This website uses cookies to ensure you have the best experience. Learn more

Remuneration And Performance Management System Essay

1926 words - 8 pages

The correct remuneration and performance management system is an ongoing discussion as it plays an integral part in organisations. Pfeffer (2005) argues that wage compression and symbolic egalitarianism is the best practice to gain competitive advantage, however other theorists advocate a ‘best fit’ model depending on the organisational strategic plan. This essay explores these arguments by demonstrating how culture, the job, and organisational context are inter-related and affect a firm’s reward system. Ultimately showing it is the way these multiple factors align that influence the reward system and promote organisational efficiency, rather than the egalitarian stance of Pfeffer (2005).

An organisations internal pay structure can affect the way employees perform to the business strategy. A workers performance not only depends on the pay level they receive (Solow, 1979, in Alexopoulos & Cohen, 2003), but also takes into consideration their pay compared to workers above and below them, those within the same group, and the external labour market (Akerlof and Yellen, 1990). Pfeffer (2005) argues wage compression, the act of reducing the size of the pay differences among employees, improves productivity. To gain competitive advantage, organisations need to acknowledge not only hierarchical wage compression (between management and employees) but also the differences between individuals at similar levels. Narrowing pay discrepancies promotes a sense of community and a common fate, leading to greater efficiency by diminishing interpersonal competition and increasing collaboration (Pfeffer, 2005). Pay compression thus advocates equity theory; if internal factors and external competitiveness are aligned, employees perceive their pay to be fair and exert maximum effort (Milkovich, Newman, Gerhart, 2011). From this perspective, compressed pay is seen as a motivational tool to incentivise as there is no added value for an individualistic nature, but rather a collective tendency.

Pfeffer (2005) also argues that wage compression helps to de-emphasise pay, creating employees who are not driven by money but who value organisational attributes like people and work that is exciting and personally rewarding. By equalising pay, it draws attention to intrinsic forms of motivation. If pay is less salient, it means motivation to work is achieved through employee-engagement, satisfaction, and commitment which will improve efficiency and performance as the lower levels will feel valuable. Endorsing an equal structure means there is a range of returns employees can receive rather than monetary; the psychological relational returns (learning opportunities, employment security), and transactional total compensation returns (benefits such as work/life balance, allowances) (Milkovich, Newman, Gerhart, 2011).

However, the validity of Pfeffers’ argument is contestable. Although compressing the pay structure supports fairness and equality, it could have an adverse...

Find Another Essay On Remuneration and Performance Management System

Evaluating a Performance Management System Essay

2080 words - 9 pages Executive Summary The Performance Management (PM) system refers to the organization activity to ensure that employees work is aligned with the company strategic objectives, vision and the goals are met consistently and efficiently. Performance appraisals and awards systems are tools of PM that can improve the work performance of employees by helping them realize their full potentials in carrying out their organization mission; ensure that

The Ideal Performance Management System Essay

2933 words - 12 pages A comprehensive performance management system will be thorough, inclusive, practical, meaningful, reliable, open, ethical, and correctable among other qualities (Aguinis, 2013). Additionally, the process of managing performance will be an ongoing process to include processes such as coaching and employee development. An ideal performance management system will serve an organization by developing satisfied and competent employees who are

The Benefits of a Performance Management System

642 words - 3 pages systems. Dynamism of change and diversity, however, have mounted pressure on HR specialist and management team to refine, modify and or make more strategic method to performance management. This takes many forms e.g. Mbo, ‘hybrid’ systems, BSC, 360 degree and ranking & rating system. These forms are necessary in order to stay competitive and need effective management. The research is to find out trends in performance management that have


1961 words - 8 pages LIFE CARE CENTER PERFORMANCE MANAGEMENT SYSTEM Introduction Building a performance management system (PMS) that’s effective to developing short and long term goals for future organizational success must incorporate everybody from upper-management to entry-level employees. However, it takes leaders and followers to be on the same page in order to make that plan standout and become effective. That means establishing a developmental plan

Performance Management and Rewards

3468 words - 14 pages since employees are always encouraged by better pays that are slightly above the market price. Job titles should not be based on an individual but on the performance of the worker. Employees will put in more effort to perform better so that they can rise to higher ranks. That kind of management had a negative psychological behavior towards work that resulted in lower performance. Two parts defined the remuneration increase and in the first part all

Performance and Career Management

1391 words - 6 pages Performance and Career Management Performance and Career Management � � � Performance appraisal is an important tool for managers and employees. Although appraisals can be subjective, well assembled appraisals encourage remuneration for employees based upon their merit and performance. Performance appraisals are used to improve employees' efforts by helping them to realize and use their full potential when carrying out the

Performance and Reward Management

3189 words - 13 pages contemplate which areas to focus more efforts so as to develop professionally. Aguinis, Gottfredson, & Joo (2012, p. 105) define performance management as the provision of information concerning an employee’s past conduct with respect to the stated goals and standards of behavior and results. The objective of performance feedback is to help the employee improve individual as well as team performance, employee engagement and motivation and ultimately job

Coaching and Performance Management

3445 words - 14 pages reinforce a performance-based organization. Besides benchmarking and delivering an individual goal setting practices for an individual performance evaluation for their relevance to CTS as a best practice to use through the organization (CTS, 2005). Performance Management By definition performance management is taking an integrated, goal-oriented approach to assigning, training, assessing, and rewarding employees’ performance. In order for the

Performance Management and Industrial Relations

2034 words - 8 pages ). This close connivance between these powerful trade unions and the government led to the passing of important labour laws such as Industrial Disputes Act. A marked feature of acts passed in this period is that they are heavily skewed towards the employer by not allowing for collective bargaining.In the above period, across the world, performance management was not practiced then in its current form but rather in the form of Merit System or Ranking

Performance and Career Management Paper

1005 words - 4 pages performance, the employee will be given direct guidelines on how to improve performance. After reviewing the tasks that equate to positive performance, the employee will provide us with an explanation of what management expects from him. If all steps are clear, we will ask the employee to sign a document describing what is expected of him and a date for a new evaluation will be set no later than 2 months after the first feedback session.Reaching

The Importance of an Organization's Performance Management System

1391 words - 6 pages One of the many ways to measure an organization's success in meeting or achieving its strategic objectives is to evaluate the performance of its employees. This evaluation, if it is to be effective or of substantial value to the organization, it needs to be systematic and purposeful. In order to explain the impact that a performance management system can have on other areas of human resource management, it is necessary to define the relationship

Similar Essays

Performance Management Appraisal System Essay

562 words - 2 pages The execution performance management requires the participation of numerous players (Managers, supervisors, and subordinates). For the system to succeed and accepted, clear understanding about the system is needed for effective implementation. Supervision and explanation of performance appraisal system is very crucial element for performance. ‘‘Merely developing a model of the strategy does not ensure the strategy will be successful.’’ Othman

Performance Management System Essay

919 words - 4 pages Organizations derive competitive advantage by outperforming rivals in the execution of activities required to ensure optimum operational effectiveness in providing products and services to customers (Porter, 1996). Operational effectiveness depends largely on the extent to which the organization’s performance management system (PM) is capable of developing the knowledge, skills, and abilities of its people (Allan, 1994). Thus, knowledge of

Employee Performance Management System Essay

3822 words - 15 pages the behavior and results that accomplish their mission. Thus, performance management and appraisal system has had myriad definitions, few of which have been listed below. (Napier,1986)Performance measurement is the "heart and soul" of the performance-based management process. Flowing from the Schafer Corporation al mission and the strategic planning process, it provides the data that will be collected, analyzed, reported, and, ultimately, used to

Performance Management System Essay

928 words - 4 pages ).” In an effort to standardize the employee evaluation system across all five divisions, the organization developed a standard performance management system in 2005. According to Aguinis, there are fourteen characteristics that form an ideal performance management system and Boulder County Public Health’s performance management system will be evaluated to see which of these characteristics their system has. Characteristics of an Ideal