Assignment 1: Review of Performance-Based Pay as a Motivational Tool for Achieving Organizational Performance: An Exploratory Case Study

Study Topic: Performance based Pay as a Motivational Tool for Achieving Organizational Performance

Published: December 1, 2011

Link:    http://www.ccsenet.org/journal/index.php/ijbm/article/view/10906

Abstract:

The case study on the said topic was taken on manufacturing company in Ghana. Total 150 responded taken the part in this survey including managerial and non-managerial staff.

The main objective of the study was to evaluate the effect of performance related pay on the motivation of employee and later on accomplishment of organizational goals. The interpretation of the results of the study should not be over generalized due to limitation of the study as it could not cover all manufacturing companies within the target population due to financial issues. 

Introduction:

There were list of theories taken in introduction from which i've mentioned few that whole describe what writer wants to focus on:

• In Africa (Ghana inclusive) in particular, employees have for a long time been awarded financially on the basis of their entry qualifications and the perceived value of their job analysis and evaluation. For example, Fosh (1990), in her studies on attitudes to income inequalities in East Africa, found that differences in paper qualifications were the most cited reason for pay differentials. In addition, the design and operation of payment systems have been based upon custom and practice, as well as collective bargaining and characteristics of the labour market.

• In recent years, there has been a discernable trend, particularly in the private sector, towards the linkage of rewards to employee performance in an attempt to enhance the achievement of organisational objectives (Mullins, 2005).

• Total compensation may be divided into two major groups: intrinsic rewards and extrinsic rewards. Indirect rewards comprise protection programmes, pay for time not worked, like leave, absence due to illness, and employee services and perquisites. Direct rewards comprise the basic wage, including cost of living adjustments and performance-based pay. Paying for performance is the process of providing a financial reward to an individual, which is linked directly to individual, group and organisational performance. As Armstrong observes, there is a trend towards PRP in manufacturing firms. Managers and other professionals around the world have expressed concern over the impact of fixed incremental systems on organisational goals. This is especially so where increments are awarded to employees as a matter of prerogative and unrelated to the assessment of performance. In many instances, employees are granted automatic promotion, with its financial implications, as it goes more with time bar or years of service. Incremental true-based systems might be of some value in encouraging a high degree of commitment, which may result in a high level of employee retention. But they are of little value in the current competitive business environment, which requires the use of appropriate performance-based strategies to achieve competitive advantage  (Armstrong, 2005).

• There have been numerous research studies on PRP in the human resource management literature, but very little research on the subject has included samples from non-Western societies (Baruch, Wheeler and Zhao, 2004).

• It is against this backdrop that this study seeks to focus on a sector of the Ghanaian situation. The main objective of the study is to assess the impact of PRP on the motivation of employees and, subsequently, on the achievement of organisational goals. The study seeks to evaluate the performance-based pay (PBP) system introduced in a manufacturing company in Ghana. It is expected that the results of this study will contribute to existing knowledge on the impact of PBP. It is also expected that the results will stimulate further interest in the subject which will serve as a basis for further research. Furthermore, the information generated would help policy makers to consider the feasibility of PBP as a yardstick in the public and private sector.

Methodology:

The case study was adopted in line with Neuman’s (2007) suggestion that it should be used to investigate “how” and “why” questions so the Questionnaire was the main data collection instrument. The respondents were from the various departments in the company. The data was edited and coded using SPSS. Descriptive statistics were used to analyse. The Pearson Correlation was used to determine whether the relationship exist between the implementation of PBP programs and Organizational performance. The t-test of independence was used to determine the strength of the relationship between two variables. 

Results:

Hypothesis:

A two-way ANOVA table was used for hypothesis.

Hypothesis 1:

H0: PBP is not positively correlated with higher employee and organisational performance.

H1: PBP is positively correlated with higher employee and organisational performance.

Hypothesis 2

Ho: There is no significant difference in the performance of the company before than after the introduction of PBP

H1: There is a significant difference in the performance of the company before than after the introduction of PBP

Conclusion:

There was a correlation between Abstract and Conclusion. 

The result of the study revealed that the effect of performance based pay on employee performance is minimal and the motivational effect of merit pay is often blunted by biased performance appraisal.