Management Principles

CHAPTER 1

INTRODUCTION

        Many different compensation practices are lumped under the name pay-for-performance. We used to think of pay as primarily an entitlement. If employees went to work and did well enough to avoid being fired, you were entitled to the same size check as everyone else doing the same job as you. Pay-for-performance plans signal a movement away from entitlement, sometimes a very slow movement toward pay that varies with some measure of individual or organizational performance.

        Despite the omission, merit pay is still pay-for-performance used for more than three quarters of all employees. Companies uses performance-related pay scheme to encourage employees to work harder. The better employees or teams, carry out works, the more the company or employer pays you. It is believed that it is a way of rewarding employees for higher performance. Employers introduce this type of scheme to keep current staff and sometimes because of wanting to compete to a new talent, and lastly they may be seeking a fairer way of distributing wages. In order for performance related schemes to work they should be based on clear, measurable targets that are agreed by both the employer and employees.

        Performance-related pay is a method of remuneration that links pay progression to an assessment of individual performance, usually measured against pre-agreed objectives. Pay increases awarded through performance-related pay as defined here are normally consolidated into basic pay although sometimes they involve the payment of non-consolidated cash lump sums.

        It has grown in prominence since the 1980’s as employers have increasingly sought effective ways of driving high performance levels by linking employee reward to business objectives. However, it has proved in some circumstances a rather crude instrument and the 1990s and beyond witnessed a number of challenges to the theory. As some of the earlier schemes failed to deliver the promised results, some employers brought in new or revised performance-related pay schemes or moved to new approaches altogether while others have developed hybrid schemes.

        In the current debate on the issue of merit pay for teachers and government employees, one frequently hears the lament: “If only we could measure results what the business does. Then we could pay for performance instead of mere seniority!” This statement assumes that business actually has a rational system of paying according to performance. The truth is business merely acts and talks as if it does.

        Formal merit-pay programs are a relatively recent phenomenon. In the past it was common for a firm to pay a fixed wage or salary based primarily on market supply-and-demand factors. Top management made all the major decisions and took the risks. White-collar employees were few in number and, although better educated than their blue-collar counterparts, had scarcely any decision-making authority and were readily replaceable. Salary increases were in frequent and highly discretionary; however, they were not arbitrary. Most businesses were small, and top managers knew who was doing a god job and who wasn’t. If the firm was making money, there might be a bonus or a pay raise, but for every employee the boss made an informed judgement. As businesses grew and became more complicated, it became impossible for top management to make sound decisions about the worth of subordinates several rungs lower. Yet, realizing that such decisions had to be made, various objective systems designed to decide performance and pay questions evolved.

        With the increase in professional management over the past 30 years and its emphasis on good employee relations, merit-pay programs have spread to the point where most firms would be embarrassed if their policy manuals, business plans, and annual reports did not include statements stressing the link between determined by a merit-pay system, according to a study of the Bureau of National Affairs (BNA). Unfortunately, broad-scale merit-pay programs simply do not work.

        Money becomes important insofar as it can satisfy recognized needs. If different needs are, in fact, prepotent across individuals, this information could be used to design a pay-for-performance system.

Given that money can satisfy at least a subset of basic needs, the question now becomes should salary increases be based on level of performance? Substantial evidence exist that management and workers alike believe that pay should be tied to performance. Numerous studies indicate that tying pay to performance has a positive impact on employee performance. A common type of study is to introduce an incentive system and observe whether workers, whose pay is now directly dependent on level of output, increase their level of performance. Several studies indicate that introduction of an incentive system results in higher performance than occurs for workers receiving hourly pay.

Background of the Study

        The researcher is a Master in Business Administration student of University of South Eastern Philippines  Since he is a future Manager or owner of a company, the researcher decided to come up with this study in order to identify or know the best way to motivate the employees and what would make them perform excellent that would satisfy them in return.

It has been said in several theories from psychology that the linking of pay to performance should lead to increased performance. In such order, payment and performance when linked with motivation will increased the performance of employees. The performance of the organization as a whole.

        Today’s competency in the business industry is crucial to survive. One’s organization must know how to value every great performance given by the employees. However, some of the employees don’t give equal or higher performance than other employees in the organization. That is the reason why we came up with pay-related performance which will show that there is a clear difference between ordinary and extra ordinary performance. It will also show if it motivates employees in performing better. In such way, we will know what the performance of the organization and if it is ready and will survive the competency.

        In this study, I choose VXI Global Solutions to be the respondent of our study. VXI Global Solution is a globals company and one of the biggest BPO company in the city of Davao, a worldwide leader in multichannel customer experience. The company is specialized in customer service, technical support, call center, debt collection and social media.

        VXI Global Solution is the only one capable among the companies I’ve gone through in providing me the demand of the study being conducted. They agreed on letting me take our survey in their company.  Another reason is that, VXI Global Solution has a multiple number of employees which I am looking for to achieve the accuracy of the result of the research to be conducted. Providing the stated reason, I come up to the decision of having Teleperformance as the respondents of our study.