Page 154 - DMGT517_PERFORMANCE_MANAGEMENT_SYSTEM

Unit 12: Performance Management Linked Reward System

Designing performance linked reward system is conditioned by a variety of factors; such Notes
as, nature of business, type of technology, the attitude of unions, and human resource
strategy of organisation.

Non-compensation rewards are important component of reward system that is critical for
improving workplace performance.
Organisations have to seek answers to 4 basic questions while designing a reward system:
who should be rewarded, what rewards should be given, how should employee assessment
be done and how rewards should be given.

Employees who perform well receive larger compensation increase; those who do not
perform satisfactorily see little or no increase in compensation.
A performance orientation requires a variable pay approach in which pay goes up or down
based on a measure of performance. Not everyone in the same job will be paid exactly the
same, and not everyone will like the approach.

Variable performance in the pay is a financially measurable reward paid to an individual
based on his overall performance. This measure includes the cumulative performance of
the individual, his strategic business unit and that of the organisation.

12.6 Keywords

Fixed Pay: It is a reward that is fixed, irrespective of the performance.
Goalsharing: These plans pay bonuses when performance is above a standard.

Group Incentive Schemes: They provide for payment of bonus either equally or proportionately
to individual within a group or team.

Profi t Sharing: It means paying employees a share of the net profit in addition to their wages or
salary.

Variable Pay: It is a financially measurable reward paid to an individual based on his overall
performance.
12.7 Self Assessment

Fill in the blanks:
1. The major objective of a reward plan is to attract appropriate ……………….. and motivate
them to perform better.

2. Your performance mainly depends on your ……………………. .
3. A company rewards people on the basis of the duration for which they serve the
organisation. The basis for reward is ………………. .

4. Under …………………. approach, employees get fringe benefits only after serving the
organisation for a certain duration.
5. ………………….. is the reward paid to the employees for performing beyond normal
expectations.
6. Pay for performance is also known as ……………………… linked pay or contingent pay.
7. ………………… are symbols of appreciation and recognition.
8. Performance management is concerned with creating a ………………….. in which
organisational and individual learning and development are continuous process.

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