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Pay for performance

Pay for performance refers to the method of paying employees or employers in the work place in relation to the work they have done. Therefore, “salary or wage increases will be determined on how a person performs in their work (Heneman & Werner, 2004). ” This can be measure according the number of extra hours an employee has engaged in, the sales made in the business or the number of clients that a person has introduced in a business. Pay for performance can be illustrated by how sales employees in a company that manufacturers and sells mobile handsets will be paid.

The company that employs them says that there is a minimum wage, which is not so high that will is guaranteed to them but other than that, there will be 15% commission gained on every handset that is bought. This form of payment has several advantages as well as disadvantages. The advantages include: The sales people will be required to work harder so that they can benefit from the sales they make. They will therefore reward themselves with better pay if more sales are made and this will continually motivate them to do better.

The businesses will also gain in the

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process because they will increase their sales and will therefore have more profits to enjoy. The increase in sales can consequently increase productivity of the business as they will be in a position to supply more. Another advantage is that the sales people will become more skilled. This is because they have to continually develop proper and unique sales strategies so that they can tap into new market.

The sales people will self-discipline themselves by setting goals and objectives for them selves because they know their livelihood depends on the sales they make therefore they will not want to jeopardize their jobs in any way. “This will in return be beneficial to the company they work for because they will not have to hire people to supervise them in the field (Galbraith, Downey & Kates 2002). ” The company will also benefit because the sales people are not restricted to a certain region therefore they can change the geographical locations and hire more sales people to meet their demands.

The disadvantages that come with pay for performance include: the sales people will be demoralized, frustrated and stressed when they do not make any sales. This will mean that they will have earned nothing having sacrificed their precious time and money in formulating work plans, traveling and convincing people. “When they will see that the frustrations are too much, they can quit and this will be a loss to the business as they will not make sells therefore there will be less profits and production will be slow because their products will not be moving (Pierre, J.

(2003). ” Another disadvantage may arise when there is new technology in the business has modified the handsets and making them better but the sales people are not conversant with the new technology or the improvements. This can also make them not sell the product well and this will be a loss to the business. Another disadvantage associated with pay for performance is that the company that the sales people work for can be taken advantage of and exploited so that the company gains.

The company can do this by setting very high targets that will cause the sales people to strain a lot and if they are not conversant with the terms of pay, they will be making sales but not gaining as much as they are supposed to in return. Another disadvantage is that if the sales program is not properly laid out by the marketing managers, it will be an expense to the business as they will be funding a program that they are not sure will yield good returns. Poor planning can also create unequal distribution gains especially when the company decides to set targets which the sales people have to achieve.

“Poor planning can therefore create administrative difficulties within organizations as well as ethical issues that the company will be faced with (Heneman & Werner, 2004). ” The pay for performance strategy does not work for me because it has many disadvantages as well as extra costs that the business can incur in case of mismanagement. It is also not good because I see it as a means of exploiting innocent people so as to fulfill personal or company goals and this is not right.

People need to be paid a standard amount on a regular basis according to the agreed terms so as to eradicate the problems associated with the pay for performance structure. References Galbraith, J. R. , Downey, D. & Kates, A. (2002). Designing dynamic organizations: a hands-on guide for leaders at all levels. AMACOM Div American Mgmt Assn, p. 205 Heneman, L. R. & Werner, J. M. (2004). Merit pay: linking pay to performance in a changing world, 2nd Ed. IAP, p. 6, 117 Pierre, J. (2003). Handbook of Public Administration, SAGE p. 51

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