Compensation Management

Advantages and Disadvantages of Incentive Schemes

Merits of Incentives

The following are the advantages derived by providing incentives to  employees:

  • Higher output: By providing incentives to his employees, the employer is able  to induce them to work better. This leads to higher output.
  • Greater profits: Needless to say, higher output results in greater profits for the  business. This happens in two ways. First, the cost per unit becomes less and  second, the enterprise is able to keep the selling price low and this results in  greater sales.
  • No problem of idle time: In an organisation where no proper incentives are  available for the workers, the tendency will be to while away the time.
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Prerequisites for a Good Incentive Scheme

‘Incentive’ may be defined as any reward of benefit given to the  employee over and above his wage or salary with a view to motivating him to  excel in his work. Incentives include both monetary as well as non-monetary  rewards. A scheme of incentive is a plan to motivate individual or group  performance.

It is true that monetary compensation does constitute very important  reason for the working of an employee. But this compensation alone cannot  bring job satisfaction to the workers. One cannot expect effective performance  from a worker who is dissatisfied with its job, even if he is well paid.  … Read the rest

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Guidelines for Effective Performance Appraisals

The performance appraisal requires willingness and a commitment to  focus on improving performance at the level of the individual or team every day.  Like a compass, an ongoing performance appraisal system provides  instantaneous, real-time information that describes the difference between one’s  current and desired course. To practice sound performance appraisal system,  managers must do the same thing-provide timely feedback about performance,  while constantly focusing everyone’s attention on the ultimate objective of  being the best among the competitors in the market.

Well-written performance appraisals are among the most effective tools  for developing people. The following guidelines would be used for effective  performance appraisals to significantly increase your team’s effectiveness and  perceived value within your organization.… Read the rest

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Process of Performance Appraisal

One of the most important things to remember about performance  appraisals is that its effectiveness will be highly influenced by its purpose. For  example, a programme, which is developed, to focus on employee development  and training needs may not be suitable for making major decisions about  salaries. Likewise, it is possible that the organization, management and  employee may all have different goals for the performance appraisal process. Performance  appraisal involves ‘identifying, evaluating and developing employees’ work  performance with the dual purpose of achieving the organization’s goals and  objectives whilst also ensuring the employee receives recognition, feedback and  development’.… Read the rest

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Developmental Approach to Performance Appraisal

The developmental approach to performance appraisal has been related  to employees as individuals. This approach has been concerned with the use of  performance appraisal as a contributor to employee motivation, development,  and human resources planning. The developmental approach contained all of the  traditional overall organizational performance appraisal purposes and the  following additional purposes:

  1. Provided employees the opportunity to formally indicate the direction  and level of the employee’s ambition.
  2. Show organizational interest in employee development, which was cited  to help the enterprise retain ambitious, capable employees instead of  losing the employees to competitors.
  3. Provided a structure for communications between employees and  management to help clarify expectations of the employee by  management and the employee, and
  4. Provide satisfaction and encouragement to the employee who has been  trying to perform well.
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Introduction to Performance Appraisal

In almost every organization, every employee is subjected to periodic  appraisal of his/her performance. This is highly important if the organization’s  human resource development objectives are to be realized, if the organization  wants to make best use of its human resource available and if the organization  wants to have a scientific and retinal compensation system. An effective  performance appraisal system brings rationality in management. If an  organization wants to maximize its effectiveness then the organization must  have tool by which it can discriminate between an effective employee and not so  effective employee. Today, appraisal is not something of a choice left to the  wishes of the corporate bosses, nor it is a privilege to be enjoyed by few  businesses conglomerates.… Read the rest

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