Strategic HRM: Individual Performance Related Pay and Employee Motivation

This essay discusses the role of Individual Performance Related Pay (IPRP) in stimulating higher employee performance and the factors that influence its effectiveness. It explores how IPRP can motivate employees in some situations but not in others, and the advantages and disadvantages of performance-related pay. The essay also highlights the importance of aligning payment systems with organizational circumstances and goals.

Strategic HRM

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Question 1 Project Task...................................................................................................................1
a) Examine how the individual performance related pay can stimulate higher level of
performance from the employees...........................................................................................1
b) Explain the reasons why Individual Performance Related Pay (IPRP) tends to motivate
employees in some situations but not in others......................................................................4
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
In today's business environment, Strategic HRM is said to be one of the crucial process
that stays enclosed with different elements like monitoring, analysing, controlling and planning
the whole situation. Over the years, change in the business environment has updated the working
of Human Resource Department of every single business company (Zehir, Karaboğa and Başar,
2020). Including this, present essay is going to be enclosed with how Individual Performance
Related Pay (IPRP) could effectively lead employees to raise their performance level.
Away with this, there are a few reasons that has also been taken into consideration that
are directly linked with Individual Performance Related Pay (IPRP), which tends to staff
motivation among a few situations only. This will lead to better understanding of what specific
modifications within the Strategic HRM needs to bring so that companies could effectively gain
competitive advancement through motivating staff.
MAIN BODY
Question 1 Project Task
a) Examine how the individual performance related pay can stimulate higher level of
performance from the employees
In present situation, it has become vital for business companies to assess the overall
performance level of the employees. Here, it has been found that there are ample number of tools
and techniques present within the business environment that aid companies in evaluating and
enhancing the performance level of the staff workers. One of the crucial program that came in
front is Individual Performance Related Pay (IPRP), that is being considered as a method, which
helps employers to manage the payment through linking salary progression to an assessment of
individual performance, usually measured against the targets that are already been agreed. Most
of the time, different organisations take into consideration of balance score card and this also
benefits to deliver motivation to staff members. This can effectively be understood with a good
example of a small business company, where manager gets the commission on the basis of extra
work he/she has given to the subordinates (Zehir, Karaboğa and Başar, 2020).
United Kingdom underwent a massive crisis during the year 2008. As a result of this, the
businesses functioning as a part of the country had to facilitate increment in employee
recognition schemes. These were aimed at retention of employees for a longer period of time
1

after the downturn. Performance Related Pay was thus introduced to encourage the staff to work
in a more effective and efficient manner. This is considered as an effective tool through which
the performance of personnel pertaining to the organisations is aligned with the output required
by companies. There are 2 main types of PRP incentives, one is whereby the pay is linked to
performance and the other one whereby performance measurement is done on the basis of traits
of staff members.
At current, many business companies are continuously paying to staff through
considering pay rise system. This is where, employees of the different companies looks as a rise
in pay scale, but it stays as a reward only. It is said that, rise among performance level of staff
would directly lead them to raise pay scale as well (Zehir, Karaboğa and Başar, 2020). Basically,
this type of award system is particularly being considered as a performance appraisal system that
at the end would help employees in categorising different groups based on the performances
which may aid in pointing the different determinations that are directly linked with all the
appraisals that the company is looking forward to make among existing pay scale. Including this,
it is said that there are various performance related programme that different organisations could
effectively utilise within the public sector. Basically, it could be considered as one of the crucial
step that helps a business company towards enhancing the performance level of employees and
aid them in meeting company's desired goals and objectives as well.
Based on the different researches it has been identified that many of the companies has
given not just the monitory benefits to employees but, other type of benefits as well considering
the different factors like emotional and so on. The reason that came in front was that, many of
the employees looks for having a healthy along with secure environment within the company. At
this phase, companies have taken many initiatives so that they could encourage and motivate
number of staff members so that productivity could effectively get improvised in specified time
frame. Away with this, it has also been found that enhancement among benefits, staff may also
start developing attachment towards organisation, because due to this capacity of the company
would automatically gets improvised within the specified time frame, and because of this it will
lead potential individuals to enhance their own sustainability.
According to Zehir, Karaboğa and Başar, (2020), many multinational business
organisations of Europe has followed IPRP and if it is compared with United Kingdom, then the
numbers of employees that has been given with the same facilities in this nation is really very
2

low in nature. Considering this information it can also be said that dispersion of the motivating
incentives related pay is more noteworthy for those workers who are highly talented and
execution evaluation in higher in the assembling and money related administrations. Due to this,
Incentive pay scale has been pretty much less then the management section (Kaufman and et. al.,
2020). Here, examples can be given is of hotels and café industry. This sort of pay plans among
United Kingdom and Europe has directly made high administration contribution which regularly
has given execution related compensation. On the other hand, significant issue in making the
arrangement as this impact the presentation related compensation to the organizations
profitability. While other investigations have showed that the view with the presentation is
identified with higher representative profitability and better work towards the association.
On the other side, government of different nations has also made number of
modifications among their pay scale and this has helped in improvising the chances for pulling
out number of opportunities that would help eligible candidates to get the job among
multinational companies. Away with this, it is also said that due to number of advises it would
lead companies to deal with the number of interventions that government of different nations has
made. This is where, organisations would have to adopt a proper incentive pay scheme that
would lead the care, to get improvised within the company.
Lastly, there are number of advantages that number of companies could face and i.e.
higher performance level related pay would directly lead employees to feel motivated towards
number of small and big tasks. Including this, it is also said that development of these schemes
may directly attract motivation among mindset of staff that are working hard enough towards
company and aid them in improvising the cost cutting in regards to the company. Including this,
it is also said that in order to improvise both loyalty and morale of staff members, it would be
required by the individual to feel that hard work is mostly rewarded (Kaufman and et. al., 2020).
There are many situations and circumstances where employees require additional support
from their respective managers and also expect to get valued according to their performance in
terms of both the monetary and non monetary terms. Here, it can be said that IPRP is most
suitable with the financial points of interest which helped in reducing the remittances and the
duty as well, which would reduce the number of problems for companies while hitting the targets
at the international market through considering the Individual Performance Related Pay (IPRP).
On the other hand, it can be said that implementation of Individual Performance Related Pay
3

(IPRP) is not at all suitable for the businesses where confidentiality is determined as the most
important work. The main reason behind not acquiring Individual Performance Related Pay
(IPRP) as it might influence employees to indulge into any sort of unethical practice which could
influence their quality of performing the work. This simply depicts that IPRP is not at all suitable
for every kind of company which goes through several types of circumstance. It can be further
said that IPRP must be incorporated by business associations by only influencing their
organisational circumstances and types. By considering this, these kinds of firms will be able to
attain gain maximum benefits from IPRP through motivating its workforce in adequate manner.
Advantages of Performance Related Pay
 It provides the workforce and managers with the incentive which can lead to increment in
business efficiency and organisational productivity.
 This instils a sense of loyalty within the employees towards the company and enables them
to enhance their business performance.
 This can lead to improvement in morale of workers as they feel their hard work is valued.
Disadvantages of Performance Related Pay
 It is often difficult to implement PRP system as the output in many sectors can not be
measured in terms of numbers.
 This encourages risk taking practice which results in increment in probability of failure.
 PRP may lead to distortion of efforts into areas that enhance profits in the short run.
b) Explain the reasons why Individual Performance Related Pay (IPRP) tends to motivate
employees in some situations but not in others
Individual performance related pay contributes in an effective manner in order to
influence the work force in some cases. Eventually, an effective payment system is linked with
motivation of employees because it helps to them in order to complete goals and objectives.
There are a vital range of theories for analysing role of better pay scale in the context of
enhancing area of market coverage in limited time period. Expectancy theory states about role of
pay for performance which can contribute in improving skills and capabilities of employees
(Zehir, Karaboğa and Başar, 2020). It is essential for management department of companies to
offer monetary and non monetary benefits to employees so that it can help in motivating them. If
workforce of companies will be motivated then this will be easier to business entities to gain
higher profits as well as to cover huge market area.
4

In addition, goal setting theory is also aligned with elements of expectancy theory and it
states about relationship between pay system & performance of employees. This theory includes
all those factors which play a key role in the context of accomplishing goals and objectives. The
goal setting theory analyse about integration of effective payment system and employees skills,
efficiency. In the businesses, managers try to find out ways which can contribute in order to
enhance their workforce performance. Basically, if employees performance will be more
effective and efficient then it may lead to higher progress of business entities. This can be done
more effectively if companies provide better monetary benefits to their employees (Turner,
2020).
In addition to this, it has been analysed that IPRP simply helps business association in
boosting up the relationship in between performance as well as rewards. The main example of
this IPRP can be seen in the form of retaining top performers of the company by simply
providing them higher rewards (e Cunha and et. al., 2020). This directly contributes in boosting
up the performance of that the particular employee in rapid manner as they are getting monetary
benefits from the company also the respected authority of the same business association are also
valuing their work in the rightful manner. It can be said that the overall example depicts that
IPRP is one of effective method that is supportive in satisfying employees and boosting up their
performance by providing them adequate level of monetary benefits according to their level of
performance. On the other hand, it has been analysed that there are some other types of
employees’ at workplace for whom IPRP is not at all suitable. The main reasons behind this
there are range of employees at workplace whose priorities and preferences are different from the
companies. These people might believes that every employee is not able to execute the same
work with the same capacity each and every time thus these people thinks that there must be
fixed income that must be provided to employees. Along with this, it can be said that if
expectation of the company is different that means no involvement of monetary value into it then
they might not get motivated with the implementation of IPRP at workplace.
In relation to this, it is said that there are various evidences that are present in today's
business environment that also majorly indicates number of individual pay scales that may not be
utilised by business organisations because they do not get settled in relation to the same. It is
being critically analysed that, there are distinctive staff members consists of positive work
environment along with the stress free work (Stokes and et. al., 2019). There are some of the
5

other factors such as family and friends for employees plays a vital role and monitory value is
not at most the prior. Considering number of researches done by many individuals, it is said that
just when the business companies looks forward to gain competitive advantages or focuses on
earn profit, then only organisations develops these types of schemes for the available workforce.
Due to this, there is less job satisfaction and lower the employees’ commitment and there will be
lower trust in the management. Away with this, considering the Individual Performance Related
Pay (IPRP), a company could effectively go through number of elements as well that may not
lead them to feel motivated among different situations and these are Job satisfaction, where this
type of compensation is said to be one of the top most contributor that leads to an individual to
feel motivated (Bogićević-Milikić, 2019). But, due to some reasons like disrupted environment
and more could effectively be considered as something that may lead an individual to feel less
motivated while performing number of tasks at workplace. Here, it is much needed for
employers to most of the time engage the staff members to provide them with number of
feedbacks along with surveys that would lead companies to make determinations in regards to all
the standards to meet that are related to satisfaction (Kaufman and et. al., 2020).
Another factor, that came in front i.e. Motivation, which effectively plays an important
role for a business organisation to perform in an effective and in efficient manner. This is where,
considering the compensation policy developed by organisation may lead individuals to feel less
motivated because they perform hard work and may also lead them to go through number of
problems as well (Kaufman and et. al., 2019).
Apart from this, it has also been analysed that there are few common issues that could
place influence over the implementation of IPRP (Rankin and Sherer, 2019). These issues are
mainly related to the type of businesses, cultural and regional values of the nation in which they
are dealing etc. The main issue among them is highly associated with the individual differences
which simply means that no matter what other factors says about the IPRP and its relations with
the company’s business performance and success but individual differences are determined as
the most important one among them all. Here, it can be said that if individuals who are working
for the company are themselves not interested in attaining more monetary benefits according to
their performance or the quality of work they are giving to the company then any sort of
initiative taken by the company towards the IPRP would be of no use.
6

Increasing competition at marketplace simply seen as another influential factor that
creates requirement of implementing IPRP within the company. This is so because, if company
do not pays required level of monetary benefits to its employees then it would be highly difficult
for them to motivate employees to enhance their level of productivity so that they can attain their
respective goals and objectives and gain competitive edge in quicker manner. In addition to this,
it has also been seen that if business association have satisfied and loyal employees then they are
able to sustain longer at the same marketplace. Therefore, these are said to be some of the crucial
elements that need proper attention so that an organisation could effectively use the Individual
Performance Related Pay (IPRP) and it would also lead firm to deal with number of situations as
well.
CONCLUSION
Considering the above information, it is specifically being summarised that strategic
HRM effectively plays a vital role where individual performance related pay helps the HR
Department of companies to motivate staff considering the performance level and deals with
number of issues as well, that employees faces while working at workplace. Including this, it is
also summarised that goal setting theory mainly aid employers to improve the performance
related pay scale through developing better insights for staff members. Including this, it is also
said that in order to pull out fruitful outcomes this type of pay scale program would lead the
company to attain number of goals and objectives in specified time frame.
7

REFERENCES
Books and Journals
Kaufman, B.E., Barry, M., Wilkinson, A. and Gomez, R., 2020. Alternative balanced scorecards
built from paradigm models in strategic HRM and employment/industrial relations and
used to measure the state of employment relations and HR system performance across US
workplaces. Human Resource Management Journal.
Zehir, C., Karaboğa, T. and Başar, D., 2020. The Transformation of Human Resource
Management and Its Impact on Overall Business Performance: Big Data Analytics and
AI Technologies in Strategic HRM. In Digital Business Strategies in Blockchain
Ecosystems (pp. 265-279). Springer, Cham.
Turner, P., 2020. Engagement Driven Strategic HRM. In Employee Engagement in
Contemporary Organizations (pp. 223-256). Palgrave Macmillan, Cham.
e Cunha, M.P., Gomes, E., Mellahi, K., Miner, A.S. and Rego, A., 2020. Strategic agility through
improvisational capabilities: implications for a paradox-sensitive HRM. Human Resource
Management Review, 30(1), p.100695.
Stokes, P., Smith, S., Wall, T., Moore, N., Rowland, C., Ward, T. and Cronshaw, S., 2019.
Resilience and the (micro-) dynamics of organizational ambidexterity: implications for
strategic HRM. The International Journal of Human Resource Management, 30(8),
pp.1287-1322.
Bogićević-Milikić, B., 2019. Promoting gender-responsive talent management in police
organizations through strategic HRM measuring. Strategic Management, 24(1), pp.19-29.
Collou, L., Bruinsma, G. and van Riemsdijk, M., 2019, October. HRM Driven Organizational
Change: Developing a Game Simulation Model for Strategic HRM. In European
Conference on Games Based Learning (pp. 160-XIV). Academic Conferences
International Limited.
Kaufman, B.E., Barry, M., Wilkinson, A. and Gomez, R., 2020. Alternative balanced scorecards
built from paradigm models in strategic HRM and employment/industrial relations and
used to measure the state of employment relations and HR system performance across US
workplaces. Human Resource Management Journal.
Kaufman, B.E., Wilkinson, A., Barry, M. and Gomez, R., 2019. Measuring the Quality of
Workplace Relations and Organizational Performance with Alternative Balanced
Scorecards from Strategic HRM and Employment-Industrial Relations. Andrew Young
School of Policy Studies Research Paper Series, (19-08).
Rankin, S. and Sherer, P.D., 2019, July. Is Strategic HRM Losing Its Way-and Possibly Its
Identity? A Social Network Perspective. In Academy of Management Proceedings (Vol.
2019, No. 1, p. 15157). Briarcliff Manor, NY 10510: Academy of Management.
8