Current Methods of Rewards, Recognition, and Performance Management
A correctly designed and implemented rewards, recognition, and performance management system is crucial to the success of an organization, regardless of size. Despite this, thirty-five (35) percent of organizations revise or replace these systems each year due to dissatisfaction and seventy-five (75) percent have had some system change during the preceding five (5) year period (Schneier, 1995). An overview of the current rewards, recognition, and performance management process utilized by the CRSST is as follows:
The reward system for the CRSST operates under two (2) pay for performance programs, merit pay and incentive pay. As the manner of work performed by members of the CRSST are objective and results-based, these incentive programs both carry the potential for high incentive intensity (Noe, Hollenbeck, Gerhart, & Wright, 2015).
Merit pay programs normally consist of annual pay increases related to individual rating and scales outlined in an organization’s performance management process (Noe, Hollenbeck, Gerhart, & Wright, 2015). The merit pay program for the CRSST operates under this guideline. The CRSST performance management process, which will be described shortly, rates employee performance on a 1-5 scale with each rating being designated a maximum pay increase from 0-5% of current employee pay. These increases are then reflected on the first full paycheck of each calendar year.
The overall effectiveness of the merit pay program to increase employee motivation at the CRSST is moderate. The organization measures the effectiveness of the program by making sure that all organizational increases do not exceed an established percentage of total organizational payroll. One of the primary issues that can be present with merit pay programs is the absence of compelling reasoning for change (Schneier, 1995). This is the case with the CRSST program. Overall employee feedback indicates that the merit increases are not indicative of perceived employee output and do not provide ample motivation to incite increased performance. As there is no way to request larger increases for truly exceptional performance and a cap placed on the number of high ratings given, most employees are left with increase averaging around two (2) percent. This low level increase does not provide the requisite motivation needed to drive optimal operational growth.
Incentive pay, reward payments handed out for individual performance, must be earned on a year by year basis and are measured on actual physical output (Noe, Hollenbeck, Gerhart, & Wright, 2015). The CRSST’s incentive pay program is directly linked to exceeding established yearly sales goals. The incentive payouts are comprised of up to 20 percent of an individual’s current salary, provided that a minimum of 90 percent of the sales goal has been reached in each of the three (3) serviced accounts (Lowes, Walmart, and Home Depot).
This particular reward program is more effective than the merit increase program. Individuals feel that they have more control over their ability to receive this payment and strive to hit established goals. Organizational effectiveness is measured by the percentage of employees who have exceeded their established sales goals. One issue with this program is that it can skew performance to meet individual goals rather than focus on organizational goals. Programs such as this can cause employees to focus solely on working to gain the reward at the expense of other activities that may provide