Strategy HRM: Evaluating Individual Performance Related Pay (IPRP)

This essay critically analyzes the extent to which individual performance-related pay (IPRP) stimulates higher employee performance. It explores circumstances where IPRP motivates employees, such as observing equity and efficiency in reward distribution, visible financial rewards, and reversible compensation decisions. Conversely, it examines situations where IPRP fails to motivate, including small salary increase pools, discrimination in reward systems, adverse economic conditions leading to vast pay discrepancies, and inter-related responsibilities among workers. The essay concludes that while IPRP can be effective under certain conditions, factors like fairness, transparency, and the overall work environment significantly influence its success in boosting employee motivation and performance. Desklib provides access to similar essays and solved assignments for students.

HRM3007 STRATEGY HRM

CONTENTS
INTRODUCTION......................................................................................................................1
CRITICALLY ANALYSING THE DEGREE TO WHICH INDIVIDUAL PERFORMANCE
RELATED PAY STIMULATE EMPLOYEE’S HIGHER PERFORMANCE........................1
CIRCUMSTANCES IN WHICH IPRP TENDS TO MOTIVATE EMPLOYEE.....................3
Observation of equity and efficiency.....................................................................................3
Visible financial rewards........................................................................................................4
Reversible compensation decisions........................................................................................4
CIRCUMSTANCES IN WHICH IPRP DOES NOT TENDS TO MOTIVATE EMPLOYEE 4
Small salary increase pool......................................................................................................4
Discrimination in the rewards system based on the staff level..............................................4
Adverse economic situation and pay discrepancies appear vast............................................5
Inter-related responsibilities of numerous workers................................................................5
CONCLUSION..........................................................................................................................5
REFERENCES...........................................................................................................................7

INTRODUCTION
Strategic human resource management refer to key procedure, which encompasses
varied tactics, and effective approaches that make a manager capable to reach desire
outcomes. This process provides a strategic concept or framework that relate to people
management and development of appropriate actions that aid to achieve long term venture
aims. Strategic HRM play significant role in the context of a new internationalize company
growth and success, in term of informing other human resource tactics, and conducting
practices accordingly. The current assignment will explain level to which staff performance
related to pay will stimulate greater levels of performance from candidates. It will also define
in what circumstances IPRP seek to motivate employees, why and in what situations it tends
not to work better and also why.
CRITICALLY ANALYSING THE DEGREE TO WHICH INDIVIDUAL
PERFORMANCE RELATED PAY STIMULATE EMPLOYEE’S
HIGHER PERFORMANCE
In the world of business, there are different types of approaches and techniques has
been adopted by the companies related to employee performance management (Sitopu,
Sitinjak and Marpaung, 2021). Each technique and approach play vital role to make a
company productive and successful in specific market or sector. Individual performance
related pay (IPRP) is the best example of strategic HRM approach that may support to
increase employees performance level and also support to enhance organizational
productivity, even better than last few years or months. It may put positive impact on staff’s
performance in term of increasing candidate’s effectiveness or efficiency, even better than
last few days that may put similar impact on a new internationalize organization. It may
affect in higher level, which play significant role in regard to employees as well as
organizational success (Lutfullaeva, 2021). It can be said that individual performance related
pay are require associating with necessarily more productive candidates. In the recent time,
this scheme is becoming more widespread as most of the organizations are taking approach to
utilize that and develop the same in appropriate manner.
Performance related pay may support candidates to grow in rapid and productive way,
which enable them to reach expect outcomes, without facing or dealing with major
challenges. It may higher extent of performance from employees in term of boosting their
confidence level, better than before (Celse, 2021). It may enable them to feel motivated and
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engaged in decision making process, through which they perform in effective and appropriate
manner. The current concept may cater individual candidate several advantages such as
financial rewards that are connected to an assessment of specific work or task performance
such as bonuses for achieving aims, sales commission, piece work payments, etc. It may
allow candidates to concentrate on what they need to do, for purpose of improving
performance and work when it is directly associated to pay (Yang and et.al., 2021).
It may allow manager or management to take pleasure of retaining and increasing
workforce productivity as well as performance, in form of increasing profitability and
generating more revenue than ever. While, individual performance related pay put negative
impact on performance of employees in term of decreasing their confidence level, when this
scheme is not applied in systematic and ethical manner. Any form of discriminative practice
from management side may affect negatively. It can be said that jobs with PRP may gain the
attention of more skilled people, who may have high level of capabilities that they are able to
utilize without making any mistake to achieve set aims, whether they are short, medium or
long term (How effective is performance-related pay, 2022). Performance related pay bring a
lot of advantages for a new internationalize organization and their stakeholders, such as it
may contribute to build positive brand image in the market against rivals, who are operating
and managing businesses functions in effective manner with skilled workforce.
Neverthless, moving further it is also important to discuss the extent to which it will
not motivate the workers. There are chances that individual performance related pay might
work efficiently however for some time only and to some degree. In the beginning phases,
workers are more attracted to perform effectively for accomplishing pre-determined
objectives for making improvement in their pay. However, the instance they realize that their
performance level and applied skills is totally governed by the management then their
motivation is discouraged. This pertains to the fact that employees or any individual does not
like to be governed by others and therefore, pay which are related to performance will be
successful only when it makes sure provisional acquiescence (Boxall and Purcell, 2018). In
addition to this, providing rewards to workers who by this time motivated intrinsically also
disable their intrinsic motivation. Workers are mainly concerned in their work and makes use
of their abilities to perform the same. Therefore, identifying and comprising these abilities in
the decision making process of the firm will make them motivated. Besides, performance
related pay also helps in reminding the employees about the gaps in the firm. They jog up
their memory that the management earns huge amount of money in comparison to them and
this, demotivates them.
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Other than this, the individual performance related pay might also not work and
impact the motivation level of the workers in case it is not headed to suitable individual. Such
type of system helps in motivating the junior employees and might not motivate the
managers. Many studies have evidenced that such type of performance related pay
framework function effectively under jobs wherein the accountabilities can be measured
reliably. However, differences in efficacy should not be exaggerated. The findings from the
above analysis states that individual performance related pay approaches encourage the
employees of the higher level management more. Nonetheless, workers at the end of the day
takes into account the unreasonableness of the reward framework (Bloom and Van Reenen,
2017). In conclusion, regardless of the system of management and level of work, enhancing
the dimension of job performance and other suitable actions which are not associated with
pay incentives might results in enhanced performance by augmenting the establishment of
objectives. The advantages being ensured from the individual performance related pay might
not appeared to be obtained from the pay itself however it might be because of the
development in standards. Standards of performance is being regarded as the most important
advantage being ensures from performance based pay as depicted by different studies. In
several cases, bringing together pay and performance measurement might results into
opposing alteration in the employee’s performance.
CIRCUMSTANCES IN WHICH IPRP TENDS TO MOTIVATE
EMPLOYEE
There are different circumstances and conditions in which individual performance
related pay motivates the workers in the organization and these are being elaborated in the
subsequent section:
Observation of equity and efficiency
The organization can encourage workers and pursue their efforts in accomplishing the
goals of the company through distribution of financial rewards efficiently as well as equally.
When equity is being augmented by the company, each and every workers sense a feeling of
belongingness and thinks that they are being valued by their managers and consequently, they
strive to attain the pre-determined performance level (Wiesenhofer, 2015). Furthermore, this
condition will also help in eliminating the gap amid the workers which is mostly considered
as the discouragement factor. Thus, it is crucial that the system of reward must be executed as
well as managed effectively considering the requirements of the workers.
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Visible financial rewards
Furthermore, workers will be more encouraged to perform higher work performance
when the financial rewards visible to them. There are numerous organizations who does not
reveal compensation amount to the workers however the firms which reveals the same
possess great potential for encouraging workers by seeking help from individual performance
related pay. If the firm discloses the amount then the workers can actually see the fairness of
the system and gets motivated for carrying out good efforts in fulfilling precise standards
(Gerhart and Rynes, 2017).
Reversible compensation decisions
It is crucial to develop and structure reward system in such a manner that a decision
related to reward can be reversed with a view to make sure that the same employees is not
rewarded in a particular manner separately. In other words, bonuses or incentives being
provided to a particular worker in a specific year can be provided to other worker in the
following year, foundation being the performance. All these alteration will support in
motivating the workers to place added efforts.
CIRCUMSTANCES IN WHICH IPRP DOES NOT TENDS TO
MOTIVATE EMPLOYEE
Different circumstances are present in which individual performance related pay does
not supports in motivating the workers and in turn discourages them to work efficiently and
these are as follows:
Small salary increase pool
Individual performance related pay sometimes discourages the employees to work
efficiently in the situation where the salary increase pool is very small. Such companies
expend more time and efforts in rating as well as ranking the workers which most of the time
results into higher level of expectation by the workers and therefore, finally leads to
dissatisfactions. In this type of condition, performance related pay might work however it
then becomes inadequate. Thus, it can be said that it is important to take into consideration
the size of the reward prior presenting a reward system to them. When workers put in added
efforts however in return gets minimal increase demotivates them (Harrison, Virick and
Williams, 2016).
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Discrimination in the rewards system based on the staff level
Employees does not gets motivated from individual performance related in the
circumstances when the rewards systems being adopted by the firms are discriminatory on
the basis of staff level. Most of the organizations have varied systems for rewards for
managers as well as other employees. Furthermore, it also varies as per their management
level wherein the managers who are seniors are being analysed and rewarded in a different
way from subordinate managers. Nevertheless, in the present year restrictions of eligibility is
incompetent and unfertile.
Adverse economic situation and pay discrepancies appear vast
When the inflation is minimal, the differences in pay is appeared to be smaller as the
workers does not notice the gap in their salaries and thus, there is no as influence. On the
other hand, during the time of high inflation when the differences in pay is appeared to be
huge, employees notices the change in the money value being received by them (Yang and
et.al., 2021). It is relatively very challenging for the managers to generate differences because
of lower budgets on wages and thus, operational management is being replaced for
performance related pay.
Inter-related responsibilities of numerous workers
Moreover, employees does not gets motivated from individual performance related in
the circumstances wherein the responsibilities of different employees are interlinked and tied
together to each other. The major issue in this condition is the incapability of differentiating
particular contribution or efforts being put up by each individual. Even if it is possible to
separate their contribution, it might not be necessary and might also devour more time and
efforts. The main reason behind this is that workers ca not control their results as the things
being attained in relation with the result is majorly relied on their colleagues (Kehoe and
Wright, 2016). Considering this aspect, measurement of performance is regarded as the key
factor for disappointment and this further results into demotivation. Moreover, workers also
observe discrimination in the evaluation as well as appraisal framework. If in case the level of
dissimilarities is on the huge amount of workers it might influence the overall motivational
level of the workers negatively and subsequently, incompetence of the firm.
CONCLUSION
On the basis of above discussion, it has been identified that new internationalize
organization and its management has obtained desire outcomes by considering and following
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strategic suggestion of human resource management. They had retained skilled and
knowledgeable candidates, in the workplace, among which each candidate is capable to
achieve competitive aim and objectives of company. Furthermore, from above analysis, it has
been concluded that individual performance related pay has contributed to retain and gain the
attention of individual candidate, by driving management attention toward strengthening
relation between existing, and new workforce. Organization has taken pleasure of talented
and knowledgeable employees and given them reason to stay with business forever, which is
quite beneficial and essential for both parties.
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REFERENCES
Books and journals
Bloom, N. and Van Reenen, J., 2017. Human resource management and productivity.
Handbook of labour economics, 4, pp.1697-1767.
Boxall, P. and Purcell, J., 2018. Strategy and human resource management. Palgrave
Macmillan.
Celse, J., 2021. Disadvantageous inequalities, effort and money burning: are people willing
to pay to reduce others' income when inequalities are based on individual
performance or based on arbitrary decisions? Economics Bulletin. 41(3), pp.1719-
1726.
Gerhart, B. and Rynes, S.L., 2017. Compensation: Theory, evidence, and strategic
implications. Thousand Oaks, CA: Sage.
Harrison, D. A., Virick, M. and Williams, S., 2016. Working without a net: Time,
performance, and turnover under maximally contingent rewards. Journal of Applied
Psychology, 81, 331–345.
Kehoe, R.R. and Wright, P.M., 2016. The impact of high-performance human resource
practices on employees’ attitudes and behaviours. Journal of Management, 39(2),
pp.366-391.
Lutfullaeva, N., 2021. Critical Evaluation of the Individual Performance Related Pay (IPRP).
SCIENTISTs. p.79.
Sitopu, Y. B., Sitinjak, K. A. and Marpaung, F. K., 2021. The Influence of Motivation, Work
Discipline, and Compensation on Employee Performance. Golden Ratio of Human
Resource Management. 1(2), pp.72-83.
Wiesenhofer, J., 2015. Implementing and establishing useful employee performance
evaluation practices. Arizona.
Yang, F and et.al., 2021. How guanxi HRM practice relates to emotional exhaustion and job
performance: the moderating role of individual pay for performance. The
International Journal of Human Resource Management. 32(11), pp.2493-2518.
Online references
How effective is performance-related pay? 2022. [Online]. Available Through:
<https://www.changeboard.com/article-details/16321/how-effective-is-performance-
related-pay-/#:~:text=The%20available%20evidence%20shows%20that,effort%2C
%20rather%20than%20group%20performance>. [Accessed on 7th February 2022].
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