Arguably, compensation is one of the key motivating factor in an organization. Employees in every organization would always appreciated being rewarded for their active participation in the development of the organization. For many decades, the question of rewarding employees on performance has been controversial, not only in the government institutions, but also in private sectors. Sandy and Regina are now in a difficult situation in whether to implement pay-for-performance policy or drop it. In fact, the proposal to implement brought immediate negative reaction of 100%. In the real sense, pay-for-performance plan is very good since it improves overall performance, but the reaction of employees is the main problem. Employees were not happy with the changes on pay plan since the 360-degree feedback plan made all people responsible for others. In addition, the perception on way changes took place brought many doubts (Novak, 1997).
Conversably, pay-for-performance plan is good to every organization. This plan is a way of encouraging employees to contribute and develop maximum efforts and potential. Sandy is very right in implementing the pay-for-performance plan since it acts as a motivation to employees and encourages high performance. Despite the resistance, the plan is a morale booster among employees, which acts as the general sentiment of all workers towards the organization. Perhaps, enacting this plan is a clear indicates to employees that the Hathaway Manufacturing cares and wants to compensate good behavior and performance (Chingos, 2002).
Increase in production is crucial to Hathaway Manufacturing since it improves overall output of the company. Pay-for-performance plan is good because it has a direct connection with the production level of employees. As a matter of fact, pay-for-performance will be cost efficient to the company. In this case, the employees will be compelled to produce more, and the higher the production the higher the revenue to the Hathaway manufacturing. Therefore, Regina and Sandy will be assured of a return even if they spend more on employees’ compensation. Moreover, pay-for-performance plan will help the company identify the employees that are capable of performing well when given incentives (Novak, 1997).
Undeniably, pay-for-performance plan serves the basis of recruitment and retention of quality employees, as well as an avenue for competition. It eliminates unhealthy collaboration among employees; everybody in the company will be working to their best to earn more, perform highly. Sandy was very right in changing the mode of compensation. Most companies in the globe opt for the pay-for-performance plan because it has good returns. Generally, pay-for-performance plan plays a tremendous role in motivation, production increase, cost effectiveness, as well as maximum potential exploration.
Regina and Sandy should put into consideration various issues before implementing the decision. Changes are always dangerous to an organization, especially if it is not implemented in the right way. In this case, before implementing the plan Regina and Sandy should consider discussing with the employees on the benefits of the pay-for-performance plan to both the organization and employees. It is unprofessional to implement the pay-for-performance plan in Hathaway manufacturing if there are no potential employees who can perform highly. Hence, they should analyze the potentiality of its employment. The employees in Hathaway Manufacturing should have proper experience, knowledge and skills to perform at the highest level possible (Chingos, 2002).
In case, the employees are not capable, the company should invest on employees training. Regina and Sandy should know that starting pay-for performance plan is very expensive and cumbersome endeavor, especially if employees require training to perform highly. Professionally, Regina and Sandy need to calculate the amount needed to change the compensation policy and the negative effects that may affect the company’s profitability (Novak, 1997). The weakness of pay-for-performance is that it ignores several issues that affect performance. Hence, in case the employees become too resistant to this change, they should reconsider using other compensation plans. In the long run, the employees and management need to come to a conformity on the pay-for-performance plan. Employees are very important, and to them compensation is the most motivational factor.
Adopting and implementing compensation plans is perhaps the most equivocal factor that has generated varied interpretations in the human resources segments of several organizations. As such, viable strategies should be employed in adopting compensation plans that offer motivation, satisfaction, and increase productivity of an organization's employees (Makhijani & Creelman, 2011). Sandy and Regina made an impromptu decision to adopt and communicate new salary plans for Hathaway Manufacturing employees and this generated negative response, which was bound to jeopardize the production of the firm. Deductively, Sandy should have approached this issue in a relatively different manner that would have elicited positive response from the employees.
Overall, prior adopting the new salary plan, Sandy should have devised a new system of evaluating individual performance than the 360 feedback system. Sandy and Regina further made mistakes in communicating the new salary plan (Novak, 1997). The communication was made without consultations with the employees and the management teams of planning, distribution, manufacturing, technical, and the human resource departments. Effective communication would have built employee understanding on the new salary plans (Makhijani & Creelman, 2011). Effective communication does not guarantee employee agreement on the new salary plans but gives them a clarification on the rationale for new salary plans. It also gives employees what they are expected to do differently, as it defines where they should increase productivity to ensure increased returns for the firm.
Sandy should have adopted the compensation plan differently by comparing the process of developing the new salary plan with the end results. Actually, the new salary plan should have set the proportion of salaries to be given based on the team performance and salaries to be given based on individual performance. This would have built and sustained the team spirit and at the same time motivate an increase in individual performance. The new salary plan should have also set salaries that would be fixed and those that would be variable. Fixed salaries ensure minimum compensations, which offer benefits to employees and reduces unhealthy competition amongst employees (Makhijani & Creelman, 2011). On the contrary, variable salaries would be based on increased individual performance, which varies based on employee job description and not employee performance.
In terms of communication, Sandy and Regina should have developed a communication strategy that facilitates employee understanding of the value of new salary plans. Different forms of media should have been used to communicate and elaborate on the new salary plans in order to foster acceptance of the new plans. The new salary plans should have been communicated to the management teams of various departments within the firm. The managers should have been educated on the same so that they can relay the message to their individual employee teams. Team managers have adequate understanding of individual teams and this would have developed positive reactions, whereby feedback from employees would have been incorporated before the communication of the final plans (Novak, 1997).
Adoption of the new plan would mean that employees’ inputs on their performance evaluation would have a significant effect on the employees pay levels. To address this, evaluation procedures will be modified to reduce performance evaluation requirements that involve a lot of cross-referencing. Employee performance competencies will also be based on core and leadership capabilities in order to avoid nonspecific competencies (Makhijani & Creelman, 2011). In fact, the level of employee performance will be based on succinct and practical descriptions of roles played by the employees. Since performance evaluations will aim at providing a reflection of individual competencies, shorter rating techniques will be employed as they are more appropriate. In addition, performance evaluations will be based on employee professionalism and this will allow employees to develop their career related needs. Performance evaluation will also incorporate sections that enable employees to give their feedback and suggestions on the appropriate performance evaluation techniques to be employed in the future.
References
Chingos, P. (2002). Paying for Performance. A Guide to Compensation Management. New
York: John Wiley & Sons
Makhijani, N., & Creelman, J. (2011). Creating a balanced scorecard for a financial
organization. London: John Wiley & Sons
Novak, J. (1997). Inserting the Team Concept into Compensation-or not. New York: HR
Magazine
