Performance-based incentives and pay packets motivate employees to work harder. Many companies already employ this technique and have reaped huge benefits. Although this is a fair method of rewarding talent, it does have some negative aspects as well.
Performance-based payment systems tend to work best in the sales and marketing sector because quantifying the performance of a salesman is easy. You just need to look at the volume of sales that he or she achieves. However, assessing the performance of a back office employee is not that easy. Although their service is equally important, their contribution to the organization cannot be measured that easily.
The best thing about performance-based pay is that it promotes healthy competition among the workers. When employees realize that they can earn much more than they typically do by achieving more sales, they will definitely work harder. If the incentives only reach a certain number of employees, it will spur everyone to work harder.
On the flip side, incentives may also breed resentment. In every organization, there are both achievers and under-performers. Interestingly, they all put in the same amount of work and time. However, the incentives will only reach the hands of those achievers. This could cause resentment among other employees and make them feel that their contribution is not appreciated.
While thoughtfully designed incentive schemes may encourage employees to stick to an organization, it may also prompt under-performers to quit. While companies are unlikely to feel the need to retain under-performers a high attrition rate does not reflect well on the company or its management. What’s more, organizations spend a great deal of time and money on training fresh employees. If a large number of these employees leave within a few months of joining, it is a sheer wastage of money and manpower.
In conclusion, performance-based incentives encourage hard work and healthy competition among employees. However, the same system may also cause resentment and hamper team efforts. Also in sectors where performance cannot be measured in terms of figures, this method simply wouldn’t work.
Performance-based
incentives
and pay packets motivate
employees
to
work
harder.
Many
companies
already employ this technique and have reaped huge benefits. Although this is a
fair
method of rewarding talent, it does have
some
negative
aspects
as well
.
Performance-based payment systems tend to
work
best in the sales and marketing sector
because
quantifying the performance of a salesman is easy. You
just
need to look at the volume of sales that he or she achieves.
However
, assessing the performance of a back office
employee
is not that easy. Although their service is
equally
important
, their contribution to the
organization
cannot
be measured
that
easily
.
The best thing about performance-based pay is that it promotes healthy competition among the workers. When
employees
realize that they can earn much more than they
typically
do by achieving more sales, they will definitely
work
harder. If the
incentives
only
reach a certain number of
employees
, it will spur everyone to
work
harder.
On the flip side,
incentives
may
also
breed resentment. In every
organization
, there are both achievers and under-performers.
Interestingly
, they all put in the same amount of
work
and time.
However
, the
incentives
will
only
reach the hands of those achievers. This could cause resentment among other
employees
and
make
them feel that their contribution is not appreciated.
While
thoughtfully
designed
incentive
schemes may encourage
employees
to stick to an
organization
, it may
also
prompt under-performers to quit. While
companies
are unlikely to feel the need to retain under-performers a high attrition rate does not reflect well on the
company
or its management. What’s more,
organizations
spend a great deal of time and money on training fresh
employees
. If
a large number of
these
employees
leave
within a few months of joining, it is a sheer wastage of money and manpower.
In conclusion
, performance-based
incentives
encourage
hard
work
and healthy competition among
employees
.
However
, the same system may
also
cause resentment and hamper team efforts.
Also
in sectors where performance cannot
be measured
in terms of figures, this method
simply
wouldn’t
work
.