Advanced Diploma in HRM: Performance Related Pay Evaluation

This report delves into the intricacies of performance-related pay (PRP) within the context of human resource management. It begins by highlighting the significance of PRP in modern business, emphasizing its role in motivating employees and improving performance, particularly in competitive markets. The report then provides an organizational overview of JF Renshaw, a British food manufacturer, and identifies its PRP system. The core of the report examines the advantages and disadvantages of PRP, drawing on various academic sources and practical examples. The advantages discussed include goal setting, rewarding top performers, and employee retention. The disadvantages include potential demotivation, reduced pay equity, and impacts on team spirit. Finally, the report identifies a PRP system used by JF Renshaw, detailing its objectives and implementation, including the monetary incentives provided for exceeding production targets. The report also includes responses from company managers and employees to gain increased insights into the effectiveness of the PRP plan.

Running head: MANAGEMENT
Management
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction:...............................................................................................................................3
Organizational Overview:..........................................................................................................4
Advantages of Performance Related Pay:..................................................................................5
Identification of the Performance Related Pay:.........................................................................8
Semi-structured interview And Responses:...............................................................................9
Conclusion:..............................................................................................................................13
References:...............................................................................................................................15

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Introduction:
The implications of the human resource management for the mainstream business entities is
observed to be notably high and that is visible with substantial amount of restructurings
taking place in almost each and every business organizations operating in today’s world of
business. According to the comments of Pandya (2016), the impact of the foreign direct
investment and globalization is visible on the business actions of majority of the mainstream
organizations. With a precise look at the increasing intensity of the business competition as a
result of the globalization, Steger (2017) mentioned that the companies have the necessity to
retain their customers in a professional manner through delivering the desired quality in their
services along with increasing the number of their product offerings. As per the comments of
Kljucnikov et al. (2016), it is important for the modern business entities to make sure that
they are continuously increasing the quality of their services as that will be crucial in
ensuring their success in retaining the customers.
With such an understanding, the dynamics of the modern human resource
management is observed to change in a notable manner and that is prominent with the
inclusion of monetary and non-monetary benefits for their employees in the compensation
packages. The main objective of these sorts of rewards is to motivate the employees for the
desired improvement in their performances both in term of production and quality. The
motivation is expected to play a crucial role in increasing their ability to enhance the quality
of their services. The study is based on one such benefit named as performance related pay.
The study evaluates the advantages and disadvantages of the performance related pay both
from practical and theoretical perspectives. Along with that, the study is focused in
identifying a performance related pay in one of the largest food manufacturer operating in the
British Food industry named as JF Renshaw. The study includes a brief analysis regarding the

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business operations of the company and in addition to this, the study identifies the objectives
and aims of the company in incorporating the selected performance related pay in their
compensation strategy. Other than this, the study includes responses from two managers and
three different employees of the selected company against a framed questionnaire for
gathering increased amount of information on the mentioned pay scheme.
Organizational Overview:
With a precise look at the business actions of the company, it is understandable that
the company works in the British food manufacturing industry for more than 120 years
(Renshawbaking.com 2020). The organization was established in the year 1898
(Renshawbaking.com 2020). The company is seen to have a rich history in baking and cake
decorations. One of the core values of the company is seen to be product innovation. Apart
from being an independent food manufacturer, the company is seen to achieve considerable
amount of success in being an efficient supplier to the general wholesalers, grocery retailers,
bakery and sugarcraft shops. Other than this, the company is seen to have the expertise of
supplying local distributors of approximately 30 countries across the globe
(Renshawbaking.com 2020). The company has the general practice of producing 20000
tonnes of finished products per annum (Renshawbaking.com 2020). All the sugar that the
company uses is seen to be milled inside their mills to ensure that the sugar used for the
development of their products is perfectly in alignment with the product standards and brand
reputation of the company. Some of the bestseller products of the company are Sapphire Blue
Ready to Roll Fondant Icing, Chocolate Flavour Frosting, Original Marzipan White and
Renshaw Extra Marshmallow Flavour Ready to Roll Icing (Renshawbaking.com 2020). The
business market of the company includes three different channels which are the wholesale,
manufacturing and foodservice.

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Advantages of Performance Related Pay:
According to the comments of Buxel, Esenduran and Griffin (2015), majority of the
mainstream organizations face the obligation of increasing their performances in a continuous
manner for maintaining the sustainability of their business activities. With a precise look at
the intensely competitive trade market, it is understandable that the companies have the
necessity to motivate their employees for the continuous improvement in their performances.
In such situation, the introduction of the performance related pay in the compensation
strategies of the company is considered to be of great significance for the modern human
resource managers in motivating their employees.
According to the comments of Perry, Engbers and Jun (2017), the Performance
Related Pay is considered to be of great significance for the companies in rewarding their
individual employees with the financial benefits that are related to the evaluation of their
performances. Considering the advantages of the Performance Related Pay, Liang and Akiba
(2015) claimed that the mentioned form of benefit provides considerable amount of scope to
managers in using a defined framework for setting their goals which becomes crucial for the
companies in enhancing the individual performances and the individual productivity. Apart
from this, Koskinen Sandberg (2017) claimed that the employees will more focus towards the
operations that they are required to do to enhance the quality of their performances in the
aspects of the quality and quantity when the monetary benefits are linked to it. One of the
crucial advantages for the modern business managers with a quality Performance Related Pay
system is that it will provide sufficient scope to the managers in rewarding the best
performers of the companies. Konings et al (2016) mentioned that the introduction of the
Performance Related Pay is a substantial technique of dealing with the poor performance of
the employees as it provides the scope to the managers in influencing their poor performers
for the desired improvement in their performances.

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On the other hand, Hom et al. (2017) mentioned that one of the crucial challenges that
the modern managers are facing in managing their human resources, is the inappropriate
retention of the employees. Hom et al. (2017) further added that majority of the mainstream
organizations such as Amazon or Google, are observed to be largely affected with the
inappropriate retention of their employees which is petty prominent with one of the reports
delivered by International Business Times. According to the comments of Kim et al. (2017),
the incapability of the companies in retaining a talented and experienced workforce, is
considered to affect the sustainability of the companies in delivering the desired quality to
their customers and that is regarded as one of the prime obstacle for the companies in
generating the customer loyalty amongst their customers.
Under such circumstances, the introduction of the Performance Related Pay is
considered to be an unique strategy from the part of the modern mainstream business entities
as that have the capability to reward the talented and efficient employees of the companies
who are exceeding their target of quality and quantity. Hence, the introduction of the
Performance Related Pay acts as a motivating factor for the employees working in the
modern world of trade. As a result, the Performance Related Pay is considered to be crucial
for the companies in managing effective retention of their talented employees. Other than
this, the mentioned Performance Related Pay system is important for the individuals in
ensuring that the employees are rewarded for accomplishing a desired and mutually accepted
work target. According to the opinion of Saqib et al. (2015), the contribution of the general
employees for enhancing the collective ability of the companies in meeting the excessive
demands of the market, get recognized with the tangible rewards provided from the part of
the business organizations.
Other than this, Bajorek and Bevan (2015) mentioned a substantial point with the
claim that the introduction of the Performance Related Pay plays a crucial role in enhancing

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the quality of the work culture inside he workforces. Bajorek and Bevan (2015) further
mentioned that the introduction such a benefit policy will be crucial for the success of the
companies in ensuring that each and every embers of the organizations are feeling an urge to
exceed their performances or overshoot their job targets. The implementation of such a plan
not only enhances the level of competition amongst but also increases the ability of the
companies in achieving the collective target in a lot easier fashion. As a result, the collective
efficiency of the companies goes up in an effective manner.
Considering the disadvantages, it is evident that the introduction of the Performance
Related Pay can be a concern for the companies as it has the capability to demotivate the
employees as some of the employees in certain workforces have the tendency of considering
their target as considerably difficult to achieve. Having said that, Shan, Hwang and Wong
(2017) mentioned that the introduction of Performance Related Pay has considerable number
of demerits as well as the process is considerably reliant on the excellence of the judgement
delivered by the managers of the companies. Murphy (2015) raised an alarming fact with the
claim that the introduction of the Performance Related Pay has the possibility of reducing the
pay equity in the organizational context and at the same time, it has the potential of making a
company responsible for costly equal pay challenges when that particular company is
incapable in handling the implementation of the mentioned policy in an appropriate manner.
One of the important challenges for the business managers with the initiation of the
Performance Related Pay is that it has the capability to affect the team spirit and the co-
operation between the members of a team when the initiation of the mentioned policy is not
handled in a professional manner. Apart from this, Shan, Hwang and Wong (2017)
claimed that the application of the Performance Related Pay has the potential to influence the
employees in such a manner that they will develop a tendency amongst themselves for
expecting an additional pay out each and every year. Considering a climate that is affected by

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low inflation rate, it is understandable that the attractiveness and effectiveness of the rewards
delivered in such situation from the part of the companies can be a major point of
dissatisfaction for the employees operating in today’s world of business.
Identification of the Performance Related Pay:
Being an efficient and renowned company operating in the baking and cake
manufacturing industry of the nation, it becomes important for the company to ensure that
they are able to create a high performing organizational environment inside their workforce.
JF Renshaw has achieved considerable amount of success in creating such an organizational
environment and that is visible with their high performances which earned them two gold
awards to the company in EEF/Aldermore Future Manufacturing Awards in 2015 along with
the Outstanding Export Award (Themanufacturer.com 2020). The company is able to set a
performance based incentive pay for their employees. As the primary target of the company
is to produce 20000 tonnes of finished products, the employees of the company are required
to contribute with an annual target of 5 tonnes of finished products (Renshawbaking.com
2020). As a result, the employees of the company are required to manage the production of
835 pounds of finished goods per month (Renshawbaking.com 2020). With a precise look at
such a target, the human resource and operations managers of the company are able formulate
an attractive performance related pay plan for their employees. The organization follows a
practice of rewarding the additional efforts of their employees through monetary benefits of
200 Pound Sterling per 250 pounds of additional finished goods. The mentioned policy is
applicable for all the 335 number of employees of company (Renshawbaking.com 2020).
The fundamental aim or objective of the company is to develop a productive
organizational environment in the company. Along with that, one of the primary goals of the
company with the introduction of such a performance related pay plan is that the company

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wanted to motivate their employees to increase their manufacturing performances.
Considering the broader perspective, it is evident that the company had the objective of
increasing their manufacturing capability for exporting increased amount of finished goods
(Shields et al. 2015). Considering the human resource perspective, the company is
determined in motivating their employees for the desired enhancement of their performances
and in recognizing their good work through tangible rewards as that will be crucial in
extracting continuous improvement in their performances in the aspect of the quantity and in
retaining the talented employees of the company.
Semi-structured interview And Responses:
Employee 1: John Bell
a. How is good and poor performance measured and/or identified?
Well, the company measures it with the help of framed criteria of operational
activities.
b. Have the causes of good and poor performance been established?
Partially.
c. How is performance rewarded (both positive and negative)?
Well, Positive performance gets rewarded through the performance based pay and on
the other hand, the negative performance invites manager’s sessions and feedbacks.
d. Is the way in which performance is rewarded fair?
To some extent, it can be considered as fair.
e. Are there any inconsistencies in the way performance is rewarded?

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To be honest, inclusion of more parameters would have increased the attractiveness of
the method.
Employee 2: Alex Henderson
a. How is good and poor performance measured and/or identified?
The good performances are considered to be those which meets work target of the
employees and on the other hand, the performances that are incapable in meeting the target,
are categorized as the poor performances.
b. Have the causes of good and poor performance been established?
To be honest, there are handsome number of causes that lead to good and poor
performances such as good wage and incentive plan for the employees along with the usage
of modern technology and innovative machinery for increasing the speed of manufacturing.
Having said that, there are certain factors that lead to the poor performances such as the
inaccurate training and developmental activities or lack of collaboration between the
employees.
c. How is performance rewarded (both positive and negative)?
The company is able to develop a dynamic initiative through the formation of
Performance Related Pay where they recognize additional efforts of their employees against
the tangible rewards.
The feedback is seen to be the widely used tactics from the part of the company for
highlighting the poor performances from the part of their employees. At the same time, the
termination of the contract of their employees is also an important tactic that is practiced by
the managers of the company at extremely adverse cases.
d. Is the way in which performance is rewarded fair?

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Well, I consider the process to be fair as it provides rewards to the ones who deserve.
e. Are there any inconsistencies in the way performance is rewarded?
On practical basis, the system can be improved with addition of increased number of
parameters which are related to the operations of the employees in the organization.
Employee 3: Benjamin Woods
a. How is good and poor performance measured and/or identified?
Yes, the successful achievement of the work target is considered to be the good
performances and the unsuccessful attempt of meeting the work target is recognized as poor
performances.
b. Have the causes of good and poor performance been established?
Causes of good performances:
Incentives.
Well- equipped machinery.
Cause of poor performances:
Inappropriate handling of the skill improvement.
c. How is performance rewarded (both positive and negative)?
Positive performance is rewarded through the Performance Related Pay plan and the
negative performance is leads to repetitive feedback sessions and contract termination.
d. Is the way in which performance is rewarded fair?
Well, I consider that the performance is rewarded in a fair fashion.
e. Are there any inconsistencies in the way performance is rewarded?

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Yes, the plan of rewarding the performances should incorporate multiple numbers of
criteria for enhancing the attractiveness of the same.
Manager 1: Jeff Anderson
a. How is good and poor performance measured and/or identified?
The respective line managers evaluate the performances of the employees and on
successful achievement of the target by the permanent employees, it is regarded as good
performances. Otherwise, it is considered as poor performances.
b. Have the causes of good and poor performance been established?
Yes, I think our incentive and wage plans are important causes of good performances.
The skill development of the employee is a point of concern for us and we are trying to
resolve the same.
c. How is performance rewarded (both positive and negative)?
Positive Performance is rewarded through incentives.
Negative Performance leads to individual sessions with the employees for identifying
the factors that are limiting the performances of the employees.
d. Is the way in which performance is rewarded fair?
To be honest, yes.
e. Are there any inconsistencies in the way performance is rewarded?
We are looking forward to include more parameters for ensuring accuracy and quality
in the performances of our employees.