Equitable Pay, Meaningful Work, and Pay for Performance Scheme
CEO of leading Software Company SAS once said “Treat employees like they make a difference and they will”. Every great leader that there has ever been has always thrown light upon the subject of employee motivation. Employee motivation is crucial for the success of any organization (Kuvaas, Buch & Dysvik, 2018). A motivated employee not only works hard and performs better but also encourages those around him to perform to the best of their abilities. There are several strategies that organizations adopt in order to motivate their employees. Some strategies are more effective than the other. The effectiveness of motivational strategies also largely depend upon the efficiency of their implementation as well as the nature of job of employee’s concerned (Shields et. al., 2015).
The essay topic suggests that providing equitable pay and meaningful work is a more effective way of motivating employee than pay for performance schemes. First it is important to understand what equitable pay is. Equitable pay or also known as fair pay means that all employees are paid equally for equal work done (Salami & Ajitoni, 2016). Meaningful work may have different meaning for different people but the idea behind the concept of meaningful work is to offer work that the employees may deem meaningful. Pay for performance scheme on the other hand refers to the practice of paying employees as per their performance (Harrison et. al., 2014). This scheme offers a certain part of an employee’s income as fixed pay whereas the other part remains variable and is disposed of based on the performance of the employee.
I disagree with the statement as I believe that pay for performance schemes is one of the most effective employee motivation strategy adopted so far. This is because, through this policy, employees are consistently motivated to put that extra effort and earn more incentives for themselves. To be completely honest, money is definitely a major motivator for employees because when an employee slogs for eight hours at work, the pay check received at the end of the month becomes a priority. No doubt equal pay and meaningful work are strong motivators for employees and can even be an impeccable strategy towards long term employee retention. However, it is the pay for performance schemes that will continue to drive employees to work hard on a month on month basis.
Herzberg’s theory of motivation also known as the motivation hygiene theory talks about several elements and policies of the work place that fall under hygiene factors while certain elements are motivating factors (Miner, 2015). The major difference between the two is that the absence of hygiene factors can cause demotivation among employees while their presence does not play a significant role in motivating them (Sanjeev & Surya, 2016). Equitable pay or equal pay for equal work in my opinion is one such hygiene factor. The presence of equitable pay can do little towards keeping employees motivated.
The Effectiveness of Employee Motivation Strategies
Meaningful work is definitely a strong motivating factor for employees. A lot of employees are continue to work at jobs that are not essentially meaningful. They may do it because of their responsibilities. However, there are few people who would take up a meaningful job by accepting a pay cut. Offering meaningful jobs to employees is surely an optimal strategy to motivate employees but when weighed against paying people extra money for their performance, it falls short.
Pay for performance schemes have been introduced in organizations in order to motivate employees to perform better. These performance schemes are a way for showing employees that their hard work and efforts are appreciated and respected in the firm. Rewards and recognition have always been optimal strategies to motivate employees in the organization (Ahmad et. al., 2014). These rewards make employees believe that every effort put by them is getting paid off. This is why they feel all the way more motivated to put even more efforts. Pay for performance schemes offer employees something above and beyond their salaries. The incentives earned through this scheme are a clear reward for their hard work and efforts.
At the end of the day all organizations are running businesses. Businesses make money through the efforts of their employees and pay a certain percentage of this money to their employees in order to compensate for their work in the form of salaries. Senior management employees get paid more than middle level employees and middle level management is better compensated than beginner level employees. This parity in pay is defined simply because the efforts put by someone in the top management as well as the responsibilities bestowed upon such an employee are a lot more than that of a fresher. Hence it can be clearly noticed that the businesses try to quantify the efforts of its employees and compensates them accordingly. Pay for performance scheme fits perfectly well in this picture. The extra efforts put by employees are quantified and they are fairly compensated based on that. Therefore not only is the scheme a strong motivating factor but also a very fair performance evaluation and compensation strategy.
It is important to note that in every organization, certain targets or minimum expectations are shared with employees at the time of joining. These are the benchmarks that an employee needs to achieve irrespective of other factors. Sales employees have revenue targets, CRM employees have customer targets and similar such practices are there in all other jobs. If an employee working with an organization fulfils its goals and achieves its target then that employee is fulfilling his or her role in the system. In this entire process, there is a strong possibility that for some employees these targets are easy to achieve. They may have more talent, ability or the required skills set to do a lot more than this. Their extra efforts are sure to benefit the organization as well. But it is also important that such employees are given some motivation in order to perform more than the target assigned to them (Gopal & Chowdhury, 2014). Pay for performance schemes offers exactly that motivation for employees. This scheme gives employees a concrete, specific, measurable and quantifiable reason to work hard after achieving their targets and they do so because they know they will be fairly contributed. Had it not been for these schemes, there would have been no quantifiable benefit offered to employees if they achieved more than their targets and in the longer run it would lead to demotivation.
The Benefits of Pay for Performance Scheme
Another important contribution for the pay for performance scheme is the change in the organizational culture that is brought about by a bunch of motivated employees who are over achieving their targets (Engineer et. al., 2016). Incentives earned by one employee will not only motivate that employee to continue putting extra efforts but will also encourage other employees of the firm to increase their efforts in order to reap the benefits of the scheme. This will therefore lead to enhanced productivity of the entire organization. Organizational culture has a significant impact on the growth of the business as well as level of employee satisfaction (Hogan & Coote, 2014). This is why it is important that employee motivation strategies adopted by the business are in line with organizational culture of the organization. Pay for performance scheme create a culture of healthy competition. Competition because employees will work towards achieving more than their targets and healthy because the incentives earned by one employee have no impact on the incentives earned by other employees. This spirit of healthy competition in the business can only be brought about by efficient motivation strategies such as pay for performance.
Despite the several benefits of the pay for performance scheme, like every other scheme or strategy, it is important that the strategy is implemented in an effective manner. The idea behind pay for performance scheme must be to motivate employees to work hard. The performance of other employees who exceed their targets owing to the scheme and earn incentives must not be used as a new benchmark for all employees because this would be unfair and may lead to employee demotivation. The idea behind the scheme is to offer a platform wherein talented employees can put in that extra efforts and be fairly compensated for the same.
Pay for performance is a staunch motivating factor for employees working across different industries. Pay equity is a hygiene factor that businesses must incorporate for ethical sustainability of the firm. Pay for performance scheme motivates employees to work hard and also rewards their hard work in a fair manner leading to improved organizational culture and enhance productivity within the business. This is why I strongly believe that pay for performance scheme is a more effective way to motivate employees than providing equitable pay and meaningful work.
References:
Ahmad, F., Abbas, T., Latif, S., & Rasheed, A. (2014). Impact of transformational leadership on employee motivation in telecommunication sector. Journal of management policies and practices, 2(2), 11-25.
Engineer, C. Y., Dale, E., Agarwal, A., Agarwal, A., Alonge, O., Edward, A., … & Peters, D. H. (2016). Effectiveness of a pay-for-performance intervention to improve maternal and child health services in Afghanistan: a cluster-randomized trial. International journal of epidemiology, 45(2), 451-459.
Gopal, R., & Chowdhury, R. G. (2014). Leadership styles and employee motivation: An empirical investigation in a leading oil company in India. International journal of research in business management, 2(5), 1-10.
Harrison, M. J., Dusheiko, M., Sutton, M., Gravelle, H., Doran, T., & Roland, M. (2014). Effect of a national primary care pay for performance scheme on emergency hospital admissions for ambulatory care sensitive conditions: controlled longitudinal study. Bmj, 349, g6423.
Hogan, S. J., & Coote, L. V. (2014). Organizational culture, innovation, and performance: A test of Schein’s model. Journal of Business Research, 67(8), 1609-1621.
Kuvaas, B., Buch, R., & Dysvik, A. (2018, July). Individual variable pay for performance, incentive effects, and employee motivation. In annual meeting of the Academy of Management, Chicago, USA.
Miner, J. B. (2015). Organizational behavior 1: Essential theories of motivation and leadership. Routledge. United Kingdom.
Salami, S. O., & Ajitoni, S. O. (2016). Job characteristics and burnout: The moderating roles of emotional intelligence, motivation and pay among bank employees. International Journal of Psychology, 51(5), 375-382.
Sanjeev, M. A., & Surya, A. V. (2016). Two factor theory of motivation and satisfaction: an empirical verification. Annals of Data Science, 3(2), 155-173.
Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic, A., McLean, P., … & Plimmer, G. (2015). Managing employee performance & reward: Concepts, practices, strategies. Cambridge University Press.
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