Question

1. Your organization is interested in adopting a pay for performance compensation program. You have been asked to chair the committee analyzing this concept as well as to prepare an outline of its positives and negatives and “best practices” recommendation. How would you approach this assignment? (minimum 300 words)

Answer 1

Performance based compensation program for employees means the entire or certain percentage of salary of the employees is variable and dependent on their throughput and performance. There are several positive as well as negative implications of implementing this program.

Positive aspects:

• The performing employee gets a higher pay compared to the non-performers.
• Their is strive for improvement and excellence
• The performance appraisal helps in upward and downward communication
• Enhance Employee involvement and Motivation
• Defining career growth path
• Determining Skill set and training requirement

Negative Aspects:

• Prone to personal and professional biases
• Applying similar approach to all, i.e. generalising
• Mood variation of appraiser
• Incorrect conclusions
• Not validating the submitted data
• Too many performance parameters

Best practices for effective performance appraisal system are:

• Highlight the positive achievements and provide guidance to improve upon failures
• Keep an unbiased mindset during appraisal
• Limit key performance parameters to 3-4 primary ones, to avoid time wastage and over data
• Schedule of performance appraisal should be maintained and respected
• Planing progressive career path.
• Motivate employees to work harder
• Make the system transparent enough to cause everyone to trust in it
• Rating should be fair
• Discussed points should be adhered to after the meeting.