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PERFORMANCE-RELATED PAY
Introduction of performance-related pay in many organizations is difficult, as it
directly conflicts with the structured pay systems. In many organizations, it is
also observed that the violation of principle of seniority-based compensation
leads to the stagnation of many senior level employees, who get demotivated for
stagnation in their pay scales. Such de-motivation lowers their level of
performance and many such employees gradually leave the organization. Steel
Authority of India (SAIL) lost many of their senior level employees when they
launched their voluntary retirement scheme (VRS), for not getting the seniority
protection in pay scales. The same thing happened in case of the State Bank of
India. In both the cases, the private steel plants and the private sector banks got
immensely benefitted for ready-to-use manpower.
PERFORMANCE-RELATED PAY
The term performance-related pay (PRP) encompasses several company wide
schemes, like employee participation and share ownership schemes, etc. and
general linkage with the compensation which the employees get. PRP schemes
are designed and administered based on a view of what the businesses needs
are. It often fails to deliver because it is not aligned closely to business strategy.
Secondly, performance-driven compensation can support constant change and
performance improvement, but they can't deliver these by itself contrary to
popular belief. Third, line managers can muddle the process, unless they get the
help.
Monitoring and Evaluation: This is really important and organizations often lack
in this. It is not enough to just introduce PRP systems; it is also important to
understand how PRP actually benefits the organization. Tracking changes after
introduction of PRP through an effective monitoring and evaluation system can
do this.
Culture: PRP often runs into conflict with the organizational culture.
Organizations, which support diversity and pursue principles of equity, may not