Performance Planning and Review: Making Employee Appraisals Work

By Richard Rudman | Go to book overview

CHAPTER 8
REWARDING PERFORMANCE
Paying for performance is a big issue in contemporary human resources management. Organisations have long believed that production and productivity improve when pay is linked to performance, and have developed payment-by-results(PBR) systems and incentive schemes to support this belief. Expectancy theory tells us that, if people want more pay and believe that working harder will get it for them, they will work harder and perform better. But how to make the theory work in practice has seldom caught people's attention as it does today.In 1951 the International Labour Office (ILO) defined PBR as wage systems that relate a worker's earnings directly to some measurement of the work of the individual, the group or the work unit. Among benefits the ILO claimed for PBR—which at that time relied heavily on quantitative techniques like work study and industrial engineering—were increased output from improved efficiency, lower production costs, better control of labour costs, less need for direct supervision and more even production flows.Half a century later, performance pay is seen in less mechanistic terms and may be defined more simply as the explicit link of financial rewards to individual, group or organisational performance. According to Brading and Wright (1990) the single most important objective of performance pay is 'to improve performance by converting the pay bill from an indiscriminate machine to a more finely tuned mechanism, sensitive and responsive to the needs of a company and its employees'. It does this by:
focusing employees' contributions where they are of most value, as set out in organisational, business unit and individual performance plans and targets
supporting the development of a performance-oriented culture in which people are paid for results rather than for the time or effort they put in
emphasising individual performance or team work as appropriate: group-based performance pay schemes are used to foster cooperation within the group while personal schemes focus on the contributions made by individuals

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