Page 167 - DMGT406_HUMAN_RESOURCE_MANAGEMENT

Human Resource Management

Notes Self Assessment

Fill in the blanks:
9. Every human being wants his/her efforts to get ....................... .
10. Employees gain more and more confidence in them and in their abilities if they receive
just rewards. As a result, their performance level ....................... .
11. Under employee stock option plan, the eligible employees are allotted company's shares
....................... the market price.

12. ....................... refers to the differences between levels of the organisational hierarchy.
13. Differential pay decisions may have two approaches. The first is based on the ........................
Compensating on seniority has been a traditional approach. The other one is related to the
....................... of employee.
14. The cost of hiring people should not be too ....................... .
15. Effective compensation management ensures that workers are ....................... overpaid
....................... underpaid.

10.6 Pay for Performance

Knowledge-based organisations these days follow a performance-based payment plan offering
awards to employees for cost saving suggestions, bonuses for perfect attendance or merit pay
based on supervisory appraisals. The objective of performance pay is to develop a productive
efficient and effective organisation which enhance employees motivation and effectiveness.
Performance pay is based on employees performance on the job. It is believed that this approach
attracts and retains better talents.
A growing number of companies in recent times have established compensation programmed
for employees that offer additional compensation based on individual, group and organisational
performance. The logic behind this move is understandable. Organisations want every individual
to think of performance in the same way as the organisation. You have to compete, get ahead,
deliver results and fight for the wining slot almost on a daily basis. In such a scenario, the
employer-employee relationship assumes a mercenary dimension, bulldozing poor performers
at every stage. The organisation becomes cold and transactional rather then warm and relationship
oriented. It affects workforce camaraderie, and undoubtedly kills the morale of a large majority
of employees who lag behind in the race. The single-minded focus on performance of course,
helps the organisation in weeding out the dead wood and remain highly competitive.
However, Most organisations, however, still pay their employees based on the number of hours
of work per week coupled with certain benefits for serving the company loyally for a particular
period.

Example: 3 M's encouragement of innovation through this route, has paid off in what
has become a legend in the field of product development (one of its chemists developed the
immensely popular product 'Post-it' when 3M gave time for the employee and announced a
handsome bonus for the final result.
Designing performance based pay involves rewarding employees as per their performance or
results achieved or contribution to organisation's overall performance either as an individual
employee or as part of the group. It shifts focus from compensation models based on job worth
and employee skills. It cannot be tailor made as it depends on variety of factors like; nature of

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