Pay for Performance Best Practices Essay
Pay for Performance Best Practices
Best practice can be defined as an idea that suggests that there is some sort of technique, method, process, incentive or reward which is considered to be more useful at producing the desired outcome or result for the company than any other technique, method or a reward etc. The performance best practice is mostly done through checklists or rating scales etc. so that the desired outcome can be achieved with fewer problems and complications. (Tech Target, 2008) Compensation When talking about compensation best practice what comes to mind is incentives and gain sharing of the employees.
Compensation can be defined as what the employees of the company receive in exchange for their contribution to the company. When they are managed correctly, it helps the company to achieve its targeted goals and objectives and the company is able to obtain, maintain and retain a productive workforce. Without the right kind of compensation, the current employees of the company are very likely to leave and the company will have a difficult time in replacing and the training the employees for that job.
The outcomes due to pay dissatisfaction can be very harmful to productivity and can disrupt the quality of work life. If worse comes to worst, pay dissatisfaction can reduce the performance of the employees, which in return may lead to strikes which will cause grievances and that will lead to physical or psychological withdrawal ranging from absenteeism and turnover and it would also increase poor mental health of the employees. (DRMR, n. d) But it must be remembered that overpayment can also cause harm to a company and its employees.
The affects of overpayment will decrease the company’s competitiveness and it will lead to anxiety, guilt and discomfort among many employees. The human resource department can contribute to the organization’s strategic objectives through the company’s compensation program. When it us seen that wages and salaries are linked with ‘pay for knowledge’ and ‘pay for skill’ the employees will have an incentive to pursue vocational training. Vocational training can be defined as training for a specific part of a work activity.
For example, Dunkin’ Donuts mostly benefits from having better trained workers, who are more productive. The result of linking compensation to continuous learning is a perpetual learning machine that furthers an organization’s strategy. Compensation is not only a way to align performance with strategy. Human resource planning, recruiting, selecting, placement, development, performance appraisals and career planning are also considered in individual efforts and company strategy.
But unlike the recruiting and developing activities, compensation programs can be quickly modified and linked with new strategies of the company. (Werther & Davis, 1996) Strategic Objectives Strategy can be defined as a set of decisions and actions that are used to formulate and implement strategies that will provide a competitively superior fit between the organization and its environment so as to achieve the stated goals and objectives of the company. Strategy basically shows that where is the organization standing in the market?
Or where does the organization wants to be in the next 5 years? It is with the help of strategy that the executives of the company define an overall direction for the company. The strategy if the company is based on growth, entrenchment and stability. The strategic analysis begins when the executives of the company evaluate the current position of the company with respect to the mission, goals and strategies. The executives scan the company’s internal and external environment and identify the strategic factors that require change.
The internal and the external environment may show a need to redefine the mission or goals or to formulate a new strategy for the company at either corporate, business or functional level of the organization. (Fullmer, 1983) Dunkin’ Donuts specializes in the provision of doughnuts and beverages. Dunkin’ Donuts client and customers are mostly based of average income households. The company has established itself as one of the most formidable forces in the restaurant business. However, this does not undermine the fact that the company still has a lot to learn from other competitors in the industry.
Job Analysis and Evaluation It is a known fact that job analysis collects information about jobs through surveys, observations and discussions among the workers and supervisors, to produce job and positions descriptions. With job analysis information as a part of the department’s HR information system, compensation analysts have the minimum information needed to evaluate the work activities of their employees. Job evaluations are steps and procedures that help to identify the relative worth of jobs or work activities.
There are different kinds of approaches to the evaluation of a job; these approaches consider the responsibility of the employee, skills that are needed for the job, efforts done by the employee and the working conditions related to the job. Without job evaluation the HR department would not be able to create a rational approach to pay. The most common methods for job evaluation that helps with a compensation plan are job ranking, job grading system, factor compensation and the point system. The Point System The methods that I would be suggesting for Dunkin’ Donuts would be the point system. Why?
Because this system evaluates the compensation factors for each job instead of using wages as the factor comparison does, this method uses points and it is more easy to use and it’s not filled with complication plus this method is most commonly used by most companies when they are evaluating their employees. This method is slightly hard to create in the initial stage, but it is more precise than any other method because it is able to handle critical, compensable factors in more detail. This system is based on six steps and theses steps are usually implemented by a job evaluation committee or by an individual HR analyst.
The steps are as follows:- Step 1 is the, determine critical factor stage. The point system uses the factors which are mostly used in the factor comparison method but it mostly adds more detail by breaking down the factors into sub factors for example, responsibility can be broken down into safety for others, equipment and materials, assisting trainees and product or service quality. Step 2 is the, determine the levels of factors stage. In this stage the amount of responsibility or any other factor like skill may vary from job to job. The point system actually creates different kinds of levels which are associated with each other.
This level actually helps the HR analyst to reward different degrees of responsibility, skills and other critical factors. Step 3 is the, allocate points to the sub factor stage where the factors list down to one side. And the levels are placed across the top of the evaluation sheet; the result is a point system matrix. Starting with a level IV, the job evaluation committee subjectively assigns the maximum possible points to each sub factor. For example, if safety (75) is twice as important as assisting trainees (37), it gets twice as many points.