A Payment By Results system Essay Example

A Payment By Results system Essay Example A Payment By Results system Essay A Payment By Results system Essay One basic way of regarding todays competing organizations is to view them as a system. Doing so, there are multiple factors that need to be assessed in order for companies to achieve their objectives. Reward management is a crucial element for the present and future of a companys survival. The reward system that we will cover at the moment is Payment By Results. The perspectives from which we can evaluate the quality of this system are motivation, commitment and flexibility. We must bear in mind that each company has a specific strategy in a long-term basis; therefore all the decision-making should be compatible to the latter. Apart from that, limitations, in terms of environment have to be considered. Employees want to earn higher or extra pay. Managers must believe that the financial motive for work is extremely important, more so than non financial motives and the most effective way of harnessing this motive is by the use of Payment By Results system not simply by paying higher wages(Behrend, 1959). Using this system, with examples including piece rate and commission, employees earn one third more than colleagues on a time rate system (Cowling James, 1994). It goes without saying that every reward system can have benefits as well as drawbacks for every organization. These depend on a number of factors. Advantages As mentioned previously, companies have found it imperative to motivate their employees in order to engender their performance at work. According to this reward system, the extent of the additional income of the employees will be closely related to the quality of their work. Needless to say, this is an effective way of giving the right incentives to a companys workforce to encourage them to excel and perform to the optimum. Apart from that, the creativity and imagination of each employee will be enhanced, so the company will be able to strive in their field. Cost-effectiveness is vital when a company requires goals that will create beneficial results. PBR can reduce a companys supervision costs. Since they already understand that due to the policy of the company they will be paid according to their own results, it gives them an incentive to perform as if they were supervised. So, it is all about finding the right way to harness an advantage. And PBR can offer a very effective solution for a company, because it is easily transformed efforts into high earnings achievements (there is no cap in earnings to an individual; the skys the limit). In addition, the emphasis reinforces the psychological contract between employer and employee and implies that the company wishes to share with their workforce. By showing interest in offering the conscientious employees additional income, organisations can, in a discrete way, enforce their employees commitment and, moreover, make them believe that the company will provide them its full support. This entirely beneficial outcome is possible by being as objective as possible when assessing the individuals output. Taking into account the Proctor and Gamble (PG) case study, Bob Wehling, PGs Global Marketing Officer asserts that their main objective was to increase top-line sales growth. The tool they used to achieve this was PBR. Putting aside the commission-based agency remuneration, PBR was the system they fostered to pay their advertising agencies a percentage of the sales and increase their flexibility. So the advertisement business world found an ally for a more optimistic future development. The creation of a stable workforce is also a rather favourable goal, especially when occurs for the long-term. Making use of the PBR reward system companies can acknowledge the value of each employee and offer them benefits accordingly. Therefore, it is rational to believe that by doing so the employees will be highly satisfied by the behaviour and the recognition of their company. Disadvantages However beneficial can this reward system be, it relies heavily on sensitive criteria because the quality of individuals work is not the easiest thing to assess in many jobs. So, this can bring about many drawbacks. Someone might argue that it is in the companys hands to take such difficult situations in their stride by setting appropriate criteria for evaluation. Yet, problems regarding this do occur. Some companies do measure their employees outcome by sales (like the Procter Gamble case study) and others by the increased number of clients. However, what is vital for a company is that they should be aware of their employees average abilities and make effort in guaranteeing that the final quality of the products or services they provide is always more important than the quantity. Problems may also arise when it is difficult for internal or external reasons to install PBR or when the trade unions might feel upset or unwilling to accept the way by which they are evaluated. In addition, PBR is likely to bring about a friction between employees when it comes to team-work, due to the fact that on the one hand all will try to perform their best, but on the other hand the will try to improve themselves at expense of their colleagues. Again, it is the obligation of the organization to settle specific rules and roles in order to avoid a negative potential situation like that. Payment By Results system is expensive to install and maintain. Output cannot be easily measured data can be manipulated and falsely recorded. One important condition that should not occur is that increase in production or output must not be at the expense of quality. Money is not the only Motivator. Recommendations One could reasonably wonder whether PBR is a reward system that is worth installing and maintaining. Although there is no certain answer to a question like that, it is recommended that any company interested in using this system should take some things into consideration. For instance, the organisation must have clear and well-planned standards not only of the goals of a company, but in the regard to the procedures that an employee s outcome is measured. Apart from that, a healthy interaction is more than necessary, in order to bring about a balanced rapport between company, managers and simple employees. We note that all of these are mere recommendations and that each company, according to their culture, strategy, structure and power, can have a distinct way of installing a Payment By Results system.