Pay for Performance: The new corporate trend

The present generation strongly believes that it is fair to be paid as per performance but also that there is no justification for non-performance. With an apparent drastic change in business and technology, the manner in which organizations manage their compensations has also metamorphosed. Now no longer can an employee relax on his office chair with a certainty of getting handsomely paid without delivering expected results. We live in a world which is information and technology driven therefore paper performance management and merit systems are of reduced significance, only clearly evident efforts which contribute to organizations growth can expect to be rewarded.
A competitive organization in todays scenario wisely recognizes that comprehensive alignment of rewards with employee performance will lead to a stronger and more productive workforce. The definition of performance differs with every individual; it is not only just results but the quality of results and also the efforts behind them. Organizations in India have been striving to align performance with pays for long in their attempt to make the employees, inclusive of the top management authorities more accountable for their contribution to companys growth as the losses misaligned compensations can create are beyond repair.

Indian companies have been linking the performances to pay as a norm where in the salary packages which the employees are offered, there is a variable component or bonus which is directly linked to the employees as well as companys performance. But the latest trend of pay for performance also includes the CEOs, CFOs, CXOs and all the higher members of the board in the same sphere of relating their pays to their performance.

Corporate Democracy: The need for corporate democracy was never felt more as public corporations today are like miniature governments having an overall effect in the social, political and economic scenarios. There has to be a fair play in compensation management be it for higher or lower level officials. In the face of economic uncertainties where salaries are being cut down and employees laid off on the basis of non- performances, the higher authorities cannot expect their incentives to shoot up. The way in which corporate governance operates at present needs a review, because if an organization is not delivering good performance and the authorities still keep getting their fair amount of salaries, there is an obvious misalignment. Corporate democracy also calls for employee involvement in decisions pertaining to company policies except for extremely confidential ones.

Justified measures while aligning the pays to performance like direct impact on the profits, team performance, client dealing, customers views on service quality, success in developing talent must be taken into consideration out of the many more to avoid a biased and favoritism feeling among some employees.

Pay for performance, a fair deal: Every new practice has its advantages as well as disadvantages; pay for performance seems to be a fair deal to many as it has the power to motivate and encourage the employees to perform their best at the task at hand and get rewarded for the same. This also gives a clear way to evaluate an employees performance in an organization. Pay for performance can work as a catalyst to make it a result driven organization which can also work in the favor of the company by taking it to superior level of performances as every employee in an effort to work towards reward and appraisals will contribute to uplifting the status of the organization. The drive to be rewarded can take the employee as well as employer to success and works well in not only sales or production departments but also in support roles like that of Information Technology and Human Resources. This trend of getting paid for performance is a steer clear policy where either you perform or you are encouraged to leave. Standards are set straight by organisations where their performance plays a pivotal role in the results they receive.

It is a sense of contentment for an employee that their performance has been evaluated on their standard of deliverables and not on the whimsical attitude of the team leader or supervisor. This dilutes the hierarchy by shifting an employees focus from impressing the higher officials to concentrating on his own performance.

Money is not all that matters: For every employee, the recognition of his efforts and being applauded for the same is a bigger motivation than money. This is also a factor which boosts the performance of employees apart from the compensation they receive form the company. Besides financially acknowledging its employees efforts, companies should also focus on actually acknowledging their efforts which makes them feel connected to the firm they work for. An employees loyalty towards the company is essential for its upliftment and growth. Getting a salary hike or incentives for delivering a brilliant performance does count a lot but at the end of the day, a personal word of appreciation from authorities counts much more.

Every organization follows a different pay for performance strategy depending on the nature of results it desires. A compensation plan which motivates the employees to excel leads to happier and committed staff. In the face of cut throat competition and sudden waves of political uncertainties, companies must secure an exceptional talent pool while also safeguarding themselves form the unforeseen future wraths of economy decline. Therefore a balanced approach to this trend of pay for performance needs to be practiced.

The author is Ms. Ritu Mehrotra, VP Global HR and Talent Management, Bristlecone (A Mahindra Company)

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