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Employee rewards

Performance related pay

Reward can act as the 'catalyst' for improved performance and better productivity. Butreward, as such, is not enough and in any case it is not a substitute for good management.

Rather, it is a part of management. Certain basic criteria are essential for rewards to be

effective. These include:

Reward should be quic.

Reward should be significant.

The goals and rewards must be! nown, understandable, and attainable.

Reward must be distinctly and directly related to performance.

Reward should be irrevocable.

Reward should be compatible with "ob measurement.

#f the reward plan is seen to be unfair and unrealistic, for e$ample promotion on the basis

of seniority or favoritism, it may have a definitely negative effect as a motivator. %or

rewards to be effective, they have to be generous and significant as noted above, hencethey must be structured to attain a proper balance of motivating people to purpose and at

optimum effort.

Rewards are generally reconed to improve productivity by somewhere of the order of &

to ( per cent. This is nearly twice as much as that attained by goal)setting or "ob)redesign. But each incentive or reward system is liely to have value under certain

conditions only. *ence to be effective, the rewards must be 'tailored' and changed to suit

the specific conditions. There is no magic formula for all situations and at all times.

+roductivity is usually but erroneously associated only with the worshop floor. But totalproductivity which ultimately determines the profitability of the entire organiation is the

sum total of the productivity at various levels right up to the C-.

%or if the worers are not given the right materials at the right place and at the right time,

their productivity will suffer due to no fault of theirs. The manager, therefore, plays avital role in the productivity of the worers and team.

ne can even go as far to say that productivity is the only reason for the e$istence of the

manager. #ndividually the manager may be considered nonproductive, in that he or shedoes not contribute directly to the production, but is responsible for integrating the worof his or her team into a total productivity effort, Thus, a manager can increase

productivity indirectly by aiding to produce more, and here too, financial motivation

plays a ma"or role.

Reward systems

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The financial rewards are basically of three types:

profit sharing!

"ob evaluation! and

merit rating.

Profit sharing

+rofit sharing could be on a macro basis or on a micro basis. The former relates to the

entire company as a whole and the latter to a particular section or group dealing with a

particular activity and/or product. n a macro level, it would be difficult to identify andreward outstanding performance. This is possible on a micro level by treating the

particular activity as a cost and profit center by itself. This is easier said than done, since

overheads and other common services have to be charged and this cannot be donecompletely ob"ectively. The cost allocation in such cases is somewhat arbitrary and the

profit will therefore not be a true reflection of the performance of that particular group or

activity.

Job evaluation

#n case of "ob evaluation, the various component factors have to be isolated and evaluatedfor purposes of inter)"ob comparison. -ach factor is assigned a rating on the basis of a

scale agreed beforehand by the union and the management "oint committee. The total

rating for each "ob then forms the basis of wage structure. *owever, there must be a baselevel, representing, in effect, the 'minimum wage', depending on the nature of wor and

the geographical area. #n some cases and in some countries these are stipulated by law. 0

typical, though somewhat broad, list of "ob factors is as follows:

woring environment!

physical characteristics!

mental characteristics!

e$tent of responsibility!

training and e$perience.

#n case of managers, the factors are:

responsibility!

e$pertise!

human relations.

Merit rating

1erit rating has been used as an indicator of performance. -ach employee is rated,

typically as e$cellent, good, average or poor, in respect of the following abilities:

communication!

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human relations, including leadership and motivation!

intelligence!

"udgment!

nowledge.

The rating, unfortunately, tends to be carried out purely mechanically and it carries aheavy bias of the rater who may be too lenient, may not be ob"ective and may also have

favorites or otherwise in the group being rated.

2e$t 3 The 4lacier +ro"ect

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