Due to challenges on both external and internal working environment, organizations are now left with no option but to adopt effective incentive programs for their employees in order to maintain or improve organization’s performance. This is mainly on the basis of employees’ efficiency and effectiveness at work.
Relating payment to performance has been the dream of every employer though it is a very difficult endeavor. It is true that fair pay is a cornerstone of the agreement between every employer and employee during the time of employment. But one common assumption made is that additional payment can directly influence performance of a specific employee. Take an example of employees in admissions office in a university.
Developing ways of motivating and recognizing employees’ contributions to enroll students is not that easy. One way would be to involve employees in decision making process regarding their pay. Because they are aware of attitudes required of them to perform better, this would be an effective tool to empower them.
Various methods can be used in determining incentive pay. In this case, there will be two ways of determining incentive pay in order to attain admissions objectives. Firstly, incentive will be paid based on employees’ performance in term of average time spent with every new student admitted. Time is critical during admission and therefore employees should take the least time possible with each new student admitted.
This will ensure that students do not spend so much time in queues waiting to be served which usually leads to exhaustion and subsequent dissatisfaction. This means that the bigger the number of new students admitted, the higher the incentive and vice versa. Secondly, incentive pay will be determined by each employee’s capacity to communicate university’s values to students during their first day. This is tricky but very important method of determining incentive pay.
Paying employees for performance using this method is difficult because it is hard to measure specific performance outcomes. The first method will be tailored towards individuals where each employee will be given incentive based on the number of new students admitted. However, in the second method, employees will be assigned to groups where they will be required to come up with the ways of communicating the core values of the institution during the time of admission.
Creating an effective incentive pay program will involve a number of key steps. To start with, it is important to state again that an incentive pay is a reward to encourage employees to behave in a certain way. Then, questions should be asked about who must be a part of the program, what the objectives are, what the types of incentives are needed, whether any form of training is required to participants to understand the program better , and how and when the program should be implemented?
The participants are employees in the admissions and the objective is to meet admission goals. Incentive will be given in a form of money and reward at the end of academic period and all employees will be trained on this in order to understand the program. It is important to remember that this program is needed so as to recognize employees’ contribution in admission of new students. They will be motivated by considering how good they perform in terms of quantity and quality of work done.
Reduced time during admission, new students’ satisfaction, and employees’ motivation are some of the expected benefits of the program. It is rational to state that the success of this program will be determined by extensive involvement of the employees to develop it to a greater extent.
Employees’ perspective will be considered with regard to what their interest is and what is likely to motivate them (pay, rewards, time-off). The program should be simple to understand and employees should be able to simply figure out what they have earned without much difficulty. Finally, the program will be communicated to the entire organization through a well-developed communication plan.
The concept of a balanced scorecard is simple and can be executed in many different ways. It was designed and formalized in early 90’s with core objective of using balance parameters to measure the status of a business (Kaplan, 2008). It goes beyond looking at financial metrics to include other parameters in a balanced equation to evaluate how a business or an organization is doing. The original scorecard addressed four main areas:
- Financial: how financially successful is the business?
- Customer perspective: how can you win customer loyalty and retain it?
- Internal business environment: what is your success in executing core objectives of the company?
- Innovation perspective: what elements contribute to learning, innovation and improvement?
Below is a balanced scorecard tailored to emphasize on shareholder value, employee value and customer value for the university. Three different measures are used as a perspective for each of the three values.
Regarding the shareholder’s value the key objective of the university would be ensuring that shareholder value is maximized over a long period of time. Share value is determined through forecasting free cash flow of the institution.
Creating incentive package for the employee in the admission office of the university is not an easy task. It tags along with major difficulties. Before looking at the difficulties, it is important to illustrate reasons for giving incentive pay in order to face the challenges facing us head-on. Incentives are given to align pay to performance, to allow good performance to earn more and motivate poor performers.
Incentive program can be a tool of communicating clearly various measures of success and to ensure that everyone in the institution understands them. There are two main challenges in designing the incentive pay in our scenario. To start with, it is very hard to measure employees’ output using the parameters stated. For instance, it will be challenging to quantify how it is better to ensure that each employee is handling students and communicating the core values of the university during admission.
Although a questionnaire will be provided to every student, rating using this method may not give accurate measure of employee performance. Secondly, employee may just do exactly what they are measured on. It is critical to remember that each employee has a baseline pay and incentives are paid when an employee performs above expectations. When parameters are well understood by everyone, they are likely to just meet what is required to earn incentive pay. This will hinder them from going a mile ahead to perform exceptionally.
Incentive pay plan is made up of many different elements though cash reward is the one predominantly used by virtually every organization, especially in sales and marketing (Vinogradov & Shadrina, 2013). There are other types of incentive that can inspire employees to go beyond expected call of duty. Let us focus on three key incentives that can be used to motivate employees in the admission office:
- Bonus pay: employees will earn bonus after analyzing how many students each one has admitted. Incentive will be based on a capacity to exceed a certain average.
- Vacation incentive: unscheduled time off duty for employees to relieve them off stress can be very motivating.
- Prizes: these can be offered to employees whose rates are highest in all parameters.
Ethical issues
Giving incentives can raise a red flag when they take place to motivate employees at work place. Mostly, incentives are reached at when a certain change is needed or to steer choices towards a required direction. Extensive use of incentive pay, as it is today, has raised very little or no ethical concerns hither to. This happens despite the fact that incentives can be manipulate employees to take a certain course of action and leave another.
In this case, an employer can use incentives to influence or entice an employee to take one option and not a different ‘undesired’ choice. At the end of the day, both parties are going to gain and this is where the se of incentives raises ethical concerns. The course of action is not voluntary where both parties choose what to do.
What if the employer uses incentives to force employees to engage in illegal activities without directly asking them to take that course of action? Incentives can also result in inappropriate use of institution funds because more money than it is allowed may be used to encourage effectiveness. On the other hand, guidelines regarding giving these incentives may be too general or too specific to be understood clearly by auditors.
Summary
In summary, it is fair to state that some of the influences and various approaches to compensation include the use of a balanced scorecard to examine the status of our institution. Among the issues related to developing and implementing employees’ benefit to revolve around challenges, there are such as linking performance to payment and ensuring that employees perform exceptionally.
To elicit and motivate employees to perform better, there is a need to introduce other human resource management practices, including proper hiring criteria, employee training, job design, and team work (Ichniowski & Shaw, 2003).
References
Ichniowski, C. & Shaw, K. (2003). Beyond incentive pay: insiders’ estimates of the value of complementary human resource management practices. Journal of economic perspectives, 7 (1), 155-180.
Kaplan, R.S. (2008). Conceptual foundations of the balanced scorecard, Handbooks of management accounting research, 3, 1253-1269.
Vinogradov, D. &Shadrina, E. (2013).Non-monetary incentives in online experiments Economics Letters, 119(3), 306-310.