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Management at times make use of the merit pay plans to award the employees. This incentive system is widely used and implemented across many organizations. In this incentive plan the pay is increased in a regular pattern based on the performance of the employee. All the employees have equal opportunity to get this incentive. The program of merit increase can be carried out when the funds are reserved for this particular incentive by the administrations. T has its own turfs and criticisms.
The merit pay plans have become very popular over time. However its success and failure rate is yet to be accurately estimated. According to one study carried out by Lindsay, Campbell, Tan, in 2001 it was found that 61% of the organizations that had variable pay plans for its employees failed to achieve its performance targets by a large margins. However when these companies employed the merit pay plans for its employees, they succeeded in achieving the performance target and consequently productivity was increased too. The study also revealed that the Executive-focused merit pay plans had generally more success rate than the ones used for lower-level, non management employees.
Another survey was carried out about the merit pay plans on over 2000 employees themselves. The results of the survey of employees from diverse organizations came to the same conclusion that they want the increment for performance included in their base pay rather than it being for on time (Taylor, Lesher, Hunnicutt, Garland, & Keefe, 1991). The survey also revealed that the employees preferred to be rewarded individually than in teams. The results also showed that the enthusiasm that the managers show over these incentives did not transcended in to the employees with the same intensity. The key to make the merit plan work lies in combining the incentive with employee participation. So the merit pay plans can be successful if certain measures are taken.
Initially this incentive method gained very negative popularity and was greatly criticized. However in recent years a more accepting attitude towards it have emerged as more nations and organizations have started awarding the employees on merit issues.
The main motivation behind the merit system is to appreciate and encourage the outstanding performances. This method is especially applied in key service areas like teaching and research. A performance measure or indicator is usually set apart to initiate such plans. In the service area of teaching, these indicators can be the evaluation of the students in specific tests such as ETS. In the case of research the performance indicator can be the number of publication under the name of the researcher. The main problem lies in finding a substantial and universally acceptable measure or indicator.
Examples of Merit Pay
The pay per performance is one example of at Temple University is one example of merit pay. The faculty however was greatly opposing this incentive method (Holley and Wright, 2008). The merit pay at The Achievement Challenge Pilot Project was more welcoming because it was followed by immense improvement in the student progress on standardized tests (Holley and Wright, 2008). Another example of an implementation of a successful merit pay is of the Marcus Winters and Gary Ritter of the University of Arkansas in which the students excelled in the respective fields post the merit pay plan. The critics accused the teachers of being competitive and non-helping with each other but there no proof was brought forth. Additionally there are others plans undertaken by many organizations which includes; Teacher Advancement Program merged with merit pay and ProComp, the Denver Professional Compensation System.
Issues related to Merit Pay
There is a need to thoroughly gauge the effectiveness of the performance appraisals including the merit pay. The research on the effectiveness will help determine how these concepts work and their efficient application in the workplace. There has been some research in this arena and analysts have come up with ways in which merit pays can be allocated and modified. They have also put forth proposals for adjustments in the performance issues. The issues of merit pay range from administration intent on making it a strategic move and employee's conflicts regarding the policies. It can result in disputes amongst the high performing and higher paid departments with the moderate performers but who are being paid less. There is also a need to amply define the terms; merit, performance and incentive pay because these concepts are still largely undefined and incomprehensible to the employees (Holley and Wright, 2008). Another example of the issue regarding merit pay is the pay plan for teacher which was initiated by Barack Obama. Much debate and discussion took place on how this merit pay plan can be carried out.
The fact that there are many intricacies involves makes it very hard to amply gauge the impact and response of the employees regarding the management decisions to deploy the merit pay. The success rate of the merit pay has been generally high but it has not stopped it from back firing in many organizations where it has created an unhealthy competition and has created a hostile competitive environment. So in order for a merit plan to work successfully in an organization, the management should take the matter in its own hands. The merit pay plan encourages the employees to put their maximum efforts at the work place. The individual or team which comes on merit succeeds in getting the pay increase. It can prove to be a very productive effort on the part of the management if it clearly defines the concepts to the employees and management before embarking on this venture (Heneman and Young, 1991).
The biggest drawback of the merit pay is that it lacks in being able to clearly define merit because merit does not have any standard measuring tool. Another merit issue is that the evaluation of the employees is done by the supervisors whose judgment can be biased which can lead to conflict within the department. The evaluations' may be perceived as unfair by the employee and may de-motivate him for the future work.
Factors to consider to make Merit Pay more Effective
There should be criteria for performance and rewarding the employees. The first and foremost should be that all the employees should be eligible to get the recognition or merit pay. The behaviors or actions which are claimed to be the reward and recognized should be made very clear. Anyone without bias if falls on the merit or the criteria should receive the recognition. The behavior should be reinforced with the help of recognition or the reward so the appraisal should not be unnecessarily delayed.
There are many issues in involved in merit pay. However there are also ways in which the merit pay can be made a more effective incentive method which can prove to be beneficial for both the employee and the organization. A merit pay should be established only after thoroughly considering the culture and the resources of the organization it is being established for. They should be more comprehensible with strictly defined terminologies of merit and incentive pay and loose definition and double meanings should be avoided at all costs to minimize the ambiguity. The best way to motivate the employee through a merit pay is to associate the pay with desired performance and outcome. The organization should also try to keep the incentive plans current and updated and simultaneously recognize and celebrate the individual differences amongst the employees. Lastly the merit pay should be made different than the base pay.
The gist of all of the research, theory and studies suggest that the merit pay plan in general have a positive impact on the job performance and productivity of an employee. However the evidence is insufficient to make statements that a merit pay is the way to enhancing the individual performance in a workplace.
Conclusively it can be said that merit pay do have a positive effect on the organization's outcome. However it is not to say that merit plans and pay increases cannot always to attribute to the high employee performance. The ambiguity regarding merit and performance evaluation criteria also exists. The inclination of merit pay is, however towards enhanced performance.
Lindsay, D., Campbell, A., Tan, K., (2001), 'The Impact of Merit Pay on Teaching Outcomes'. Research in Higher Education Journal - Volume 2
Taylor, R. L., Hunnicutt, G. G., and Keeffe, J. M. (1991). Merit pay in academia:
Historical perspectives and contemporary perceptions. Review of Public Personnel Administration, 11(3), 51-65.
Holley, M., Wright, P. (2008), 'Examples of merit pay', Mackinac Center
Heneman, H. G. and Young, I. P. (1991). Assessment of a merit pay program for school district administrators. Public Personnel Management, 20(1), 35-48.
Some organizations do a thorough job analysis first and then human resource planning as part of a restructuring process. What makes more sense to you? Why? If actual performance of the human resources plan differs from desired performance, what remedial steps might you use?
Job is a very important concept of job analysis. It is done of the job rather than the person. The data for the job analysis can be collected from various sources including interviews and questionnaires. The end product of the job analysis is the panoramic description about the job itself rather than the required characteristics of the employee (Burrell, Morgan, 1979). It is vital for organizations to hire the most competent candidates who are well suited at their positions. It is equally important for the job seeker to be able to start their career with a job that well suits their skills, capabilities and personality. This can achieved through making use of the job analysis which clearly outlines the specification of the job.
Importance of Job Analysis
Source of dire information related to Job
Job analysis is an important part of the human resource planning because it gives important information about the specific duties and tasks required for the job. It includes information about the effort, duration, skills, equipment and complexity of the job. The job analysis also takes in to account the environment of the workplace. The information gathered as a result of studying the environment helps in giving the insight in to the requirement of the human resource. The information about the environment includes the odours and the temperature extremes (Gibson, Ivancevich, Donnelly, 1994). The different types of tools and equipment used during the course of the job are also elaborated in the job analysis. The kind of relationship between the supervisor and the managers is also discussed in the job analysis. Additionally the knowledge, skills and abilities needed to perform the job are also clarified in the job analysis. The statement of the minimum requirement of the job further clarifies the necessary skills required in the human force.
Utility of Job Analysis in training, selection, and performance appraisals
The job analysis is later on used for employment related procedures of training, selection, and performance appraisals and alike. The thorough job analysis can help determine the training needs of the employees. The training content of the work force, their assessment rest to measure effectiveness of training and methods of training are also determined through the job analysis. Another sub functions of human resource planning which is to determine the compensable job factors are also facilitated by the job analysis (Hackman, Oldham, 1996). In the same manner the selection procedure for the work force is also greatly aided by the job analysis. The appropriate salary level with respect to the allocated duties is determined in the job analysis. The importance of the job analysis can be gauged from the fact that the selection instrument is also determined in the job analysis. Job analysis also contains the goals, objectives, performance standards, evaluation criteria and duties to be evaluated for the performance review of the employees.
Source of Information related to Labor Law
The importance of job analysis can also be determined from its inclusion of compliance with labor law. It outlines the compliance with labor law, civil rights legislation and EEO (Equal Employment Opportunity) compliance.
Human resource comprises of about 20% to 80% of the total operating expense. If the human resource is not intricately selected and recruited then it might result in dire results for the company. Accurate assessment, selection and recruitment can only be followed by a well specified job analysis (Terpstra, Rozell, 1993). So a job analysis can help an organization succeed by accurate assessment of the required employees who will ultimately be best matched with their respective jobs (Butler and Waldroop, 1999).
Performance is basically how well people do their jobs. Organizations put their every effort in trying to make their employees put in their best and meet the performance standards. At times, the organizations looking to resolve a particular performance problem implement different strategies without understanding the nature and context of the problem. A company can make use of a number of methods to improve the performance of their organizations, teams and individuals.
The comparison of the actual performance on the performance indicators reveals the discrepancy between the desired and actual performance. The mangers can compare the performance in reports or any summarized forms which are later on presented in the verbal or written form. If there is significant deviation in the actual and the desired performance then the manager brings the attention towards it and suggests remedies.
Factors Influencing Performance
There are some factors which greatly influence the way an employee performs at their jobs. These factors includes; the job expectations, feedback, physical environment, incentives, skills and knowledge (Zalesny and Ford, 1990). The organization which succeeds to instil and sustain these performance factors ultimately benefits from employees who are extremely productive and make full use of their capabilities. These performance factors can come from a number of sources including, supervisors and colleagues.
Joseph massie identified two types of mistakes that a manager can make while gauging the discrepancy in the actual and desired performance and coming up with a remedy for it. These two types of error are listed below;
Taking action when no action is needed
Failing to take action when some corrective action is needed.
Remedies to fill the gap between the Actual and Desired Performance
If a gap in the desired and the actual performance has occurred, it becomes the responsibility of the management to close it. A solution or intervention becomes necessary if the work force is to be utilized to its full potential. The solution or the intervention can range from reinforcement of written policies, job descriptions, direction, coaching and training.
A manager can use of feedback in attempts to close any gap in the actual performance and desired performance. The definition for the feedback is "information about past behavior, delivered in the present, which may influence future behavior." (Dunn and Hall, 1984) The benefit of giving timely and frequent feedback is that it helps improving the performance when necessary. It is however very important that the feedback is based on verifiable performance instead of assumptions and generalizations.
Counseling and Coaching:
Another way to improve the performance of the employee is through directing, counseling and coaching. In this method the manger needs to assist the employees to reach the best of their capability and achieve their performance goals. The performance deficiencies of the employees can be greatly dealt with if the manager gives the necessary support and direction. The employee can succeed in learning new skills and expanding their responsibilities with the help of a coach. The method of coaching is most beneficial when the problem is to be defined and goal and strategies are to be set. A coach can help the employees in closing the gap between the actual and desired performance.
Another subjective way to communicate the gap between the desired and current performance is by encouraging self-assessment. Self assessment helps the employees to know about their short comings in a less personal way. It also facilitates positive discussion and reduces the potential of defensive behavior. The major positive point of this type of method is that it is very different from the traditional top down approach of the performance appraisals.
Implementation of Development Plans:
It is a feature of successful organization that they commit to their employees; invest in their skills and abilities through ample training. The development plans for the employees range from industrial engineering, training and development, quality assurance, and human resources development. They basically work to improve the employee performance for the better and help them acquire competencies and required skills.
Eloquent definition of desired performance:
It is very important for the management to clearly define the desired performance. It should be specific, observable and measureable. The statement of the desired performance takes in to account both the quality and quantity of performance. The clear definition of the performance is very important in order to build an army of work force who knows what is expected of them. In the same manner there should be some clear performance indicators on which the performance should be evaluated. These indicators should be communicated to the employees well in advance.
Another way to help close the gap between the actual and desired performance is by hosting formal appraisals programs. This formal approach will drive more employees to reach their performance standard. However when hosting these events, it is very necessary that the performance appraisal or review, is clarified otherwise its credibility can be questioned. The motive behind hosting such formal appraisals to arouse a desire for continued improvement and sustaining the performance. The high morale of the employees at this public appraisal eventually shows it his future good performance as well. Another advantage of these appraisals is that it gives the supervisor or the management a regular track and record of performance of all the employees over a specific time period.