasingly utilized due to concerns about student performance. The goal is to incentivize improvement in student retention. The paper aims to review the evidence regarding the effectiveness of PRP on student achievement and propose new insights on the topic. It is important to note that teachers have multiple responsibilities beyond teaching alone.In contrast, a single-person teaching plan involves multiple instructors who respond to the same curriculum. Therefore, determining the overall performance of individual instructors is challenging. The issue with the salary budget is that the school administrators can only allocate a small amount for wages. The data collected over a five-year period (1994-1999) from two community high schools, one following a merit-based salary system (School A) and the other using a traditional method (School B), was analyzed. Teachers in both schools received a base salary for each 60-minute class they taught. Those with higher qualifications received a 5% increase in their basic salary. Two types of bonus wages were offered. The first one was awarded if 80% of students assigned to classes continued to attend until the end of the term. The second one was based on student surveys. If teachers received a rating of 4.65 or higher on the 5-point scale from the survey, they would be eligible

for a performance bonus (5%) and retention bonus (10%). Both schools investigated allowed open enrollment within the county. To compare attendance, grade point average, course completion, and passing rates, the paper used a difference in differences analysis. The results indicated an increase in course completion for both schools, with all rates exceeding 15%. However, the overall daily attendance rate declined for both schools.The attending rates at School A, which implemented a merit wage system, remained the same, while the rates at School B, which had a traditional wage system, slightly increased. However, both schools experienced a decline in GPA and passing rates over a five-year period. This decline can be attributed to the practice of inflating student evaluations to obtain performance bonuses, leading to a decrease in learning quality. Therefore, both GPA and passing rates were significantly affected. In summary, implementing PRP resulted in higher student retention, but it had a negative impact on daily attendance rates.

The main objective of the article is to examine the effectiveness of PRP (Performance Related Pay) in improving the job performance of research and development professionals in Chinese high-tech organizations. R&D professionals play a crucial role in enhancing the competitive advantage of these organizations. These professionals are compensated based on outcomes achieved. Establishing a fair allocation process that combines compensation and performance improvement results in positive outcomes for employers. However, the opposite is true if such fairness is not upheld.The exploration of the influence of procedural justness on occupation performance and the moderated effects of procedural justness on the relationship between PRP and occupation performance were investigated by the writers. The study focused on the theoretical background and

hypotheses related to this topic. Two factors, namely undertaking and contextual performance, independently contribute to overall performance, which organizations rely on to maintain management effectiveness. The study includes six hypotheses based on Harman's single-factor test to minimize potential effects of common method discrepancy. In total, 1000 questionnaires were sent to R professionals in hi-tech organizations. The researchers used a Likert 5-point scale (1 representing "strongly disagree" and 5 representing "strongly agree") in order to analyze the relationship between PRP, procedural justness, undertaking performance, and contextual performance. Results from hierarchical multiple regression analysis showed that PRP is positively associated with an R professional's undertaking performance and contextual performance, as the regression coefficients were statistically significant. Furthermore, the relationship between procedural justness and undertaking performance was supported by the findings of the study.The text suggests that procedural justice is not supported by negative regression coefficients in the relationship between procedural justice and contextual performance. Additionally, it states that procedural justice positively moderates the relationships between performance-related pay, task performance, and contextual performance. The research conducted on Harman's individual-factor model shows high reliability coefficients of 0.9 or higher, indicating sufficient reliability in the testing process and variables. The article concludes that performance-related pay can effectively stimulate job performance, especially in task performance, and also mentions that procedural equity impacts employee citizenship behavior. In Section 3, it is discussed how both a high-tech company in Taiwan and a high school in the US implemented performance-related pay to enhance employee motivation and performance. The success of this implementation is said to depend on procedural justice. Without fair treatment, rifts among employees may occur, leading to negative consequences such as unclear

admissions and performance assessments in business organizations.However, for complex organizations like schools that require multiple tasks and may lead to unintended consequences, PRP can have varying effects in different fields. According to Redman and Wilkinson (2009), PRP can be used for cost control and development, although these objectives may conflict with each other. However, there is little evidence to prove that PRP is a successful motivation strategy. Research shows that performance-based pay tends to demotivate rather than motivate individuals overall (Redman and Wilkinson, 2009). Nevertheless, performance-based pay has been successfully applied in the hi-tech sector to reinforce the job performance of R professionals (Chien et al., 2010). In this industry, higher wages are often more appealing to task-oriented employees. However, this approach cannot be applied to the entire work process within an organization. Additionally, employees may mistakenly believe that results are equivalent to rewards and may focus solely on increasing performance quantity rather than quality. Only when employees perceive that their organization uses performance-based pay as a motivator, will they exhibit better job performance.Improving occupational performance not only enhances an organization's competitive advantage but also reduces monitoring costs for R&D professionals. Chien et al. (2010) discovered that performance-related wages can also motivate employees who have less predictable tasks. For instance, sales representatives at a store may have undefined targets and must satisfy each customer's needs. Higher sales lead to higher pay. Chien et al. (2010) also found that procedural fairness is positively linked to task performance when R professionals perceive the incentive distribution procedures as fair, resulting in improved performance. It is essential for professionals to believe that the performance-related pay (PRP) system is being

assessed fairly and that they receive proper feedback and support. If this is not the case, PRP can have a negative impact on motivation. In the education industry, a case study based on class completion rates, daily attendance, GPA points, and passing rates introduced a trial to assess teacher performance. Various indicators are associated with teachers' performance. The study revealed successful student retention but no improvement in student performance. PRP can motivate teachers to enhance their teaching methods to attract more students to attend class, but it does not guarantee better teaching quality.The last week of term witnessed a flaw in attendance, although there was an improvement in class completion. However, the decrease in student passing rate indicates that the impact of PRP on learning outcomes is challenging to define as either positive or negative within an organization. If bonuses are primarily based on student evaluations, instructors may lower their standards to attract higher ratings. Therefore, an increase in attendance cannot solely explain whether student performance has improved. Eberts et al.'s study (2002) failed to consider that factors beyond the assessment of teaching performance may be involved. Forest (2008) argues that other factors, such as motivation, have a stronger influence on performance than PRP. When considering the education industry, which involves complex tasks, PRP may not be the best approach to promoting educational quality, even though it can motivate instructors. In order to discuss the reasons why PRP is not useful in the field of education, the hierarchy of needs can be introduced. In an educational industry supported by government funding, schools will focus more on their reputation as it is the most important factor

in attracting students. To achieve this goal, the expertise of instructors gained through public academic research and journal contributions should be highly respected by others.In Maslow's hierarchy of needs theory, some individuals are not only satisfied with their basic salary and stable job. This is why non-financial achievement is seen as a self-realization requirement for those seeking self-fulfillment through challenging tasks (Buchanan and Huczynski, 2010) (See Maslow's hierarchy of needs in Appendix 1). Recognition received from schools and academia serves as a non-financial reward for teachers. The objectives of a performance-based pay system should be measurable, realistic, and achievable, allowing staff to focus on their individual goals and achieve them with motivation. It is also beneficial for the organization. However, implementing a performance-based pay system may not be suitable for the education industry. The graded system appears to work better than performance-based pay in the field of teaching. In the case of Eberts et al. (2002), performance-related pay improved course completion rather than overall study performance, such as passing rates. However, in this case, measuring course completion was limited to the last two weeks of the term, leading to misguided objectives. Therefore, attendance should be measured throughout the entire year rather than just the last two weeks of the term.The difference in the implementation of public presentation-related wage between Chinese hi-tech companies and the learning industry in the USA arises from their different backgrounds. The relationship between instructors' actions and students' progress is complex and difficult to measure, with potential for demoralization and disruption in collaboration. These factors have resulted in limited improvement in introducing PRP into public education (Ballou, 2001). Defining the effects of

PRP in an organization is challenging, as managers may apply other strategies or reward systems to improve motivation and performance of employees.

Conclusion

In conclusion, PRP is not a universal solution for all situations. Therefore, it is advisable for both academic researchers and organizational managers to pay closer attention to the actual circumstances and potential issues of implementing HRM theory. The use of PRP in different types of organizations should adhere to procedural fairness and clear objectives. These two cases demonstrate various limitations. Implementing PRP poses a challenge for complex organizations, and it may not be equally effective in all areas of a business organization. This essay also discusses how non-financial factors can impact the operation of PRP in educational organizations. Generally, it is difficult to determine whether PRP is beneficial or detrimental.Appendix 1 displays an image titled "Maslow's hierarchy of demands."