Remuneration Planning

We are nowadays talking about globalisation, borderless marketing and unimaginable business transaction volumes of previous decade and etcetera, there is one thing which has not changed for sure: the human factor. Plans, execution and measurement of actions have existed, continue living and will always exist help measuring any form of activity. Everything should need to have a valuable meaning for the human being to act on it. It is where one can think of a cycle of plans and targets – actions on it – performance evaluation and rewards mechanism based on the output of works.

Usage of performance appraisals are more often than before, and they are no longer in any standard form. More often usage of it surfaced certain limitations. With the existence of the Internet and intranet environment offering an endless flow of information for employees and employers, it mostly helped employers measuring the performances of employees more quickly and let employees with access to the information perform much better. Performance appraisal is accepted and valued by employees if employers build, enhance and maintain trust by emphasising and promoting transparency and illustrate visible procedural fairness. While maintaining the present source of information channels like surveillance by colleagues or customers of mystery shoppers; in the soon future, performance appraisals might be through software systems which is straightforward to illustrate a much wider range of measures both from inside and outside the organisation. (Bach 2005,p.287)

Performance evaluation results in companies to act on the findings and remuneration is one of them. While compensation or reward policies and practices have been troubled by a range of intense pressures like competition, workforce and regulation; pay remains as a direct connection to the employee’s performance. Many of the developments outline a search over healthy equation between external and internal job equity. For instance, external pressure would have a clear visibility in the event there is a new hire from an external universe with a high pay where internal setup is not due. Therefore, recruiting and retaining employees shall be addressed by acknowledging their worth with the development of career and earnings opportunities.

Need for pay systems must always be transparent, consistent and fair. Naturally, if pay helps better employee attitude and behaviour which improves business performance, it becomes crucial treating and operating the employees. It is typically very complex to change pay and reward systems for an ongoing business. (Kessler 2005, p.317)

Focus on customer service jobs will highlight that the activities in this field are pretty much standardised and governed which disables any buffer between production, consumption and service. This alone occasionally causes dissatisfaction over employees and high turnover or absenteeism. Mass customization would be required to establishing a cost effective and customer oriented business concept, which then adopts standardisation and rationalisation along with a certain level of understanding and attention to the service quality. Specifically, in such environments, it is important to let employees involve in decision making which will provide improved motivation, effort and performance together with job security and high pay returns to the employees. (Deery 2005,p.346)

It is crucial for employers to have a clear understanding of their target customer groups and to define the methodology to be used maintaining the relations. This will enable organisations to decide on the reward mechanism.  For example, in sales and customer service focused business environments, if employees’ representation of the company is more important than the sales volume, it might be a better idea to consider a higher basic salary remuneration package. This will encourage customer service focus and protects income flow for the employee. While salary plus commission structure has a direct financial motivation to an employee, salespersons might purely focus on easier to sell products, and this might potentially neglect the overall profitability concerns. Salary plus bonus indeed provide financial motivation and is appropriate to employ when employees are asked to focus on the aspect of their work rather than the volume they could generate. Commission only remuneration attracts star-sellers, boost the amount in a shorter period and does not require much supervision. However, similar to salary plus commission structure, this could potentially lead neglectfulness over profitability. (Armstrong 2010, p.348)

Pay itself is not the only output to be discussed as a result of the performance appraisals. Performance appraisals also help employers understand the employee’s motivation level and apply necessary adjustments during daily activities, pre and post performance evaluations. There are four basic emotional needs that a humankind employs. These are acquiring (i.e. acquisition of food, status, education, good or services), bonding (i.e. networking with peers, family ties), comprehending (i.e. rationalising of our existence, understanding the immediate environment and reasons), and defending (a fundamental instinct). In work environment, there are again four commonly measured workplace indicators which can be attributed to four emotional needs directly. Engagement (acquire), satisfaction (bonding), commitment (comprehend) and intention to quit (defend). Any improvement on these four drives especially comprehends, and job design will have an enormous positive impact on employee motivation. Companies should maintain well-balanced equation between all the four drives and emotional needs for immediate and healthy motivation improvement. Transparency along the way will also promote clear and fair understanding at employee side over their manager’s limitations but will display what the manager should be doing as well. (Nohria 2008, p.78)

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References:

Bach, S 2005, ‘New Directions in Performance Management’, in S Bach (4th edn), Managing Human Resources, Victoria, Australia, pp.287-312.
Kessler, I 2005, ‘Remuneration Systems’, in S Bach (4th edn), Managing Human Resources, Victoria, Australia, pp.317-342.
Deery, S 2005, ‘Customer Service Work, Emotional Labour and Performance’, in S Bach (4th edn), Managing Human Resources, Victoria, Australia, pp.346-367.
Armstrong, M 2010, Armstrong’s Handbook of Reward Management Practice  Improving performance through reward, 3rd edn, Kogan Page, London, United Kingdom.
Nohria, N 2008, ‘Employee Motivation A Powerful New Model’, Harvard Business Review, July-August, pp. 78-84.

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