CB935: Organisational Behaviour and Human Resource Management (2010/2011)

CB935: Organisational Behaviour and Human Resource Management

Essay Assignment

Name: Viriya Kaewpun (10902604) Date Words : 07 December 2010 : 2,364 words (exclude table)

Introduction
Human Resource Management or HRM plays an important role to the business today. According to Mckenna and Bech (2002), they had showed that the Human Resource Management is a strategic which is important for employees performance. It is clear to say that success lies in business strategic, but the company should consider about its labour or staff as the organization should ensure that the entire job had already place the right people with right skill and right time as Vickerstaff advice which quoted in Mclander C., 1989. By doing this, it could help company performance improved. Whatsoever, assigning the right worker to the right job with the right time as the strategic of Human Resource Management of the company may not be practical with some group of people as personal background may be suitable for the job but they may not be able to do the job as the job may not challenge them (Schultz, 2001). This idea supported by Marchington and Wilkinson, 205 as normally people will not want to work with the job that they do not enjoy it unless the pay system could motivate them. Tabassi and Baker, 2008, their recent journal paper suggests that the company should find the way to motivate them which satisfy their need. Most people believe that if they have done excellent performance or above average, they should be rewarded. By this, Y. Liu have noted that many company offer a variety of incentive compensation form as payment such as stock, performance bonuses for individual or group work, and profit sharing. Moreover, Schultz also suggests that rewards can be in a form of transfers to position providing greater opportunity for advancement which based on a systematic evaluation of employee worth, not supervisors opinion. Besides, Y.liu still believes that incentive compensation can increase employers motivation because the relevant studies found in the literature show that there are positive link between payment and performance. However, motivation and payment could improve the quality of worker output, the company should have payment system which are designed on an appropriate way to motivate the worker as Jean-Marie Hilltrop, 1996 suggested in his journal. This essay will conduct many literature reviews which related to the advantage of the pay related to performance or PRP that may concern to psychology, argument of pay related to performance in practical and the case study.

The pay related to performance in Psychological aspect

According to Schultz D. and E.S., 2001, they thought that peoples development of personal standards of comparison is concerning to the pay the worker believe their job deserves, the amount they think their co-workers are being paid and the minimum salary that they could accept. It could mean that payment could be a powerful tool in the interpersonal relationship. The company should have reasonable aggregated pay plan for preventing the consequences.

Furthermore, A.E. Barber, M.J. Simmering, 2002 has challenged quote that the negative attitudes regarding pay plans can lead to detrimental employee actions. Pfeffer and DavisBlake, 1992 was referred in A.E. Barber, M.J. Simmering, 2002, they believe that this can cause a leaving of employees because they have negative reactions to compensation plans. As a result, the payment allocate decisions could be critical to the success of this plan, if it was accepted by the group. The performance related pay could be a key process leading to competitive advantage and it could encourage the employee behavior and the opinion towards strengthening of an organizations competitive tactics. When performance became the important factor to payment decision, the employee would try to achieve their organization goal (Maheshwari and Singh, 2010) as Pfeffer, 1994; Marchington, 1995 was suggested their concept in Jean-Marie Hiltrops European Management journal. To illustrate a case, the payment system provides an encouragement for high performance of a job by remunerate the higher the wage as the more products unit can produce. Many work groups improve and find their new method for production. The result shows that the performance related pay can encourage the better performance (Thompson, 205 quoted in Maheshwari and Singh, 2010). F.F.T Chiang T.A. Birtch (2010) supports that is clearly define that the performance related pay scheme is vital to achieve the positive goal of work attitudes and quote that the storage employees perceive the performance-pay link, the more likely they demonstrate higher job satisfaction. Moreover, Whitener (2001) quoted his concept to support as the motivation by focused human resource practice (e.g. reward) exhibit a stranger and more meaningful relationship with positive attitudes than other human resource practice (e.g. selection and training). Many academic research had discuss about the comparison between new payment system (payment relate performance) and the old payment system. The new payment system is based on the concept of fitting between rewards and the companys strategic, and between the flexibility and changeableness of the payment system and unitarism in the processing of decision-making by mean of which the payment was defined. (Michael P. and Glenuile J., 1998. The British journal of industrial relation, 36(2), pp. 227-247) Besides, the new payment system also encompasses reward for proficiency (especially skill and knowledge). The new payment system is totally different from the old system which is the view of payment system is focusing on the production or performance. In comparison to the old system, the job-evaluated grade structures pay by time and seniority. By using the old payment system, the employees were not motivated because they may think that the salary depended only on how long do they work with the company.

Argument to Pay related to Performance

Table 1. Extent of Support for Various Human Resource Policies Linked with Rewards and Performance Rewards and Performance Strongly support % Focus on merit philosophy 18 throughout the organization; emphasize individual performance Encourage, recognize and 18 reward employees for customer service and quality Encourage, recognize and 12 reward employees or innovation and creativity Encourage, recognize and 15 reward employees for productivity gains Encourage, recognize and 2 reward employees for enhancing their own skill and knowledge Promote the sharing of 7 both the rewards and risks of business Adopt performance 10 appraisal systems using customer ratings Provide flexible benefit 6 packages Supports Neither Against % % supports nor against % 45 23 8 Strongly against % 6

36

34

40

32

11

37

29

13

36

36

11

29

37

17

10

25

41

17

21

40

22

11

The table presents the supporting of a linkage between the Various Human Resource Policies with rewards and performance; a case study from British companies policy. It is important to note that most of the policies on rewards and performance are focus on individual performance, customer service and quality, and productivity gains as vast majority to either support or strongly support. The table can be debated that the payment is an important link to the performance.

On the other hand, some journals shown difference aspects as PRP may not give the positive results to the organization as it depends on the appraisal potential problem as based on McKenna E. and Beech N. 2002) 1) The appraisal forms are poor design which may combined by some unrelated object (support by Molander C. and Winterton J., 1994., 1994) 2) The appraisal time is not appropriate and the training program is not practical. 3) Insufficient interview 4) The feedback given to the lower line is incomplete in a number of points. (This is support by Kerr, S. (2006).) 5) The action strategic 6) There are amount of unreliable judgments which may concern to interpersonal relationship between the upper line and the lower line. According to J. Greenberg, 2003 argued that some employee believed their managers were most inequitable which means that they expected their managers would pay by related on the performance but they did not exactly do so. 7) Inappropriate target setting Moreover, there are several arguments to debate PRP method. Kerr, S. (2006). believes that the organization should not work on reward as priority. The company should not upgrade the reward system unless your measurements are reliable. Thus, the clear articulation of outcome desiring could be the priority, because if the performance management/ assessment/ appraisal system is not reasonable for the worker, people will seem to hate the new system as they had been hate the system before. Kerr, S. (2006). also supported J. Greenberg, 2003 as the example: The worlds largest insurance company had an ordinary measuring system of rewards and measurements in which high performance received very small increase in annual salary. For this, Molander C. and Winterton J., 1994 suggested that the organization should be postpone introducing of the new appraisal until the managerial climate can match with the system. PRP scheme as well as other theories claim that extrinsic payment may decrease longterm intrinsic motivation and negative effect on performance (Rayner C. and Adam-Smith D., 2009) It has been argue by Kohn, 1993 and Marsden and French as quote in Rayner C. and Adam-Smith D., 2009 that any competitive reward scheme creates many more losses than winner and there is some evidence for the potential negative performance impacts of contingent pay schemes in practice. There are some people also agree that the performance appraisal and payment is least effective with Human Resource Policies, as the employees were perceived. (Hutchinson and Purcell, 2003 as quote in Rayner C. and Adam-Smith D., 2009)

The case study

According to case study from Saudi Arabia, Abdallah M.I., 2007, concerns the performance related to payment. Saudi Arabia is interested in surveys as majority of the tremendous income comes from oil production. The case study which could improve organization performance was being surveyed by five leading Saudi companies listed below: 1. Saudi Aramco (SA) is the largest oil company in the world as quoted by Saudi Aramco, 2005 in Abdallah M.I.,2007 2. Saudi Basic Industries Corporation (SABIC) is the largest non-oil industrial company in the Middle East as quoted by About, n.d. in Abdallah M.I.,2007 3. Saudi Electricity Company (SEC) 4. Saudi Telecom Company (STC) is the one who responses in handling all telecommunication activities in the kingdom as quoted in Abdallah M.I.,2007 5. Procter & Gamble (P&G) is the largest consumer product company which able to effort decent employment opportunities for Saudi as quoted by Local, 2003 in Abdallah M.I.,2007 There are some cultural effects to the business as the board of managers want to improve their organization performance by greatly stimulating the cultural issue and the work practice othat could limit employees performance level in comparison to the other companies in Western international companies. The case has shown that the job opportunities in the country are very low since with no doubt, most of the population works in managerial or high position. One factor was because of some believed that Labour-type jobs were unattractive and dishonorable. Furthermore, according to Beer et al, 1995, support to Abdallah M.I., 2007 believed that in most organizations, the supervisors did not give honest or candid performance on appraisals. As a consequence, it damaged the appraisal and the self-esteem from the workers. In Saudi Arabia, some employees viewed the candid feedback on performance as unfriendly and hostile, and the culture values of work as group, and the pay for performance system. That seemed to undermine the workers personal feelings. Kerr. S,2006 supported this case saying that the poor management could not induce employees motivation in performance. By this, some managers may not allow replacing the poor performers by the high ones, unless the difference in payment between the skillful worker and the lower-skill worker was great. The risk of companies not able to motivate both of high and low performers worker are therefore high and the work will still remain unproductive In this case, it was asked that the performances related to payment systems are practical or effective for the five large companies in Saudi Arabia. The answer was suggested by Beer et. al, 1985 which shown in Abdallah M.I., 2007 that the high performance workers are satisfied if the payment was based on the performance and it could lead to an improve of the performance of organization (as supported by Improving, 2005 as shown in Abdallah M.I., 2007). The survey included upper management (manager or higher), middle management, and first-line supervisor sectors but focusing primarily on the upper managements opinion as the main target. There were many scales of survey and it was conducted by a self-administered

instrument via the internet. The online survey can gain deep and thoughtful information, not counting that it is faster and lower cost than the other way. The survey of PRP is to find how much the effectiveness of the reward system in which way to support the organizational performance attempt and lead. The analysis of the survey is that 1) Saudi Aramco (SA) - 80% of the respondents agreed that the performance related payment was supported by their employees - 72% of the respondents indicated that the systems leaded the positive result to the organization culture. - 30% are disagreed because they believed that the supervisor did not provide candid or honest feedback on their performance. 2) Saudi Basic Industries Corporation (SABIC) and Saudi Electricity Company (SEC) have a similar trend as only 17% did not believe the appraisal results from supervisor were reliable. SABIC agree that candid and honest feedback could demotivate their employees; while 54% of STC believed in the same way. 3) Saudi Electricity Company (SEC) and Saudi Aramco (SA); 53% agreed that the appraisal was candid and honest on their performance. Again, around one-third agreed that candid and honest feedback could decrease the motivation of their employees. 4) Procter & Gamble (P&G); 23% of the respondents agreed that the feedback could demotivate their employees. In overall, there was a huge amount of respondents agreed that the five companies supported for the PRP system and 65% agreed that the systems could produce satisfactory result in the culture of the organization and just only 11% were disagreed with. In conclusion, the case study surveyed the effectiveness of PRP systems leads the companies to accept and support the reward system, but it also shows some disagreement and dissatisfaction of the employees. According to Abdallah M.I., 2007 suggested that the most effective honest feedback on performance reward could likely be monetary reward. The employees in this case could receive a satisfactory and face-saving performance appraisal while allowing management rewarding the high performers with higher salary increment in more casual way, as quote by Abdallah M.I., 2007

Conclusion
General idea of performance related payment is the more effective of the employees, the higher compensation. Payment and reward system is one of the best systems which could help the employees knowing the efficiency of the employees. According to Bramham J., 1989, if a person has good performance, one should be rewarded and one should know what is expected to be assessed. Thus, PRP system could be the most effectiveness way which should be applied to every organization.

References
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