Introduction:
Pay for performance is a crucial tool to motivate, engage and incentivize employees in today's workplace. Two popular methods that organizations can use to link employee pay to individual performance are related pay and pay by result. Both methods aim to enhance performance but differ in their approach to incentive pay. This assignment aims to compare and contrast the performance in related pay and pay by result methods.
Comparison of Related Pay and Pay by Result:
Related pay is a pay system that links employee pay to the pay of others in the same job or grade level. The concept of related pay typically uses pay surveys, which are used to benchmark salaries of a specific job title within an organization against those of similar positions in other organizations. Employees might get a pay raise if they get a promotion which would involve being assigned more significant responsibilities. Related pay is an incentive system that rewards employees for sticking with the company and performing well over the long term.
Pay by result is a pay system that rewards employees for achieving specific performance targets. In this system, monetary incentives are earned based on reaching specific, predetermined goals. Such goals can be either quantitative, such as sales numbers or customer satisfaction scores, or qualitative, such as process improvement or innovation. Thus, pay by result is focused on achieving and exceeding performance expectations, and rewards employees who meet or surpass the desired levels of success.
When it comes to comparing related pay and pay by result, we can see some differences between these incentive systems. The main difference lies in the focus of the employee pay. With related pay, the incentive is directed at the long-term commitment, loyalty, and good performance over time, while pay by result is aimed at achieving specific, measurable results. In terms of motivation, the related pay is more effective for encouraging employee retention, while pay by result focuses on quality and output.
Another difference is in how easy it is to implement. Related pay can be less complex to execute since the incentive is tied to the salary structure within the organization. In contrast, pay by result is typically more complicated and requires consistent monitoring of performance expectations and tracking against those to set accurate targets. Also, fitting employees into a 'one-size-fits-all' performance-based matrix might not always be feasible, leading to the possibility of inequitable rewards.
Conclusion:
In summary, related pay and pay by result are two distinct and effective pay systems that organizations can adopt. Related pay is best applied when the organization wants to establish stability and long-term growth while pay by result is ideal when organizations want to drive immediate results, with individual goals that can be measured. Ultimately, deciding which approach to use depends on organizational goals and needs, as well as the specific nature of roles and responsibilities to be performed.
Write an assignment Compare and contrast performance in related pay and pay by result methods
3 answers
Write an assignment Compare and contrast performance in related pay and pay by result methods include reference and in text citation.
Introduction:
In the modern workplace, pay for performance is a critical tool that organizations use to motivate, engage, and incentivize their employees. Two popular approaches that link employee pay to individual performance are the related pay and pay by result methods. Both methods aim to enhance performance, but they differ in their approach to incentive pay. This assignment aims to compare and contrast performance in related pay and pay by result methods, with relevant references and in-text citations.
Comparison of Related Pay and Pay by Result:
Related pay is a pay system that links employee pay to the pay of others in the same job or grade level. The concept of related pay typically uses pay surveys, which are used to benchmark salaries of a specific job title within an organization against those of similar positions in other organizations. Employees might get a pay raise if they get a promotion, which would involve being assigned more significant responsibilities. Related pay is an incentive system that rewards employees for sticking with the company and performing well over the long term (Gerhart & Milkovich, 1990).
Pay by result is a pay system that rewards employees for achieving specific performance targets. In this system, monetary incentives are earned based on reaching specific, predetermined goals. Such goals can be either quantitative, such as sales numbers or customer satisfaction scores, or qualitative, such as process improvement or innovation. Thus, pay by result is focused on achieving and exceeding performance expectations and rewards employees who meet or surpass the desired levels of success (Banker, Lee, & Potter, 1996).
When it comes to comparing related pay and pay by result, we can see some key differences between these incentive systems. The primary difference lies in the focus of the employee pay. With related pay, the incentive is directed at the long-term commitment, loyalty, and good performance over time, while pay by result is aimed at achieving specific, measurable results. In terms of motivation, related pay is more effective for encouraging employee retention, while pay by result focuses on quality and output (Cable & Judge, 1994).
Another difference is in how easy it is to implement. Related pay can be less complex to execute since the incentive is tied to the salary structure within the organization. In contrast, pay by result is typically more complicated and requires consistent monitoring of performance expectations and tracking against those to set accurate targets. Also, fitting employees into a 'one-size-fits-all' performance-based matrix might not always be feasible, leading to the possibility of inequitable rewards (Gerhart & Milkovich, 1990).
Conclusion:
In conclusion, related pay and pay by result are two distinct and effective pay systems that organizations can adopt. Related pay is best applied when the organization wants to establish stability and long-term growth, while pay by result is ideal when organizations want to drive immediate results, with individual goals that can be measured. Ultimately, deciding which approach to use depends on organizational goals and needs as well as the specific nature of roles and responsibilities to be performed.
References:
Banker, R. D., Lee, S. Y., & Potter, G. (1996). A field study of the impact of a performance-based incentive plan. Journal of accounting and economics, 21(2), 195-226.
Cable, D. M., & Judge, T. A. (1994). Pay preferences and job search decisions: A laboratory study of job choice. Journal of applied psychology, 79(3), 374-381.
Gerhart, B., & Milkovich, G. T. (1990). Organizational differences in managerial compensation and financial performance. Academy of management journal, 33(4), 663-691.
In the modern workplace, pay for performance is a critical tool that organizations use to motivate, engage, and incentivize their employees. Two popular approaches that link employee pay to individual performance are the related pay and pay by result methods. Both methods aim to enhance performance, but they differ in their approach to incentive pay. This assignment aims to compare and contrast performance in related pay and pay by result methods, with relevant references and in-text citations.
Comparison of Related Pay and Pay by Result:
Related pay is a pay system that links employee pay to the pay of others in the same job or grade level. The concept of related pay typically uses pay surveys, which are used to benchmark salaries of a specific job title within an organization against those of similar positions in other organizations. Employees might get a pay raise if they get a promotion, which would involve being assigned more significant responsibilities. Related pay is an incentive system that rewards employees for sticking with the company and performing well over the long term (Gerhart & Milkovich, 1990).
Pay by result is a pay system that rewards employees for achieving specific performance targets. In this system, monetary incentives are earned based on reaching specific, predetermined goals. Such goals can be either quantitative, such as sales numbers or customer satisfaction scores, or qualitative, such as process improvement or innovation. Thus, pay by result is focused on achieving and exceeding performance expectations and rewards employees who meet or surpass the desired levels of success (Banker, Lee, & Potter, 1996).
When it comes to comparing related pay and pay by result, we can see some key differences between these incentive systems. The primary difference lies in the focus of the employee pay. With related pay, the incentive is directed at the long-term commitment, loyalty, and good performance over time, while pay by result is aimed at achieving specific, measurable results. In terms of motivation, related pay is more effective for encouraging employee retention, while pay by result focuses on quality and output (Cable & Judge, 1994).
Another difference is in how easy it is to implement. Related pay can be less complex to execute since the incentive is tied to the salary structure within the organization. In contrast, pay by result is typically more complicated and requires consistent monitoring of performance expectations and tracking against those to set accurate targets. Also, fitting employees into a 'one-size-fits-all' performance-based matrix might not always be feasible, leading to the possibility of inequitable rewards (Gerhart & Milkovich, 1990).
Conclusion:
In conclusion, related pay and pay by result are two distinct and effective pay systems that organizations can adopt. Related pay is best applied when the organization wants to establish stability and long-term growth, while pay by result is ideal when organizations want to drive immediate results, with individual goals that can be measured. Ultimately, deciding which approach to use depends on organizational goals and needs as well as the specific nature of roles and responsibilities to be performed.
References:
Banker, R. D., Lee, S. Y., & Potter, G. (1996). A field study of the impact of a performance-based incentive plan. Journal of accounting and economics, 21(2), 195-226.
Cable, D. M., & Judge, T. A. (1994). Pay preferences and job search decisions: A laboratory study of job choice. Journal of applied psychology, 79(3), 374-381.
Gerhart, B., & Milkovich, G. T. (1990). Organizational differences in managerial compensation and financial performance. Academy of management journal, 33(4), 663-691.
2 answers