HR Headline: Pay for Performance in Public Schools Remains Controversial - Essay Example

Pay for Performance Plan Introduction A pay-for-performance plan is an incentive plan that aims at rewarding highlyproductive employees with higher income. Apparently, these top performers drive the organization to provide the highest benefits and profits for the organization necessitating the high cash rewards. Measurement of effectiveness of Pay-for-Performance PlansIt is essential to measure the effectiveness of the plan appropriate for a particular business to ensure that the goals of such organization are met.

Firstly, the HR department should measure the effects of the plan on employees’ performance. This means that the plan would be effective if it meets objective of motivating employees in job performance (Chingos, 2005). The company should set standards that they wish their employees to attain. If such levels of performance are met then the plan could be said to be effective.Secondly, the company’s costs in relation to the pay-for-performance plan should be investigated to determine its liquidity position.

The cash flow statement gives the information that could determine the effect of the program to organization financial position. The costs should not eat too much into the organization earnings. The cost of the plan should have negative effects on the normal financial operations of the company. Simply, the plan should be affordable to the organization (Chingos, 2005).It is also possible to determine the effectiveness of the plan by determining job satisfaction among company’s employees. This gives crucial information about the incentives offered by the organization in terms of its effect on the general contentment of the employees (Chingos, 2005).

If workers exhibit a rather satisfactory feeling on their jobs, it might be caused by the effectiveness of the incentive plans. Disadvantages of using a pay-for-performance plan from an employees perspective Pay –for –performance means that employees that perform highly in their jobs are compensated more than worker who performs less favorably. However, these pose problems to employees in any organization (Tropman, 2011).To start with; this plan would be unfavorable to most employees since it is difficult to performing well every month.

This means that the employees will be having high pay in certain months and receive low compensations in other lowly performed months (Jorgensen, 2006). Another notable disadvantage of this plan is that it is not favorable to the senior staff. This is because the incentive does not reward employee based on their experience and seniority. It is possible to find a junior staff earning more money with this plan than another senior staff in the same organization (Tropman, 2011). This has negative effects since demoralize the senior staff.

The disadvantages of using pay-for-performance from the employers’ perspectiveMany studies have been carried out and they seem to agree to the same thing; the pay-for-performance has its limitations that make most organizations shy from implementing it as primary compensation plan. Firstly, there is the psychological cost from loss aversion (Jorgensen, 2006). This means that employees have income targets that are set depending on their needs to cover their obligations adequately. Apparently, their positive reaction to pay, for performance, would diminish dramatically once they achieve their goals and thus the company would lose out with time, when these goals are attained.

Secondly, most companies have salary programs consisting of high base salaries. As a result, there is a substantially higher budget requirement to paying both the salaries and the performance incentives. Due to this needs for increased funds allocation, the company may end up with liquidity problems (Tropman, 2011).Finally, another issue of the pay-for-performance incentive plan is that it focuses more on individual performance instead of teamwork. This may lead to the failing of team-based-activities within the organization (Tropman, 2011).

This may lead to negative impact on the general performance of the organization since most activities are performed by a team. References:Chingos, P. T. (2005). Paying for Performance. New York: John Wiley & Sons.Jorgensen, K. (2006). Pay for Results. Chicago: Silver Lake Publishing.Tropman, J. E. (2011). The Compensation Solution: How to Develop an Employee-Driven Rewards System. New York: John Wiley & Sons.