Introduction To Pay And Performance Plans Commerce Essay


In all the organizations, human performance is a critical factor for determining their performance; with the advent of time, the employees have become a valuable asset of the company. In today's world, an organization that has a competent and efficient workforce will be able to achieve its desired goals and even move ahead successfully in its industry. All the organizations are demanding overall improvement in employees' performance so that they can compete effectively on global level which in turn has positive impact on their profitability (Guest and Neil, 1690).

In order to motivate the employees in enhancing their performance, an organization needs to develop both pay and performance plans so that it can have an efficient workforce for today and future. With the passage of time, the companies have realized that they can enhance the performance of the employees by helping them in developing their skills and capabilities by focusing on development of each employee's performance and pay plans. In the last couple of years, the performance management process has become an integral part of the organization's Human Resource Management (HRM) department that helps the HR experts in ensuring proper talent management within the organization (Cokins, 120).

Performance Management Process

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In order to develop a well-integrated performance and pay plan, every organization has to design a Performance Management System that will provide it support in improving its performance in the long-run. According to Morris, Performance Management is often considered as the basic tool for talent management process and it comprises of the following key elements:

Every employee is allowed to develop its own targets and avail the opportunity of maximizing the individual's productivity.

It provides the foundation for enhancing the entire talent's organizational capabilities.

Every individual's efforts are aligned with the goals of an organization so that they can be an important part of the organization's enhanced performance.

The rewards and recognition can be aligned with the performance outcomes for ensuring retention of the key people within the organization (100).

Although the organizations claim to develop an effective Performance Management system for their employees but they don't keep track of the results; when the outcomes of an individual are compared with the targets identified in their Performance and pay plan (Wellins and Allan, 32). It is vital for every organization to develop a plan that focuses on pay for performance rather than an incentive based pay; it has been observed in majority of the corporations that when rewards are tied with performance the employees are motivated to make valuable contribution in their jobs (Wang, Bib-Shiaw and Chester, 1134).

When a plan and performance plan is developed, there are two main areas of concern for an organization i.e. how to decide about the performance targets and the pay level increments to reward the employees. In order to develop effective performance objectives for each employee, the standard procedure is that at the start of the year an employee sits with his/her supervisor to decide about the year-end goals; the goals are developed on the basis of SMART principle which ensures that the accomplishments made by the person will make valuable contributions in the organization's performance (Morris, 103).

In order to attract, recruit and retain competitive and talented workforce, the corporations have realized that they need to design their compensation packages in accordance to the market prevailing rates. When the companies are developing their compensation plans, they seek to gather information from various sources such as market surveys, competitor's reports, government published data, compensation statistics provided by research agencies and etc. After careful analysis of a wide range of resources, the HR experts design the pay plan so that they can reward the employees competitively and it ensures that their morale is boosted to a much higher level (Cokins, 230).

According to Wellins and Allan, pay for performance plans are difficult to study and even challenging for implementation as there is no one size fit all policy; the organizations have to modify their pay and performance plans in accordance with their respective industry standards and key elements so that they can motivate the employees and ensure that their well-set objectives and goals are properly accomplished (54).

Latest trend for motivating employees and enhancing their performance

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It has been observed by Guest and Neil that the market has become competitive and retaining employees is crucial for every organization so that they can have a workforce that is loyal and competent to play a pivotal role in proper progression of the company in the industry (1692). The employees are attracted to those organizations that consider them to be an integral part of their business operations and treat them fairly; at the same time, their worth in the corporation should be emphasized by using appropriate rewards and recognition methods.


In today's dynamic and competitive environment, only those corporations can survive that focus on the development of their existing workforce by providing them various opportunities for developing appropriate set of competencies and skills. Although the pay and performance plans are developed for present and future but it is vital for the organizations to develop an effective Performance Management System that will help them in monitoring the performance of employees on an ongoing basis. The results of the employees should be monitored on continuous basis to ensure that the system is effective and is able to successfully achieve the desired goals and objectives.

Almost all of the employees are motivated to work hard when they realize that they will be rewarded for exceptional performance either in the form of increase in pay and non-cash rewards such as share ownership, increments in benefits and promotion to next higher level. In order to boost the morale of the entire workforce, every firm has to ensure that it has a well-designed pay and performance plan which will assist it in attaining its desired objectives. Simultaneously, every organization has to develop a competitive edge in the market by diverting its focus on highly skilled and proficient workforce that will remain loyal to the firm and will provide support in maintaining its strong presence in the market.