BA HONS IN BUSINESS STUDIES

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BA (HONS) IN BUSINESS STUDIES
HUMAN RESOURCE MANAGEMENT BMG346J1 Lecture 9
Employee Remuneration and Motivation Norman
Crawford Room 1K11
School of Business Organisation and Management
Email NG.Crawford_at_ulster.ac.uk
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LEARNING OBJECTIVES

• By the end of this session, you should
• understand the basic trends in pay setting in the
  UK in recent years, especially regarding the use
  of performance pay
• be able to articulate the essential differences
  between payment by results, performance related
  pay (PRP), profit sharing, profit related pay,
  employee share ownership (ESO) and employee share
  ownership plans (ESOPS) and
• be award of the advantages and disadvantages of
  performance relationship to HRM in particular
  the (de)motivational potential of PRP

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THE SIGNIFICANCE OF THE PAY SYSTEM

• Main facets of pay
• 1. level of pay
• 2. fairness of pay re differentials
  relatives (the pay structure)
• - job evaluation, systematic (although not
  scientific) way of measuring job against criteria
  to ascertain its place in relation to other jobs
  in org.
• 3. The pay system, the set of rules linking
  reward to effort and/or status in work. 2 main
  types of system - paid by time paid for
  performance

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CATEGORIES OF PAY(CASEY ET AL, 1992)

• Individual payment by results, eg piecework,
  output target-based bonuses, commission bonuses
• collective payment by results, rewards
  productivity of group, section, department or
  company
• collective bonus schemes, based on company
  profits, eg profit-sharing schemes, employee
  share option schemes
• performance-related pay, based on assessment of
  performance and/or competence

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Payment by Results (PBR) Individual/CollectiveAr
guments for and Against

• Arguments for PBR
• increase in mgt control
• less supervision and greater freedom for
  employees
• opportunites to achieve high earnings
• create joint appreciation of necessity to
  increase profit - mutual benefit

• Arguments against PBR
• relationship between effort and reward often
  portrayed too simplistically
• intervening variables, eg social relationships
• erosion of mgt control
• worker-manager conflict

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Collective Bonus Schemes

• Most effective when teams are
• stable, mature
• identifiable as a performing unit with measurable
  outcomes
• autonomous
• comprise interdependencies
• flexible, multi-skilled, good team players

• Problems can include
• pressure to conform - reduction in effort
  (levelling effect)
• resistance to transfer from high performing teams
• individualist culture

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Performance-Related Pay (PRP)Possible Reasons
for Introduction

• To increase motivation
• to encourage certain behaviours
• to help in recruitment and retention
• to facilitate change in organisational culture
• to encourage internalisation of performance norms
• to weaken trade union power
• increased role of line manager
• greater financial control
• moral justification
• encouragement of flexibility

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Performance-Related Pay (PRP)Possible Problems

• Expectancy theory of motivation
• displacement of objectives
• undermining esprit de corps
• reinforcement of status, control and power
  differences
• assessment of individual performance
• financial constraints
• crowding out intrinsic motivation

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Implications of PRP for Managers/Organisations

• Is pay the prime motivator?
• Is the best way of managing through the pay
  system?
• Importance of clearly defined performance
  criteria - objectives and behaviours closely
  linked to work practices
• Importance of objective and consistent assessment
  of performance outcomes - training of managers in
  appraisal
• Clear and effective links between performance and
  level of pay
• Does PRP contradict ethos of teamwork?
• Reasons for introducing PRP?
• - to signal change in culture
• - to highlight managerial responsibility for
  performance
• - focus on individual reduced role for TUs and
  collective bargaining