Pay for Performance
Employees’ motivation enables companies to achieve high level of productivity because the workers feel appreciated and valued in the organization. Various motivation and appraisal approaches are used by companies to motivate their employees. One of these approaches is the pay for performance method. The annual merit under this approach increases regularly depending on the individual employee’s performance in an organization (Adler, Campion, Colquitt, Grubb, Murphy, Ollander-Krane, &Pulakos, 2016). On the other hand, other dynamics such as increasing cost of living has triggered a concern and an issue of debate on whether the pay for performance is a credible appraisal method. The increase in the cost of living is automatic annually; therefore, it is important that employers adjust their payroll plans accordingly so that their employees don’t struggle to make the ends meet at the end of the day. There is various incentives and merit based variables that will be considered in exploring the suitability of the pay for performance appraisal method in companies.
According to the Edere and Manso (2013), compensation based on the pay-for-performance is effective in promoting higher productivity. This study helps in unveiling how managerial compensations can promote innovation and thus enhance the companies’ competitiveness in the global business environment.
Companies should always work to optimize their productivity and efficiency and promote sustainability through cost management. Pay for performance affects employees in various ways and thus a relevant topic of study in this case (Ederer, &Manso, 2013). On the other hand, offering opportunities for advancement to the employees may be a critical factor for high performance in pay for performance organizations since employees’ performance and innovation does not depend only on the financial benefits. Studies indicate that about 80% of the employees in the current world want benefits in terms of trainings rather than the pay increment among others (Sepe& Whitehead, 2015). The study will focus on health industries specific to study the pay for performance organization with the knowledge of understanding of the company policy as being obtained. The research study will aim at analyzing whether both the intrinsic (trainings) and extrinsic factors (money reward) influence the level of employees morale and performance.
Statement of the problem
The problem for this research is the lack of knowledge about the impact of trainings on the productivity of an organization. Apparently, that most of the organizations that have adopted the pay for performance appraisal method have not achieved their expected level of productivity. The pay for performance remuneration package links the employee’s payment (salary and bonus) to their motivation level and the workplace environment. The pay for performance has limited effects on the organization’s productivity and this shows that there are other measures that must be supplemented to the remuneration scheme to ensure significant improvement in the employees’ motivation level.
According to Berman, (2015), employees have various expectations when working in an institution; therefore, they may not be motivated by the bonus they receive and salary benefits only. As such, the pay-for-performance may not necessarily be an independent variable but rather a moderating variable. The work performance in a pay for performance organization is affected by the policy, training and transactional pay. Upon this backdrop, the question that this research work seeks to answer is how these organizations are affected by the pay for performance initiative.
This research draws on data showing how performance based organizations are often using training and monetary rewards as incentives to increase levels of performance. The research uses the case of the study conducted by Tomas Chamorro-Premuzic who explored the outcomes of an organization shifting their focus towards the intrinsic rewards versus the extrinsic rewards in improving the organizations productivity and employees’ motivation. The study findings indicated that intrinsic factors play a major role in the level of employees’ motivation compared to extrinsic factors. Also, it was evident that the employees’ personalities were better predictors of their level of engagement than their salary. The more extraverted and agreeable, the more they will be satisfied with their job (Chamorro-Premuzic, 2013). The fact that pay-for-performance is not adequate to enhance the productivity of a company justifies that the research work is viable and that a gap exists. Based on the theoretical framework, the study is based on the hypothesis that integration of trainings (DV) to the employees increases their level of performance (IV) in the institutions supporting the pay-for-performance appraisal scheme.
Improvement of productivity will be measured as the enhancement of achievement of these goals. Training quality and quantity will be a standard of measure such as achieve x and you receive as per the company policy. The effectiveness of the levels of training and incentives will not be evaluated beyond their presence in the organization. Finally, the performance organization will be operationalized based on the available policies in the health industry. The validity of the variables manipulation shall be enhanced by reducing the effect of the confounding variables.
Purpose of the Study
This study intends to create a research design that determines whether managers that conduct employees’ trainings benefit from the high employees’ productivity compared to those that support pay-for-performance without trainings. The advancement and development opportunities include training, sponsoring education and empowering employees through exposures that equip them with new knowledge and skills. The data will be collected through administration of questionnaires to the study participants to determine how the opportunities affect their job delivery (Adler, et al., 2016). Understanding the importance of employees’ trainings alongside the pay for performance programs in the organization’s productivity will help managers and employers develop appropriate measures to motivate their employees (Anitha, 2014) rather than sticking to the pay for performance initiative. This study is set to benefit chief executive managers and the human resource managers.
Relationships of Variables
The independent variable is the level of employees’ performance while the dependent variable will be employees training with the study focusing on organizations supporting the pay-for-performance schemes. The moderating variables will include the training and monetary incentive employees receive in the pay-for-performance scheme. The moderating variables enhances the relationship between work performance and the level of performance achieved based on the training and transactional pay administered. Based on this research, employers can understand how to achieve high productivity under the pay-for-performance scheme (De Coning, 2016).
• Does regular training affect employee performance in pay for performance organizations and thus enhances the ability of a business organization to compete in the global environment?
• Do companies that offer training benefits achieve high productivity as a result of employees’ motivation compared to the companies that offer only the pay for performance scheme?
Adler, S., Campion, M., Colquitt, A., Grubb, A., Murphy, K., Ollander-Krane, R., &Pulakos, E. D. (2016). Getting rid of performance ratings: Genius or folly? A debate. Industrial and Organizational Psychology, 9(2), 219-252.
Anitha, J. (2014). Determinants of employee engagement and their impact on employee performance. International journal of productivity and performance management.
Berman, E. (2015). Performance and productivity in public and nonprofit organizations.Routledge.
Chamorro-Premuzic, T. (2013). Does money really affect motivation? A review of the research. Harvard Business Review Blog Network April, 10, 2013.
De Coning, J. A. (2016). Does good pay compensate for a dissatisfying job? The relationship between gross wage, wage satisfaction, job satisfaction and life satisfaction (Doctoral dissertation).
Ederer, F., &Manso, G. (2013). Is pay for performance detrimental to innovation?. Management Science, 59(7), 1496-1513.
Sepe, S. M., & Whitehead, C. K. (2015).Rethinking Chutes: Incentives, Investment, and Innovation.