A predetermined performance target
The intention of this paragraph is to critically analyze whether Telstar Corp should adopt a trait based, result based or a behavior based performance system and this paragraph further discusses their respective advantages and disadvantages. The management at Telstar Corp has adopted a result and behavior based performance appraisal strategy for identifying the achievements of pre-determined performance targets aligned to its reward strategy.
‘Telstar Corp’ adopts a result, competency based performance system particularly for senior managers and for lower level employees it uses both result and behavior based performance system. Di Cieri (2005) proposes that people will be more motivated if their remuneration is linked in some way to their performance provided that the parameters are clearly set out and participating individuals understand how they can clearly influence the result, performance related pay can at times be an effective way to communicate and emphasize the message that everyone can contribute to the greater good of the company.
Ashton (1996) claims that result based remuneration strategy if applied in a company has the power to change the performance of the company because it brings a lot of motivation and thereby commitment in the employees of that company. Whereas, Kohn (2000) argues that result based method can be bad for business because firstly it encourages people to focus narrowly on a task, to do it as quickly as possible, and to take fewer risks, secondly extrinsic rewards can erode intrinsic interest and thirdly people come to see them selves as being controlled by a reward.
Di Cieri (2005) claims that behavior based method are one which focuses on the employee’s competencies, skills, actions and behaviors in performing a job. This is where performance measurement and appraisal is essential. Result based performance focuses more on assessing what employees do (how they perform) and achieve in their job. Poels (1997) argues that the competencies an employee demonstrates and the potential that he or she possesses becomes more and more important and consequently deserves more reward then a person giving no results.
Whereas Ashton (1996) argues that the disadvantages of result based method are; it puts extra pressure on employees, on their work load, which at times effects their personal or family life, in quest of achieving targets sometimes they might end up in depression, there is also the fear of loosing the job in the minds of employees which makes them feel uneasy most of the time not only at work but some of them tend to take work pressure home which in turn effects their family lives.
De Cieri (2005) argues that peer group pressure to qualify with their high achieving colleagues is also very strong within a commercial environment thereby at times too much competition between employees can take form of personal rivalry which is really bad for the company. The management at ‘Telstar Corp’ adopts a diverse remuneration strategy for its employees and managers.
For managers it is solely based on results but for employees it is both behavior and result based. Telstar Corp pays high packages to executives and senior management so that they can give their best performance as they are the reason behind the results generated by the company, their combined efforts help in the achievement of pre determined performance goals.
It is the intention of this paragraph to critically analyze whether short-term monetary reward strategies such as one-time commissions, cash bonuses, loyalty bonuses, merchandises, retail vouchers ; services, vacations ; holidays, bonuses ; gifts, kids school fees and insurance fees should be equitably accessed by managers and employees within Telstar Corp in the achievement of pre determined performance goals. Kepner (2001) suggests that the primary purpose of short term monetary incentives is to reward employees for their excellent job performance.
Locke (2004) found that short term monetary incentives increased production output by a median of 30% more than any other motivational device studied. He further argues that they are worth the effort and the fact that they can motivate employees to stretch themselves. Millard (2006) argues that performance or merit based bonuses are not gift bonuses which are handed out firm wide, they are purely tied to performance, this may be a reward for client development or simply working longer hours.
White (2006) argues that Bonuses can help employers manage costs and are very effective around creating focus on business objectives. In contrast De Cieri (2005) criticizes that employees often do not bother putting in the extra effort when they feel the bonus is tied to variables beyond their control. Grote (2002) claims that vouchers are so popular in incentive campaigns compared to cash or merchandise as they are cheaper, virtually instant (speed of issue), multi denominational and have all the flexibility of cash with none of the messiness associated with delivering cash or other merchandise.
Kohn (1993) argues that monetary incentives encourage compliance rather than risk-taking because most rewards are based only on performance. As a result, associates are discouraged from being creative in the workplace. He further argues that monetary incentives may be used to circumvent problems in the workplace. For example, incentives to boost sales can be used to compensate for poor management. Employers also may use monetary incentives as an extrinsic rather than an intrinsic motivator.
In other words, employees are driven to do things just for the monetary reward versus doing something because it is the right thing to do. This can disrupt or terminate good relationships between employees because they are transformed from co-workers to competitors, which can quickly disrupt the workplace environment. Similarly Eagan (2005) argues that when employees lust after money or when they are just greedy in their pursuit of bonuses, it can lead to inappropriate behavior.
She also argues that monetary incentives do such a good job of motivating employees that they do whatever they get paid for and nothing else. Some incentive plans reward output volume at the expense of quality or customer service. She further argues that if rewards aren’t relevant to employees, they don’t buy in and don’t behave the way the company desires. Rewards must match the person; this is why it’s so important for the management to understand their employees and what’s meaningful to an individual. She concludes that in the end it all comes back to really getting to know the employees.
Horsley (2005) proposes it is in the nature of any organization that there will always be some element of rivalry leading to fights, jealousy and job hopping when it comes to carving up the rewards, he further argues that devious and dishonest behavior in the pursuit of bonuses is more likely to arise when the system is administered in a way that is not clear or precise. Too often, companies are disorganized or scattershot in their approach, with inconsistent or hard-to-measure results hence companies run the risk of undermining their own investment.
Rewards must be appropriately targeted in order to mean anything. According to a Maritz Research poll of 1,002 employees conducted in October 2005, only 27 % of those who want to be recognized with gift cards, merchandise or trips actually receive that form of award and only 40 % craving written praise receive it. Godar (2005) claims that part of the mismatch may be because of the growing diversity in the workplace, she further claims that it’s the generational differences and also the differences in the workforce’s age group(20-28, 28-35, 35-45), lifestyle and life stage(single, married, with kids).
Maritz advises employers to ask new employees how they prefer to be recognized or rewarded. Ignoring valued employees is too big a risk to take. Not only will retention suffer, but the attitude of employees who don’t feel valued and appreciated will trickle down to customers who in turn affect the company’s goals and objectives. Coulter (2004) suggests that recognition if not rewards must be timely, it must be immediate. It could take up to 28 days from the time an employee was nominated for an award to when he or she received it, which could be a long wait.
Fay (2001) proposes that the advantages of using short term monetary remuneration strategies are traditionally; these have helped maintain a positive motivational environment for employees as it is a commonly held view that monetary incentives drive performance, it motivates employees to work hard because they know that if they achieve good results the management will reward them in the short term instantly. It also helps management in differentiating between the most efficient employees and the rest which helps during deciding whom to promote.
Further the management can judge the caliber and mentality of every employee by seeing the impact of the above incentives on employee performance. Whereas Fisher (2000) argues that the disadvantages of using short term monetary remuneration strategies are, they run the risk of creating some serious internal equity issues among employees, at times it makes employees lazy when there are no bonuses or commissions. Secondly, if the rates of bonuses are not fixed then it can be a problem.
Thirdly, at times the actual performance of employees turns into greed of more money and further in a team based environment it may eliminate the feeling of team sprit because every one works for their bonuses and commissions. At ‘Telstar Corp’ the management has launched a ‘Pride@Telstar Corp’ program which is web-based; Telstar Corp’s new program has four elements: formal appreciation, instant appreciation, service awards and cash awards.
Formal appreciation is based on activity and behaviour, both managers and employees can nominate employees and teams for exceptional performance. Awards are delivered as points redeemable online for various types of vacations ; holidays while the company covers all relevant taxes. The number of vacation days given to any particular employee normally increases over time, there is usually a short waiting period of 3-6 months during which employees are ineligible for vacations, but for competitive reasons there is often no waiting period for management employees.
Instant appreciation, involves small items like mugs, bags and pens or merchandises, retail vouchers ; services that managers have on hand and can give to employees at any time to reward certain specific behaviour, event or accomplishment. This program further includes formal bonuses ; gifts, service awards and cash awards such as one-time commissions, cash bonuses, loyalty bonuses, as well as payment of kids’ school fees and insurance fees which can all be done online using the intranet at work or via the internet from home.
It also allows staff to self-select from a range of benefits, e. g. staffs choose between health insurance and a gym membership. This program has already helped to support thousands of daily interactions with employees and managers. At Telstar the level and composition of short term monetary incentives are equal with between the employees and the managers for those who have achieved a predetermined performance target.