PFP Ultimate

7/29/2019 PFP Ultimate

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PAY FOR PERFORMANCE

BYArpan Vora

Nitika Agarwal

Vivek Patel

To :

Prof. Sameer Pingle


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Some Questions to begin with

What is performance ? Is there a need to define performance why?

Is it possible to define performance ? How may performance be defined? Why should pay be related to performance to whose

performance should it be related? What part of pay should be related? How much of pay should

be related? Who decides who should get how much? Should employees know about this? At which stage should

they be brought into the picture?


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It is any type of financial reward that is provided only

when certain specified performance results occur.

What is Pay for Performance ?


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Motivation.

Increase the commitment.

Reinforce cultures and values.

Alignment with company performance.

Discriminate equitably between employees based

on performance

Objective of PFP


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How do you select a PFP system?

In designing a PFP system three major questions

should be asked.

Who should be included in PFP system?

How will performance be measured?

Which incentives will be used?


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Performance related pay falls broadly under two headings:

Merit based

The person being appraised will then be scored ontheir achievement over the year and this will correspond to alevel of pay that they will be awarded. Unfortunately thissystem is not very efficient as the focus can be on recentachievement, not on the entire year.


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Goal based

The employee is then scored by whether they

achieved this objective, and this score is then linked to a

pay level. A possible downside to this approach is that

the employee may focus solely on what he/she believes

will allow them to achieve this goal, thus neglecting

other areas of their work. One major benefit of goal-

based of this method is that any organizational

aims/goals will become the priority of the individual.


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For pay for performance to be

effective, agencies need to meetcertain requirements.

A culture that supports pay for performance;

A rigorous performance evaluation system;

Effective and fair supervisors;

Appropriate training for supervisors and

employees; Adequate funding;

Ongoing system evaluation


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When a pay for performance system functions properly:

Outstanding performers will receive the greatest rewards, to

acknowledge their superior contributions and to motivate them

to continue high performance.

Average performers will receive substantially smaller raises,

which may encourage them to work harder to achieve larger

raises in the future.

Poor performers will receive no increase, which is intendedto persuade them to improve their performance or leave.


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Areas of Study

Does performance related pay really motivate

people? Does it really affect individual performance?

How does it contribute to organization performance

and effectiveness?

Can there be a single best system?


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Some Definitions

Performance Payfinancial or financially measurable

reward linked directly to individual or organizational

performance.

Individual performance related pay pay directly linked to

individual performance (mostly related to increase in

basic pay).Performance Bonus/Variable Pay non-recurring cash

lump sums related to performance achieved by the

individual, team or organization.


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Competency related pay pay related to increase in thedemonstrated level of competency in doing the job

Profit sharing schemes that share a proportion of the

organization's profit with the employees (on commonbasis)

Gain sharing schemes that share a set proportion of gain

with the employees higher the gain, higher theproportion


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Some Research Studies.

What should determine pay increase

Individual performance 96%

Competitive market position 72% Position in salary range 67%

External market rates of increase 59%

Internal equity issues 53%

External rate of inflation 42%

Individual competency/skill demonstration 37%

Timing and amount of last increase 30%


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Moving to Practice ----


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Company : Kirti Telnet Pvt. Limited ( KTPL) Kirti Telnet Pvt. Limited (KTPL),founded in 1987, in

Ahmedabad Gujarat, is the only company dedicated to data-

communications solutions

Segment : SME Person contacted : Snehal Patel

Designation : Director


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Questions Addressed.

What do you mean by Pay for performance?

How do you use this concept in your organization? Explain the

rationale for using PFP.

Who decides the pay in your organization? HR? Line Manager?

Top Management? All? How it is decided?

Are you using any Employee Recognition programme? Explain.

What role employee recognition plays in motivating and retaining

employees?


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PFP Ultimate

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