Organizational Culture and Performance: A Study on Pay for Performance Compensation Plan and Performance Evaluation System

The report aims at providing an insight into how organizational culture emphasizes performance instead of tenure. The report commences with an introduction of the organizational cultures that primarily focus on employee performance. The report also discusses about the pay for performance compensation plan and performance evaluation plan. The report also puts forward recommendations on the choice of a suitable performance evaluation system and a compensation plan that addresses most issues. The report also puts forward discussions on why the compensation plan seems credible.

Running head: HUMAN RESOURCE MANAGEMENT
Human Resource Management
Name of the Student:
Name of the University:
Author Note:

1HUMAN RESOURCE MANAGEMENT
Executive Summary:
The report aims at providing an insight into how organizational culture emphasizes performance
instead of tenure. The report commences with an introduction of the organizational cultures that
primarily focus on employee performance. The report also discusses about the pay for
performance compensation plan and performance evaluation plan. The report also puts forward
recommendations on the choice of a suitable performance evaluation system and a compensation
plan that addresses most issues. The report also puts forward discussions on why the
compensation plan seems credible.

2HUMAN RESOURCE MANAGEMENT
Table of Contents
Introduction:....................................................................................................................................3
Statement of the Problem:...............................................................................................................3
Literature Review:...........................................................................................................................3
Organizational cultures that emphasize performance rather than tenure.....................................3
Pay for performance compensation plans....................................................................................5
Performance evaluation systems..................................................................................................7
Recommendations on the Choice of Performance Evaluation System...........................................8
Compensation Plan Addressing All Issues....................................................................................10
An Analysis of the Credibility of the Plan.....................................................................................10
Conclusion:....................................................................................................................................11
References:....................................................................................................................................12
Appendix:......................................................................................................................................13

3HUMAN RESOURCE MANAGEMENT
Introduction:
The report aims at providing at insight into the impact of organizational culture on the
performance of the employees. The report will help in discovering that there exists a relationship
between the organizational culture and performance. It will also help in understanding that a
strong employee responsive culture can lead to efficiency in performance. The constant growth
in the nature of global business acted as the primary catalyst in studying organizational culture
that over time has affected the success and the behavior of the teams, individuals and
organizations. Organizational culture has received increased attention due to the key role it has in
the determination of the employee level and their performance (Alvesson, 2016). The reports
will also analyze the importance of pay for performance compensation plans and performance
evaluation system.
Statement of the Problem:
In the twenty first century, corporate culture has received wider acceptance with each of
its aspects affecting the various systems and subsystem of an organization. Globalization,
increased competition, alliances and creation of workforce department has led to greater
requirement of organizational culture. This made it an important aspect for the development of
the company. Culture however represents a common bond that helps in generating the sense of
belongingness amongst actors within an organization (Awadh & Alyahya, 2013). The research
would try to discover how the organizational culture puts forward a shared system that forms the
basis of communication and mutual understanding thereby contributing to organizational
performance.

4HUMAN RESOURCE MANAGEMENT
Literature Review:
Organizational cultures that emphasize performance rather than tenure
According to Alvesson & Sveningsson (2015), the idea of organizational culture must be
shared within the purview of the organizations. Awadh & Alyahya (2013) stated that
organizational culture is based on the cognitive systems that help employees in decision making
and thinking. He also identified different levels of culture based on multifaceted values, beliefs
and assumptions that determine ways for an organization in conducting business. Nicolini (2016)
however defined organizational culture as the normative glue that holds the entire organization
together. Organizational culture also acts as the base for determining the difference between the
organizations that does business within the similar national culture. According to Hogan & Coote
(2014), two essential factors build up an organizational culture. These include the structural
stability of the group and the integration of a single item into a superior standard. According to
Nica (2013), culture represents a system based on common values at various levels within
organization. The norms and values of put forward by the organizational culture have a stronger
impact on the organizational performance. Although norms remains invisible but it plays an
important role on improving performance.
Alvesson (2016) overviews the organizational culture as shared patterns of assumptions,
expectations and beliefs of the members of an organization. He also mentions it as collective
programming of mind that helps in distinguishing one category or group of people from the
other. Belias & Koustelios (2014) identifies the organizational culture that focuses on the
performance instead of tenure. These include the competitive culture, cooperative culture and the
adhocracy culture.

5HUMAN RESOURCE MANAGEMENT
Competitive Culture represents an organizational culture that encourages employees in
attaining newer levels of achievement, quickening competition amongst the fellow employees
along with encouraging them in taking charge (Jones, George & Langton, 2013). A company
representing such culture rewards those who are capable of attaining certain predetermined
standards. Such a culture also helps in encouraging employee decisiveness and in the creation of
an environment of higher expectations.
Cooperative Culture on the other hand represents a culture that promotes the
independence of the employees based on goal setting and the initiatives used (Tsai et al., 2015).
This type of culture values the employees and ensures the distribution of power and authority
based on the trust. Besides, the cooperative norms also ensure encouraging the behavior
including the maintenance of personal standard and integrity, realization of goals along with the
factor of work enjoyment. In other words, this type of culture encourages teamwork and
performance.
Adhocracy Culture primarily depends on creativity and energy. In this type of culture,
employees remain encouraged in taking risks and the leaders’ acts as the entrepreneurs or the
innovators (Haffar, Al-Karaghouli & Ghoneim, 2013). Here, the organization is made to undergo
experimentation by emphasizing on freedom and individual ingenuity. In this culture, the core
values depend on agility and change. This type of organizational culture also emphasizes on the
performance factor.
Pay for performance compensation plans
According to Ederer & Manso (2013), while adopting reward philosophy based on
employee contribution within organization it is necessary to determine right balance between the

6HUMAN RESOURCE MANAGEMENT
short term and the long-term compensation and the variable versus the guaranteed compensation.
The concept involved in the development of such philosophy represents the extent to which
payment remains tied to the specific performance. This particular issue will vary across
organization. Nevertheless, all business should have the capability to identify the performance
objectives to be fulfilled by the workforce along with the achievement of the financial outcomes
on the attainment of the results.
Shields et al., (2015) stated that the development of the pay for performance
compensation plan becomes easier with the understanding on what the approach intends to
achieve. Thus, the effective construction of the pay for performance compensation plan helps the
company in fulfilling the mentioned objectives. This includes:
 Recruiting and retaining highest quality of the employees
 Communicating and reinforcing the goals, values and objectives of the company
 Engaging the employees in defining the success within organization
 Ensures rewarding the contributors for their successful achievements
Thus, the Pay for performance compensation plan represents a method used for creating a
line of sight between the elements related to the purpose and culture of the company. However,
for implementing the plan, compensation should reinforce the desired behavior within the
company’s strategic framework in a manner convincing enough for producing desired level of
performance. This is accomplished based on five essentials (Kim, Sutton & Gong, 2013):
Essential 1: This includes tying the performance rewards to the financial objectives of
the shareholders. This is because most of the companies have financial responsibility towards

7HUMAN RESOURCE MANAGEMENT
shareholders. Therefore, the evaluation of a compensation plan should be like the other
investments of the company and within context of financial outcomes expected by shareholders.
Essential 2: This involves in employing the accurate mix of the compensation elements.
The accurate blend of the compensation elements is vital for drawing relationship between the
key outcomes that the growing companies seek to achieve. This includes, increase in
productivity, fulfilling the needs of the employee and the company through meeting satisfaction
quotient and achieving the retention goals.
Essential 3: This involves modifying the employee behavior that implies that
compensation should not only be meaningful but motivational for the recipient and align with the
goals and expectations of the shareholders. This balance however varies across companies.
Essential 4: This involves embracing performance with the payment of the employees.
This is essential because if the employees are not able to create the impact asked for, the plan
will result in no compensation investment for the company.
Essential 5: This involves undertaking effective communication and reinforcing rewards
as they act as the key for creating a long-term commitment and focus within the organization.
Compensation rewards puts forward a means for reminding the employees about the importance
in striving for the goal.
Performance evaluation systems
According to Estampe et al. (2013), performance evaluation systems represent a
systematic process for examining the degree of performance of an employee in his or her job.
The word systematic implies that the performance evaluation process is planned in a manner that

8HUMAN RESOURCE MANAGEMENT
allows formal feedback. It is also termed performance assessment, performance appraisal or
employee appraisals. An organization should implement a systematic performance evaluation
system for the following reasons:
1. The evaluation process encourages positive behavior and performance
2. The evaluation process represents a way of satisfying the curiosity of the employees
about the performance of their jobs
3. It is used as tool for developing employees
4. It also helps in providing a platform for promotions, pay hikes and disciplinary legal
action.
Thus, the basic goals of performance evaluation system lie in providing equitable
measurement of the contribution of the employee towards the workforce. It also helped in
producing accurate documentation for protecting both employer and the employee along with
attaining a higher level of quantity and the quality of work produced. The following five steps
are followed for creating a performance evaluation system for any practice. These steps include:
1. Development of the evaluation form
2. Identification of the performance measures
3. Setting guidelines for the feedback
4. Creation of disciplinary and termination procedures
5. Setting a schedule for evaluation
Recommendations on the Choice of Performance Evaluation System

9HUMAN RESOURCE MANAGEMENT
The most suitable choice for performance evaluation system would be 360-degree
appraisal (Bracken & Church, 2013). This is because it provides a comprehensive feedback on
the performance of the employees in forming deeper insights. This performance evaluation
system involves gathering required feedback from the multiple parties that involves coworkers,
managers, vendors and even customers. Accuracy in the performance review is determined with
the collection of more information that brings the picture more into the focus. This process of
performance evaluation system is not only time consuming but also laborious when compared
with the other techniques. Employees however prefer this appraisal system because here the data
remains unbiased and it leads to the creation of multidimensional vantage point. The 360-degree
appraisal form for the manager is as follows:
Grading
Manager
A B C D
Supervises
others well
Projects a
Professional
Image
Sets Example
through
performance
Communicates
Well
Makes decision
easily
Handles

10HUMAN RESOURCE MANAGEMENT
problems and
pressures
effectively
Organized and
Efficient
Figure 1: 360 Degree Appraisal Form for Managers
Source: (Karkoulian, Assaker & Hallak, 2016)
Compensation Plan Addressing All Issues
Compensation plan represents the manner in which all components of the compensation
package such as salaries, benefits and wages paid (Chung, Steenburgh & Sudhir, 2013). It also
determines the purpose for which employees receive bonus, incentives and salary hike.
Implementation of voluntary deferred compensation plan helps in addressing all issues.
Here employees remain eligible for participating in the tax-sheltered supplemental in
investment programs through deduction of payroll. Such investment plans allows the employee
in saving for his retirement either on after tax or tax deferred basis. As the income received after
retirement is lesser than the income while they are working so they often receive tax advantage.
An Analysis of the Credibility of the Plan
This compensation plan seems credible for the following reasons (Sirkin & Cagney, 2017):
 It helps in lowering taxes. Employees’ makes a contribution towards the plan before taxes
are deducted which implies they are taxed on smaller amounts.

11HUMAN RESOURCE MANAGEMENT
 Ensures compounding interest and tax deferred growth. This plan enables accruing of
earnings and interest deferring tax. The compound interest will enable quick growth
compared to the savings in the taxable account where earnings and interest are taxed
every year.
 Ensures planning for future since the other sources of the income like the social security
and the pension plans amended by state hardly replace the final salary of the person on
retirement
Conclusion:
On a concluding note, one can say that an organizational culture has a deeper impact on
employee performance that not only helps in enhancing productivity but also organizational
performance. A thorough analysis of the report will put forward that there exists a positive
association between performance improvement and the presence of strong organizational culture.
Adoption of the organizational culture helps the employees in doing their work not only
effectively but also efficiently. Employee performance has contributed to the increase in the net
organizational profit. Positive development is easy to achieve when every individual remains in a
common path within the organization. Through the report, one will also be able to understand
how the stronger organizational culture acts helpful for new employees in understanding the
competitive advantage. Group efficiency and employee commitment plays a vital role in
adopting the beliefs and values of an organization and in enhancing its performance. One can
also understand the essentials required for designing the pay for performance compensation
plans. One also gets to know why the 360 degree appraisal form is one of most suitable
performance evaluation plan. The report also portrayed how the chosen compensation plan
proves credible.

12HUMAN RESOURCE MANAGEMENT
References:
Alvesson, M. (Ed.). (2016). Organizational culture. Sage.
Alvesson, M., & Sveningsson, S. (2015). Changing organizational culture: Cultural change
work in progress. Routledge.
Awadh, A. M., & Alyahya, M. S. (2013). Impact of organizational culture on employee
performance. International Review of Management and Business Research, 2(1), 168.
Belias, D., & Koustelios, A. (2014). Organizational culture and job satisfaction: A
review. International Review of Management and Marketing, 4(2), 132-149.
Bracken, D. W., & Church, A. H. (2013). The" new" performance management paradigm:
capitalizing on the unrealized potential of 360 degree feedback. People and
Strategy, 36(2), 34.
Chung, D. J., Steenburgh, T., & Sudhir, K. (2013). Do bonuses enhance sales productivity? A
dynamic structural analysis of bonus-based compensation plans. Marketing
Science, 33(2), 165-187.
Ederer, F., & Manso, G. (2013). Is pay for performance detrimental to innovation?. Management
Science, 59(7), 1496-1513.
Estampe, D., Lamouri, S., Paris, J. L., & Brahim-Djelloul, S. (2013). A framework for analysing
supply chain performance evaluation models. International Journal of Production
Economics, 142(2), 247-258.

13HUMAN RESOURCE MANAGEMENT
Haffar, M., Al-Karaghouli, W., & Ghoneim, A. (2013). The mediating effect of individual
readiness for change in the relationship between organisational culture and TQM
implementation. Total Quality Management & Business Excellence, 24(5-6), 693-706.
Hogan, S. J., & Coote, L. V. (2014). Organizational culture, innovation, and performance: A test
of Schein's model. Journal of Business Research, 67(8), 1609-1621.
Jones, G. R., George, J. M., & Langton, N. (2013). Essentials of contemporary management.
McGraw-Hill/Irwin.
Karkoulian, S., Assaker, G., & Hallak, R. (2016). An empirical study of 360-degree feedback,
organizational justice, and firm sustainability. Journal of Business Research, 69(5), 1862-
1867.
Kim, H., Sutton, K. L., & Gong, Y. (2013). Group-based pay-for-performance plans and firm
performance: The moderating role of empowerment practices. Asia Pacific journal of
management, 30(1), 31-52.
Nica, E. (2013). Organizational culture in the public sector. Economics, Management and
Financial Markets, 8(2), 179.
Nicolini, D. (2016). Knowing in Organizations: A Practice-Based Approach: A Practice-Based
Approach. Routledge.
Shields, J., Brown, M., Kaine, S., Dolle-Samuel, C., North-Samardzic, A., McLean, P., ... &
Plimmer, G. (2015). Managing employee performance & reward: Concepts, practices,
strategies. Cambridge University Press.
Sirkin, M. S., & Cagney, L. K. (2017). Executive compensation. Law Journal Press.

14HUMAN RESOURCE MANAGEMENT
Tsai, C. Y., Horng, J. S., Liu, C. H., & Hu, D. C. (2015). Work environment and atmosphere:
The role of organizational support in the creativity performance of tourism and
hospitality organizations. International Journal of Hospitality Management, 46, 26-35.

15HUMAN RESOURCE MANAGEMENT
Appendix:
Appendix 1: Performance Appraisal form for Manager