Motivation and Performance-related Pay Essays

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Performance-Related Pay

In the current times, organizations are gradually acknowledging the significance of modern reward management methods and how beneficial it is for the company’s interests. Armstrong and Murlis (2007) defined reward strategy as ‘the direction in which reward management innovations and developments should go to support the business strategy, how it should be integrated, the priority that should be given to initiatives and the pace at which they should be implemented’. CIPD’s (2012) 11th annual survey report states that two-thirds out of 455 organizations in the United Kingdom implement some form of reward strategy, be it an incentive or a recognition scheme.

Performance-related pay (PRP) by definition is a method of remuneration that links pay progression to an assessment of individual performance (CIPD, 2012). Different sectors of business offer different reward schemes, for example bonus payments, pension schemes, non-monetary incentives and so forth. CIPD (2012) reports the integration of performance-related pay has been widespread in UK organizations as organizations seek efficacious ways to extract high performance levels from their employees.

One of the frameworks that support the efficacy of performance-related pay as a driving force for employee motivation is Vroom’s (1964) ‘expectancy theory’. The theory is based on the belief an employee will achieve the results expected in their work if the consequential financial and personal reward is in the individual’s interests. Brown and Leigh (1996) talks about the three elements that support Vroom’s (1964) theory, the first being effort-performance relationship which looks at the likelihood of the individual’s performance to be recognized for appraisal. Performance-reward relationship talks about the extent to which the employee believes that the outcome of their performance will lead to organizational rewards. Rewards-personal goals relationship on the other hand, is about the attractiveness of the potential reward to the individual. Forest (2008) implies the ‘expectancy theory’ can therefore be used by Human Resource to develop a strategy that would offer both extrinsic and intrinsic rewards that would ultimately drive an employee’s motivation.

Case Study 1:Liverpool Football ClubApart from business organizations, a football club also operates using a business model that implements Performance-related Pay (PRP). Football clubs often include an incentive-based reward system in a player’s contract in order to further encourage high levels of performance on the field. Liverpool Football Club has recently awarded a notable pay rise to one of its players, Luis Suarez, increasing his weekly wages from £80,000 to £100,000 as he clinched the top-scorer spot in the Barclay’s Premier League.(The Guardian, 2013) |

Case Study 2John Lewis PartnershipThe renowned and esteemed John Lewis Partnership (JLP) has more than 80,000 partners and is one of the best examples of employee-ownership in the United Kingdom. The Head of Reward, Andrew Clark, dictates that the reward strategy is one of the key elements behind the business’ success. JLP pays above National Minimum Wage across the country and offers a reward package of up to 14% of one’s salary. Besides the array of incentives such as store discounts, subsidized holidays and pension schemes, JLP focuses on individual performance-driven progression that would drive up a partner’s earnings.(CIPD, 2012; John Lewis, 2012) |

Case Study 3 Which? Consumer favorite, Which?, is a campaigning charity and operates on a not-for-profit basis to raise awareness for consumer rights. Funded by membership subscriptions and online services, Which? currently employs 450. Which?’s talent management forces introduced the reward management system in 2010 ‘One Which? One Reward’ that offers multiples of benefits: 11% pension scheme, insurance and pay is performance-linked. The campaign resulted in 50% decrease in
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