Today organizations are showing a high degree of commitment towards reinforcement of reward practices which are aligned with other HR practices and the goals of the organization for attracting, retaining and motivating employees. Efficient reward practices helps in attracting result driven professionals who can thrive and succeed in performance based environments. Hence, it is a crucial motivator and may contribute towards the enhancement of the productivity of the employees if implemented properly. For example, Continental Airlines as a part of their turnaround strategy introduced on time bonus incentive package according to which an employee will gain a bonus of $65 every month for ensuring on time flight operations.
An effective reward system should be linked with the performance development system, which focuses on performance based pay and offers ample learning opportunities along with a healthy work environment. Variable pay can play a crucial role in boosting the performance of the employees especially the star performers instead of the fixed pay packages. Few such reward practices may take the forms of gain sharing, bonuses, team based incentives, profit sharing, ESOP’s and equity based incentive awards.
An efficient management of reward system may have a beneficial effect upon the performance in several ways – instilling a sense of ownership amongst the employees, may facilitate long term focus with continuous improvement, reduces service operating costs, promotes team work, minimizes employee dissatisfaction and enhanced employee interest in the financial performance of the company. Few organizations like General Mills, reward their employees for attaining new skills which may add value to the organizational performance and thereby facilitate job rotation, cross training and self managed work teams. Few organizations also recognize exceptional performance by providing recognition awards and lump-sum merit awards for winning employee commitment and attaining long term beneficial results. Example, TISCO, offers instant or on the spot rewards, monthly rewards and annual rewards to its employees under its ‘Shabashi scheme’.
Performance improvement plans or programs are monitored, structured, and result based activities wherein employees who are performing below the average demanded by the organization are expected to do better under the PIP, which is when the line managers in conjunction with the HR managers monitor the performance of the employees. Though this is an undesirable situation for the employees to find themselves in a PIP, it is a fact of life that organizations implement these PIPs for employees at all levels.
The Performance Improvement Plans/Programs (PIP) Process and the Roles of the Stakeholders
The placement of the employee in a PIP takes place after due consultation between the employee, the manager, and the HR manager. In many cases, employees are placed on watch without the PIP if their performance is deemed unsatisfactory. Often, employees are observed for two consecutive performance cycles and if their performance does not improve or worsens, then the decision to place the employee under PIP are taken. Many line managers are reluctant to go for PIPs straightway as once the employee is placed in a PIP; his or her performance is monitored not only by the line manager but also by the HR manager. This means that each deliverable that the employee completes is checked for compliance with the performance standards by both the line manager and the HR manager who though does not get involved in the technicalities and subject matter, nonetheless asks for status reports from the manager and the employee. Indeed, many organizations view the PIPs as a waste of time of all stakeholders as dramatic improvements in performance are unlikely going by the statistics. On the other hand, organizations need a valid reason to terminate the services of employees and hence, the PIPs are designed to motivate the employee and set stern conditions for him or her so that their performance improves.
PIP and its Effect on Employees
From the employee’s perspective, PIPs are like an insult as the very basis of their work is being challenged. Many employees usually take the hint when placed on PIP or if the manager indicates such a course of action to them and resign so that the embarrassment is saved for everybody. Indeed, it is a rather sad state of affairs if even after the PIP the employee does not ramp up on his or her performance. Of course, not all PIPs end up this way and there are many success stories shared by managers about how employees did improve their performance after being placed in the PIP. Whatever be the outcome, the mere mention of the PIP is by itself an indication that the organization has lost trust in the employee. Further, the issue of personal bias enters the scene as well as some managers would like to settle scores with the employees whom they do not like for whatever reason and hence, they insist on PIPs for those employees. It needs to be remembered that this is not a common occurrence as there are many checks and balances in the organizational structure that are explicitly designed to prevent such an occurrence.