Why It Is a Good Idea to Pay for Performace - Research Paper Example

Pay for Performance: why it is a good Idea Pay for Performance: what does research say and does it work? Firms are currently facing an increasingly global and competitive business environment characterized by unpredictable and rapidly changing product markets. This has necessitated adoption of effective human resource management practices that can ensure efficiency in business operations. Pay for performance is one of these practices. The application of pay for performance involves compensating workers after they meet specific standards of quality and quantity. Bayo- moriones, Enrique & Martinez- DE- Morentin (2013) posit that pay for performance can improve organizational performance by enhancing employee motivation and identification with the goals of the organization (p. 1117). The relationship between compensation systems and organizational performance has attracted attention in the modern competitive business environment. The primary subjects addressing compensation systems include administration, economics, sociology, and strategic human resource management. Pay for performance is the best approach for enhancing efficiency and effectiveness in modern organizations through motivation enhancement, maintenance of focus on productivity, and efficiency in operations. The primary focus of this paper is to analyze the use of pay for performance systems in organizations including the system’s contribution to improvement of efficiency and effectiveness. Pay for performance is believed to enhance worker performance because workers strive to earn extra income by improving their productivity. The paper examines the aspect regarding the compensation of employees, focusing on the relationship between remuneration and worker productivity. Pay for performance is actually one method of remunerating employees, but based on their contribution to the organization’s overall improvement (Kim, Sutton & Gong, 2013, p. 48). Remuneration has been established to be direct proportional to worker productivity because employers make payments to workers from the money they earn for the companies. There is a positive correlation between compensation systems and organizational performance, which has attracted widespread attention in the modern competitive business environment. For example, The Affordable Care Act broadens pay-for-performance efforts in hospitals by establishing a Hospital Value-Based Purchasing Program. Effective October 1, 2012, hospitals were rewarded depending on how well they performed on a set of quality measures as well as on how much they improved in performance relative to a baseline (US Institute of Medicine, 2013, p. 49).. The better a hospital performs on its quality measures, the greater the reward the hospital receives. Health care laws were also extended through 2014 the Medicare Physician Quality Reporting System that provides financial incentives to physicians for reporting quality data to CMS. Beginning in 2015, the incentive payments will be eliminated, and physicians who do not satisfactorily report quality data will have a reduction in their payments from Medicare (US Institute of Medicine, 2013, p. 66). The fundamental focus of human resource managers constitutes comprehending the processes of using the pay for performance system, the challenges associated with using the compensation plan, and the approaches limiting the challenges to make it effective (Kim, Sutton & Gong, 2013, p. 44). There is widespread probability of failure in organizations characterized by lack of clarity in understanding available compensation plans. Managers without knowledge of best techniques of pay suitable for specific circumstances are exposed to dangers of failure to motivate, retain, and attract employees. The modern business contexts are rapidly changing, necessitating implementation of effective ways of managing employees for enhanced performance. Another aspect of human resource consideration is comprehension of the goals of pay for performance as pertains to improving the transparency and accountability of organizational processes. Therefore, it is necessary to carry out research to find out the extent to which pay for performance will help improve the efficiency and productivity of the human resources. The economic theory identifies two basic mechanisms for reducing moral hazard in the workplace; these are the intensification of direct control mechanisms and the provision of contract incentives. Direct control mechanisms constitute the strategies that organizations use to directly regulate the behaviors of people in the workplace. Examples of direct control mechanisms include close supervisions, clocks, setting goals to be achieved before leaving the workplace, and fining workers who delay performing responsibilities that cost the organization. Direct control mechanisms, however, are not effective because they lack motivating elements, leading to lose of employee morale, increased employee turnover, and widespread conflicts (Ken, 2013, p. 8). These problems arise because employees view the organization as an agent of miserable life. Provision of contract incentives helps in curing the adversities associated with direct control mechanisms. Employees sign contracts with their employers, agreeing to receive certain levels of payments if they achieve pre-determined levels of productivity. Employees cannot give up if with the organization if they fail to achieve their goals because of their unfavorable conditions that limit performance. Workers who achieve their goals are motivated to work extra harder. Similarly, other employees learn from the performing group and seek proper strategies for meeting the contract requirements. This implies that contract incentives are more effective in meeting productivity requirements than direct control mechanisms. It is critical for human resource managers to understand the elements of pay for performance system. The first element of pay for performance constitutes tying performance awards to shareholders’ financial objectives because all companies have financial responsibility to shareholders. Thus, companies seek to determine if the incremental investment in pay for performance can contribute to the company’s financial success. The second element of this plan is adopting the proper mix of compensation components. Organizations strive to strike a balance between short-term and long-term incentives. Objectives of giving incentives include increased productivity, meeting the satisfaction quotient, and achieving the desired retention goals (Kim, Sutton & Gong, 2013, p. 34). Third, human resource managers effectively communicate and reinforce rewards. Proper communication and coaching are vital in creating long-term focus and commitment to the organization. An effective pay for performance plan is made up three components; these are merit increases, short and long-term incentives, and promotions (Larkin, Pierce & Gino (2012). Merit increases are given to employees after specified period of serving the organization or achieving pre-determined measures of performance (p. 1198). For example, Nestle has designed annual salary increments per year, which will be effective from November 2014. Similarly, marketers in Sony have opportunities of having their salaries increased by 2.2% if they achieve a more than 15% increase in sales volume. Kim, Sutton and Gong (2013) defines merit increases as the payments that are advanced to employees for exceptional performance (p. 51). Merit increases are awarded in form of percentages, such as 8% or 11%, to an employee’s earnings. Companies also have short-term incentives that are given to employees who achieve certain goals; examples of short-term incentives include paid leaves, free tours, paid dinners, and car fuels. Hiring guidelines are vital consideration for human resource managers when using the pay for performance plan. According to Larkin, Pierce and Gino (2012), hiring guidelines act as execution processes. The execution process is just as critical as the design itself, and sometimes even more important than the design (p. 1195). Companies establish clear hiring guidelines, terms of employees’ commitment and standards of measuring performance. Therefore, human resource managers strive to create awareness of these terms and communicate to employees the implications of failing to meet the pre-determined standards. Firms extending both long-term and short-term incentives to employees do it based on certain pre-determined criterion; this amounts to pay for performance because employees must achieve an established level of performance for the company to consider them for incentives. Employee compensation has elicited a lot of interest in the recent years among academicians in the fields of economic and management, regulators and public policy formulators. This is because compensation is a critical consideration in employee performance. In most organizations, compensation has always constituted a basic pay and some allowances depending on the worker’s working conditions (Landsberg, 2009, p. 12). Other companies pay employees a specified pay plus commission depending on the worker’s productivity. This implies that if the worker does not achieve the commission limit, they can still receive basic pay. The role of commission part is to encourage workers to put extra effort in production because they are aware that high productivity is associated with increased payments. Additionally, some companies, particularly the marketing firms, pay workers purely on commission basis. Commission pay has been used across place and time because it is believed to encourage workers to put extra effort in order to achieve their optimum earnings. However, commission is sometimes discouraged because it may lead to exploitation of workers especially if conditions make it impossible for them to make sales. According to Xiu and Gunderson (2013), firms seeking sustainability and success must institute proper approaches for motivating, attracting, and retaining the best employees (p. 235). Employee motivation is the best approach for enhancing productivity and retaining employees. Motivation implies the strategies companies institute for ensuring that employees maintain focus on achievement of organizational objectives. The research carried out by Roeder & Franz (2014) revealed that employee motivation is the greatest contributor to productivity and employee retention (p. 22). This is because unsatisfied workers will always move around in search of better jobs in terms of safety, job security, and payment. For example, Humana, Inc. reported a labor turnover of 43% in 2009; further investigation of the issue revealed that the company was offering poor benefits that did not rhyme with workers’ contribution. Payments constitute the greatest motivators in any economic system. The most qualified employees are attracted to the best paying companies. This is because highly qualified employees put more effort to job performance; hence, they need higher compensations that the less qualified workers. Considering the efficiency and effectiveness of employees, highly qualified workers have minimal chances of making errors. Reduced number of errors leads to easy management and completion of tasks. Additionally, exceptional qualification is attributed to reduced costs of production. Highly qualified employees have the skills and experience for performing efficiently, reducing the amount of wastes, saving time for the organization, and maintaining the high quality of products due to reduced number of errors. For example, most companies pay interns and attachés lower salaries compared to internal employees working at the same level and performing similar tasks in the organization. Thus, payments should differ in organization depending on worker productivity. Lester, Matharu, Mohammed, and Foskett-Tharby (2013) posit that organizations across the globe are increasingly moving towards linking compensation with performance (p. 13). The strong relationship between pay and performance is believed to encourage and sustain employee contributions to organizational success. Although some companies have expanded their use of pay for performance to reward teams, business units, and corporate performance, most companies continues to use the compensation plan for rewarding individual performance. Human resources contribute to the overall performance of the organization, either individually or collectively. Wilson (2013) asserts that individual contribution outdoes collective contribution (p. 7). Teamwork is one of the approaches for ensuring quality productivity in organizations; however, conflicts that characterize teams have negative effects on team performance. Similarly, employees are dedicated to personal success; this implies that any incentive promoting individual development would be accepted faster than the one promoting group development. Therefore, individual pay for performance programs are effective in enhancing employee productivity. Steinmetz, de Vries and Tijdens (2014) focused on the factors that affect employee turnover in an organization. The primary concern was to identify the aspects of working time and remuneration on employee retention (p. 16). According to Gigliotti (2013), previous studies that focused on causes of employee turnover neglected the effects of work-related aspects of working time and remuneration (p. 889). The problem here constitutes failure to recognize the fact that wages and salaries are closely related to job satisfaction and attrition of employees, both locally and internationally. Job satisfaction is the extent to which an employee is contented with his or her job (Bayo- Moriones, Enrique & Martinez- DE- Morentin, 2013, p. 1119). Job satisfaction is vital to achieving improved performance because contented employees always strive to meet the organizational goals. Attrition of employees implies migration of employees within the borders of one country or internationally. The intention to quit a job and move to another one is caused by lack of satisfaction that makes the employee to move to another company or country. Employee motivation is the main factor determining performance of the workforce. Motivation comprises of reasons that make a person to act in certain manner. Chien, Eastman, Li and Rosenthal (2012) argue that the factors that make people feel satisfied with their work are the opposite of factors that cause dissatisfaction (p. 83). The extent to which employees are dissatisfied is determined by deficiencies in their workplaces and the actual context of the job. The primary determinants of job satisfaction include the content of work, accomplishments, recognition, career opportunities, personal growth, and compensation. Understanding the aspect of motivation in job performance has been achieved through various theories of motivation; all these theories have the element of pay as the basic factor determining motivation among other factors. Maslow’s Hierarchy of Needs constitutes the most affluent theory of motivation in specialized literature. According to Abraham Maslow, motivation to work is caused by desire to satisfy a person’s needs (as cited in Viorel, Aurel, Virgil & Stefania, 2009, p. 325). Maslow classified human needs into five categories: physiological needs, safety needs, social needs, esteem needs, and self-actualization as shown in appendix 1. The figure implies that human needs can be arranged in a hierarchical order. People strive to satisfy the needs at the base of the hierarchy before beginning to satisfy the upper needs. For example, a person must satisfy the need for food, shelter, and clothing before seeking recognition, esteem, and self-actualization. Human beings are continually in a state of deprivation; hence, human needs are never fully satisfied. One of the characteristics of human wants is that they are insatiable, that is, human wants are never satisfied because others keep up cropping as others are satisfied. Human resource managers should realize that once a need is satisfied it no longer motivates employees. The only way through which employees can achieve satisfaction of these needs is by receiving payments that are directly proportional to their productivity. The urge to satisfy human needs as depicted in Abraham Maslow’s hierarchy of needs differs from one person to another; hence, human beings work at different rates depending on the urgency with which they want to achieve their goals. This explains why it is necessary to institute pay for performance so that people with high motivation to work are afforded the opportunities for performing exceptionally towards satisfying their needs (Gillam, Niroshan & Steel, 2012, p. 461). Additionally, Maslow asserted that when an inferior rank need is satisfied, the next level need becomes dominant. Thus, the attention of the person shifts to the accomplishment of this higher rank need. This requires additional income accompanied by increased effort input into productivity. Maslow’s Hierarchy of Needs theory was influential in most organizations; however, it is sometimes criticized because of its rigidity. This is because Maslow failed to recognize the fact that people are different and have different priorities. Maslow himself agreed that it is difficult to accept that the needs of people are characterized by progressive and constant advancement towards the top in an orderly manner (Kaarboe & Siciliani, 2011, p. 227). The theory, however, exhibits a general application in the natural world because human beings strive to satisfy basic needs before seeking luxurious lives. The expectancy theory posits that a worker’s efforts in the production process depend on expectancy, instrumentality, and valence. Expectancy constitutes the belief that an increased effort will result to attainment of performance goals; thus, the employees increase efforts in production processes because they expect to achieve their expected goals (Fang & Gerhart, 2012, p. 1176). For example, if a company promises an employee that he or she will be paid an additiona $1,000 for reaching 110 clients instead of the normal 100 clients, the employee will invest more effort and time to ensure he or she achieves the target. The element of instrumentality in the expectancy theory implies that employees expect to receive a reward if performance goals are met. Rewards come in several forms including promotions, rise in pay, employee of the year award, and recognition. Instrumentality is the key determinant of expectancy. Valence is the value that employees place on the on the reward the organization provides to them (Barbosa, Bucione & Souza, 2014, p. 5). If an employee place high value on the rewards, they will exploit their fullest potential in the production process in order to receive the rewards. On the other hand, employees will reduce their efforts in the production process if they place a low value on the reward. This is the reason for organizations striving to understand the likes and dislikes of each employee in order to provide them with rewards that have value for them. Valence is relative because different employees will view a given reward differently (Gorbaneff, Cortes, Torres & Yepes, 2011, p. 451). People have different tastes and preferences for different things. Human resource managers have the responsibility of determining the most valued reward for each employee and promise him or her rewards if they achieve the predetermined goals. Employees will have no incentive to exert an increased level of effort if they do not believe that increasing their effort will increase their chances of winning a prize (Wharam, Frank, Rosland, Paasche-Orlow, Farber, Sinsky & Figaro, 2011, p. 234). It is the belief to win a prize that drives employees towards increasing effort. Some organizations set unachievable targets that cannot be attained by employees during a given period of time. Employees fail to find an incentive for increasing their effort because they are sure of not achieving the target levels (Marler, 2012, p. 8). This eliminates the incentive to increase their input in the production process. Employees, thus, may reduce their effort in the production process, leading to minimized productivity. Thus, from the perspective of the expectancy theory, human resource managers need to institute proper mechanisms in organizational practices in order to establish effort-performance relationship to avoid failure of pay for performance systems (Gomez-Mejia & Werner, 2008, p. 43). Modern organizations have begun embracing team and group performance. Some organizations prefer using team-based compensation strategies to individual compensation schemes. Team-based compensation involves human resource managers tying a portion of employees’ wages, bonuses, commissions, and other benefits to the success of group goals (Backes-Gellner & Pull, 2013, p. 375). This implies that all members of the team receive similar incentive pay. According to the tournament theory, team-based compensation systems are efficient if employees are homogeneous. Homogeneity among the group members implies that their priorities and chances of winning are equally distributed within the group because of working under equal conditions and competitiveness (Sack, 2010, p. 33). The incentives may be fully or partly destroyed if employees are heterogeneous. For example, if a group has several employees, but only two exceptional performers, average employees will have no incentive to increase the efforts because they are sure of the exceptional employees winning. Backes-Gellner and Pull (2013) argues that employees are rather typically heterogeneous in organizational reality (p. 382). Retaining the effectiveness of team-based pay for performance is a critical factor for consideration by the management if they have to make the system successful. The proponents of the agency theory believe that there are two alternatives for setting compensation: pay for performance and paying a flat rate. Larkin, Pierce and Gino (2012) argue that most firms pay for performance based on some observable output of an employee (p. 1199). The human resource managers quantify the value that an employee adds to the organization when determining the compensation level for the employee. Regardless of this, some firms can still pay on subjective measures not dependent on observable output. Landsberg (2009) argues that employees can work harder when their pay is based on performance than when the firms pay a flat rate (p. 13). Employees do not have short cuts to receiving the compensation that they expect except by increasing their effort in the production process. Piece rate earnings for an employee are determined by the amount of effort and time the employer puts into their work. Employees who input more time and effort will definitely receive higher payments compared to those who input less time and effort. The human capital theory has gained widespread popularity and has become a dominant means of wage determination. According to Landsberg (2009), earnings in the labor market are determined by the skills and knowledge that employees possess (p.12). Human capital comprises of a stock of competencies, habits, personality attributes, and knowledge embodied in the ability to perform tasks in and produce economic value. Accumulation of human capital requires huge input in terms of time and finances. However, some people can work without having to attend formal education, but they cannot perform specialized functions. Kim, Sutton & Gong (2013) assert that employees who have accumulated more human capital than others should be rewarded more than those who have not undergone the process of human capital accumulation (p. 49). The amount of human capital that a person possesses is determined by education, skills, and experience the person has. Thus, organizations should compensate employees depending on their experience, knowledge, and skills. Employers believe that the amount of human capital determines worker productivity; hence, people should be rewarded in accordance to their productivity. Research carried out by Hannaford, Ritchie, Sheikh, Williams and Simpson (2011) revealed that prior to implementation of pay for performance in Scottish primary care, there was a large increase in the proportion of patients with hypertension recorded in on their practice computer records (p. e448). The older women and men with greatest socio-economic deprivation were less likely to have recorded blood pressure measurement than younger and economically stable patients. The research findings indicate that old people who were not able to pay highly for the sought medical services were not given the best medical services. On the contrary, the young and affluent people with the ability to compensate doctors highly were given the best treatments and their blood pressure levels normalized faster than the aged patients. The researchers, however, assumed that all the old people under the study were under conditions of economic deprivation, which could not be true. The assumption, perhaps, was because most elderly people are no longer working, and may not be able to raise the same amount of money as the working class. Chien, Eastman, Li & Rosenthal (2012) interviewed fifteen employees from different organizations in the United States (p. S84). The objective of the study was to identify the greatest causes of reduced employee productivity in selected organizations. The summary of variables that were put under consideration included level of compensation, long working hours, strict supervisors, difficult of tasks, and unrealistic targets of performance. Appendix 2 is a tabular representation of the responses that were collected from the employees. The greatest number of employees said that the level of compensation determines the efforts they put into the production process; this represent 45% of the population under study. These employees believe that they should be compensated proportionate to the value they add to the organization. Thus, employees could need to earn extra income if they add more value to the company. Findings from Chien, Eastman, Li & Rosenthal (2012) further reveled that 17% of the respondents believe that working for long hours could decrease their level of productivity (p. S81). The effect of working for long hours includes fatigue and boredom, which have negative implications on the workers’ ability to work effectively and efficiently (Gillam, Niroshan & Steel, 2012, p. 462). When employees work for more than 8 hours, they tend to get tired and may sometimes develop boredom to the job, leading to decreased morale for work. Another 15% of the respondents believe that difficulty of the tasks can reduce their output. Employees cannot be able to work fast when tasks are difficult and beyond their level of experience. Unrealistic targets and strict managers could cause reduced productivity for 10% and 13% of the employees respectively. Employees do not find any incentive in increasing efforts towards achieving unrealistic targets. Additionally, managing workers scientifically eliminates the humanistic element that characterizes effective human resource management (Fang & Gerhart, 2012, p. 1189); this leads to loss of motivation among employees with consequent decrease in performance. There is a need for human resource managers to fix employees’ pay based on their performance. According to Larkin, Pierce and Gino (2012), organisations that have not yet differentiated their pay based on performance could not be fully benefiting from the firm’s competitive advantages (p. 1201). Competitive advantage involves companies acquiring or developing attributes or combination of attributes that enable it to outperform its competitors. Examples of these attributes include access to highly trained and skilled personnel. Other factors enhancing competitive advantages include information technology and robotics, which also require exceptionally trained workers to operate. Weak performers find it difficult working in organisations that differentiate rewards based on the level of performances; this explains the reason for high employee turnover in strict organizations. Kim, Sutton & Gong (2013) assert that competitive advantage comprises of both internal and external aspects of a firm, which enables the organization to maintain sustainability in the face of intensive competition (p. 45). Among these aspects, include flexibility and efficiency among the management and the workforce. Goldman and Corrada (2011) posit that pay for performance is the best approach for ensuring flexibility within the firm operations. Efficiency arises from the ability of the employees to perform tasks within the budget with the primary objective of cost minimization. Hill and Turner (2011) define the pre-established measures for quality as including effective material utilization and waste minimization (p. 12). When employees receive payments and rewards for work well done, they develop an attitude of saving materials from destruction because they view the organisation as their own investment. The old business paradigm that was founded on economic profits is currently fading rapidly. Conventionally, companies should strive to maximize profits as much as possible even if it is at the expense of its workface (Goldman & Corrada, 2011, p. 34). This assumption is becoming obsolete because organizations have realized its associated ramifications. Smart companies in the United States have proved that making employees happy is actually the best strategy for generating superior returns for investors. These companies include Costco, Whole Foods Market, and the Container Store. Making employees comfortable in this case involves compensating them according to their performance (Hood, Hardy & Lewis, 2011, p. 12). Increased productivity implies that employees are putting extra effort in the production process; therefore, they should be rewarded for that through increased salaries, wages, and commissions. Costco, Whole Foods Market, and the Container Store companies have witnessed rapid increase in productivity caused by increased employee rewards to ensure their welfare. These companies believe that satisfied employees are motivated to work for organizational success because they enjoy the benefits arising from its existence. Wal-Mart Inc. is one of the companies that have faced widespread criticisms because of its poor pay for employees. Wal-Mart differs with other companies such as Costco when it comes to issues like labor relations (Gottfried & Reese, 2004, p. 23). The company is criticized because of its poor working conditions, low benefits, and insufficiency wages. Wal-mart is characterized by widespread gender discrimination and overworking of employees; this has caused negative effects on the company’s productivity. On the contrary, Costco is praised for good working conditions, high benefits, and sufficient workers for its employees. For example, Costco pays its hourly workers $20.89 an hour while Wal-Mart pays an average wage of $12.67 an hour for full-time employees (Gross, 2010, 34). Top performing companies offer generous benefits such as health care and 401-K plans in addition to several opportunities for professional growth and promotion of employees at different levels of the organization. As employees expect to benefit from these plans, they strive to work extra harder to ensure organizational sustainability and prosperity. Wal-Marts low wages have led to full-time employees seeking public assistance and registering to charity organizations in order to access their basic needs. These employees are not lazy, but they are engaged in physical and demanding jobs. Public assistance to these employees amounts to $2.66 annually, leading to increased burden to the government (Eriksson, 2010, p. 57). Performance for Wal-Mart is deteriorating and there is high rate of employee turnover, which adds to the risks of the company. Appendix 2 depicts wage disparities in Wal-Mart. The bar graph shows that while a CEO in the US receives 8.50%, the average US employee was paid only 0.30%. Oliphant, Wagner and Gerhard (2012) argues that every year Wal-Mart it makes various adjustments to its financial results when measuring the pay for performance for top executives (p. 34). In the year 2014, for example, the adjustments made to recorded financial statements resulted in better performance than it was reported in the audited financial statements. The enhanced performance meant higher incentive pay for executives. The company makes these adjustments to encourage executives to make the right decisions for the business. The pay for performance sometimes brings down executive pay; for example, in 2012 there was a decrease in executives’ compensations after their performance did not reach the predetermined goals (Steinmetz, de Vries & Tijdens, 2014. P. 19). Pay for performance is a critical aspect for consideration by human resource managers when designing employee compensation methods. Financial rewards are characterized by dynamisms caused by changing business environment that undermines the ability of the firm to inspire trust and commitment among the employees. Research on pay for performance has enabled human resource managers to understand the critical aspects of effective compensation approaches in enhancing productivity. Most theories of motivation for increasing employee input to production processes concludes that rewards, particularly financial, are vital in enhancing worker productivity (Landsberg, 2009, p. 12). Pay for performance has the potential for increasing worker motivation, increased productivity, efficiency, and effectiveness in resource utilization. Companies should make sure that employees are clear in terms of their commitment. Creating awareness of the consequences of not achieving the pre-determined standards constitutes the critical component of hiring guidelines. Pay for performance is the best approach for employee compensation because it creates incentives for employees to increase their effort in the production process, which results in efficiency, effectiveness, and increased productivity (Ken, 2013, p. 9). Human resource managers ought to understand the applicability of motivation theories in their work environment. Most theories of motivations focus on employee compensation as the critical factor enhancing employees’ willingness to increase their effort in production. Companies have the potential for benefiting from employee motivation if they strive to make them happy by paying them fairly. All organizations should institute pay for performance system if they need to enhance employee productivity. Human resource managers should educate their workforce about the pay for performance plans to enable them understand its benefits in order for them to dedicate their energies towards achievement of predetermined standards. References Backes-Gellner, U., & Pull, K. (2013). Tournament Compensation Systems, Employee Heterogeneity, and Firm Performance. Human Resource Management, 52(3), 375-398. Barbosa, K., Bucione, A., & Souza, A. (2014). Performance-based Compensation vs. Guaranteed Compensation: Contractual Incentives and Performance in the Brazilian banking industry. (English). Brazilian Journal Of Applied Economics, 18(1), 5. Bayo- moriones, A., Enrique Galdon- Sanchez, J., & Martinez- DE- Morentin, S. (2013). 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Gender Earnings Differences in China: Base Pay, Performance Pay, and Total Pay. Contemporary Economic Policy, 31(1), 235-254. Appendices Appendix 1: Diagrammatic Representation of Abraham Maslow’s Hierarchy of Needs Appendix 2: Factors influencing employee productivity Sn. Factor Percentage of Respondents 1 Level of compensation 45 2 Long working hours 17 3 Difficulty of tasks 15 4 Unrealistic targets 10 5 Strict managers 13 Total 100 Appendix 3: The Comparison of CEO’s pay in comparison to average employee in the USA Read More