Managing Human Resources: Performance Related Pay at TESCO Report

This report provides a detailed analysis of performance-related pay (PRP) as a human resource management strategy, focusing on its application within TESCO. The report begins with an introduction to the concept of PRP, emphasizing its role in aligning employee efforts with organizational goals. The main body of the report offers an overview of PRP, outlining its mechanics, including the use of financial incentives based on performance evaluations. It then explores the advantages of PRP, such as clear goal definition, improved performance management, and enhanced motivation. Furthermore, the report examines how PRP fulfills employee motivational needs, especially financial incentives and job security. It also discusses the disadvantages of PRP, including potential impacts on teamwork and challenges in performance measurement. Budgeting considerations for PRP implementation are also discussed, along with the influence of internal and external factors such as economic conditions and wage levels. The report includes examples of successful PRP implementations in other organizations, such as ARGOS, John Lewis Partnership, and NHS, and concludes by summarizing the reasons for choosing PRP, highlighting its ability to motivate employees, promote competition, and its applicability across various organizational types. References to academic sources support the analysis.

Managing Human
Resources

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
REFERENCES................................................................................................................................4

INTRODUCTION
Human resource is the lifeblood for an organisation by which the goals and objectives are
achieved. There are plans and policies for managing the people working in the organisation for
making them give their efforts (Cascio, 2015). Furthermore, programs and development sessions
are conducted in order to encourage personnel to achieve the goals. In this report, TESCO has
been chosen which has its headquarters in Hertfordshire, United Kingdom. Performance related
pay has been chosen in this report. Furthermore, this assignment covers overview of chosen
reward system, its advantages offered to organisation, fulfilment of motivational needs with this
reward system. In addition to this, budget for such system, impact of internal and external factors
for implementation, examples of successful implementation of this reward system and reason for
opting the same.
MAIN BODY Overview of performance related pay- It is a reward system in which financial or
monetary benefits are given to employees on the basis of their performance. There is a
standard or mark which reflects the expectations of the company from its workforce. If an
individual perform the required standard and/or above that, then extra payment in the
form of bonus or incentives are paid (Shields, J., and et. al., 2015). It involves review of
performance on regular basis followed by categorisation of them into groups which helps
the company to determine the exact reward to be given to them. There is no major
variations in this reward system and considers performance as the sole element to judge
the capabilities of a person.
 Advantages- It offers numerous advantages which make performance related pay a
suitable reward system. Some of these are as follows:
1. Tasks and goals are defined clearly to each and every individuals on which they have
absolute focus.
2. It is an effective way of managing poor performance of employees.
3. It encourages the staff to give their best performance.
4. Targets are achieved without any delay which leads to higher profit.5. It enhances the focus of workforce on the goals and objectives.
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 Motivational needs of employees- Motivation is an important element to keep employees
working in the organisation with all their efforts. It helps in increasing job satisfaction
which leads to lower employee turnover. The main purpose for which a candidate takes
up the job is to earn money. Therefore, it can be said salary is what motivates employees
to a great extent. When staff is paid additional they work efficiently. Also, it helps in
creating an environment which promotes security about the job among the candidates. It
is another motivational needs. Apart from this, people look for an organisation which
judge the capabilities on the basis of their performance. It is useful in developing
impartial atmosphere for existing employees which attract new potential applicants to
apply (Noe, R.A., and et. al., 2017).
 Disadvantages or risks of performance related pay- This reward system has
disadvantages which should be considered by TESCO before its implementation. These
are elaborated underneath:
1. The managers greatly rely on the quality which can add more pressure to employees.
2. This reward system make the staff lose their contribution or interest in teamwork because
each of them compete against each other to get higher pay.
3. There is difficulty in measuring the performance if the the objectives are not completely
fulfilled because the amount of incentives cannot be determined.4. If the employee perceives the incentive amount low then it can reduce the motivation
among them.
 Budgeting consideration- Every reward system require budget in order to provide the
incentives or bonus within the time. It is an expense for the company for which the
finance team should invest time in preparing budget. In respect of performance related
pay, there is a major requirement of budgeting. Some of the considerations that should be
take into account which are as follows:
1. Annual increase in wage or salary should be included for preparing the budget.
2. The tax amount to be given on the amount to be provided as an incentive.3. Type of budget is also important to choose. There are two different budgets viz. Fixed
and flexible which have their individual characteristics. It should be appropriate
according to the requirement of the organisation.
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 Impact of internal or external factors on implementing performance related pay- There
are number of factors which may influence the implementation. Organisations should
have the knowledge about such factors in order to reduce the negative impact. The same
are as follows:
1. Economic conditions: There are crisis in the economy which should be taken into
account for taking into account the operations efficiency.
2. Current wage level: It is directly related to the wage level. It is a proportionate of the
complete salary that is paid to every individual (Trevor, Reilly and Gerhart, 2012).
3. Cost of living: It has direct nexus with per capital income of the candidate working in the
organisation. It is also a major element which should be taken into account. Examples of other organisations which have successfully implemented it- There are
many companies which have applied performance review system within their
organisations. Some of these are ARGOS, John Lewis Partnership, NHS etc. These
belong to different categories of organisations such as public, NPO, private etc. This
means that every entity irrespective of its type can implement this system.
 Summary- This report has shown the brief of the above mentioned reward system along
with advantages and disadvantage of the same. These are important for making the
decision to choose this. Some of the reasons for this system are as follows:
1. Money is a great way to motivate employees and this system involve financial
benefits.
2. It helps in promoting competition among the working people due to which every one
work with their best efforts.
3. It is useful for all the entities irrespective of the size, nature, turnover etc.
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REFERENCES
Books & Journals:
Cascio, W.F., 2015. Managing human resources. McGraw-Hill.
Noe, R.A., and et. al., 2017. Human resource management: Gaining a competitive advantage.
New York, NY: McGraw-Hill Education.
Shields, J., and et. al., 2015. Managing employee performance & reward: Concepts, practices,
strategies. Cambridge University Press.
Trevor, C.O., Reilly, G. and Gerhart, B., 2012. Reconsidering pay dispersion's effect on the
performance of interdependent work: Reconciling sorting and pay inequality. Academy
of Management Journal. 55(3). pp.585-610.
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