Performance

Using the job characteristics model, analyze and discuss the work design implications of the Coca-Cola Company’s approach to creating jobs for improved performance?

The job characteristics model as proposed by Hackman and Oldham (1974) measures three main components: core job dimensions, critical psychological states arising from the interaction of the core job dimensions, and personal work outcomes. Moderating the psychological states and work outcomes is employee growth need strength which indicates the employee’s desire to develop his capacities. The model ascertains a person-to-job fit (Kulik, Oldham, & Hackman, 1987).

The Coca-Cola Company creates jobs for improved performance by improving the five core job dimensions.  The company focuses on skill variety enhancement by promoting career development activities. Towards this objective, there are many company programs that help with personal career planning and career improvement. The company offers several online courses that the employees can enroll in.

To empower the employees, they are encouraged to voice out their ideas and suggestions during regular meetings, discussion forums and informal talks with their supervisors and managers. The practice increases employee accountability towards the output of the company; therefore there is an increased sense of well-being when the company performs positively. The company also has a performance management system where personal and performance assessments are regularly carried out aimed towards understanding the employees’ current effectiveness in their jobs and how to further add value to the corporation. Improving the core dimensions in the job characteristics model also increases the intellectual capacity of the organization. Assets like intellectual capacity are not reflected in the financial statements of organizations, are intangible, but contribute largely to market value of the organization (Mouritsen, Bukh, & Marr, 2004).  To measure the effect of company activities on increasing the job core dimensions, the engagement of the employees are measured regularly through company surveys. The latest survey conducted in 2008 showed that employee engagement increased from 79% in 2006 to 81% in 2008 (Sustainability: The Coca-Cola Company, 2008). Therefore, at Coca-Cola, increasing the core dimensions of the job characteristics resulted in improving the psychological states of the employee and thus, work motivation and performance were greatly enhanced.

How can the social information processing model be applied to understanding the Coca-Cola Company’s approach to creating jobs for improved performance?

The job characteristics model and the social informaiton processing model have the same objective: to improve the employee job satisfaction through job design. The social information processing theory (SIP) focuses on the effects interpersonal relationships. This translates to the importance of the job from the point of view or opinions of other people. Thus, SIP is a communication approach in relation to the job characteristics model (Colucci & Rice, 2008). There are four  basic premises that are contributed by other people in the workplace: understanding the work environment, understanding the important aspects of the work itself, how employees perceive and feel about  their jobs (Nelson & Quick, 2006). Therefore the importance of interpersonal relationships in the job environment cannot be overemphasized.

SIP is instrumental in understanding Coca-Cola’s approach to creating job performance because it focuses on interpersonal relationships and communication. At Coca-Cola, communication between management and employees is very important and the company has maximized the benefits of the process. By opening the lines of communication, the company is able to solicit ideas on how to improve production efficiency and more importantly, employee satisfaction.

What alternative work patterns does the Coca-Cola Company offer its employees, and why does it use them?

Coca-Cola Company offers two alternative work patterns: flextime and job sharing. Flextime allows an employee to set his own work schedule. Flextime has many advantages. For employees living in highly urbanized communities where there is heavy vehicular traffic, his work schedule can be arranged around the time when traffic is low. Employees who have to attend to school or other non-work activities can work earlier or later than the regular working time. Flextime also allows an employee to work at the time when he is most productive.

Job sharing is another alternative offered by Coca-Cola in positions where this is possible like production and manufacturing. With job sharing, the employee will be able to attend to other activities that he also deems significant or necessary.

Coca-Cola is committed to providing their workers with work opportunities and conditions that make their job experience meaningful. By offering alternative work patterns, Coca-Cola shows its support for the employees’ lifestyle preferences and work/personal needs. This support by the company results in benefits for both employee and the company; by increasing employee motivation, the company performance is also enhanced.

References

1. Colucci, W., & Rice, R. E. (2008). Towards Innovations in Social Information Processing Theory Conceptualization and Specification in Light of an Evolving Job Characteristics Model. Annual Meeting of the International Communication Association. New York city.
2. Kulik, C. T., Oldham, G. R., & Hackman, R. J. (1987). Work Design as an Approach to Person-Job Fit. Journal of Vocational Behavior , 31, 278-296.
3. Mouritsen, J., Bukh, P. N., & Marr, B. (2004). Reporting on Intellectual Capital: Why, Waht and How? Measuring Business Excellence , 8 (1), 46-54.
4. Nelson, D. L., & Quick, J. C. (2006). Organizational Behavior: Foundation, Realities and Challenges. Mason, Ohio: Southwestern.
5. Sustainability: The Coca-Cola Company. (2008). Retrieved November 18, 2008, from The Coca-Cola Company: http://www.thecoca-colacompany.com/citizenship/engagement.html

Mix between current method and intelligence test.

Evaluate alternatives:

1. Intelligence tests. If Intelligence tests are used by corporations to screen Job applicants, colleges could use the same methodology. Also this will give a future opportunity for the students after graduation, to be familiar with this kind of test. Also corporations looking new employees will be confident that the graduated students have already passed the intelligence test, so they can give priority for students graduated from New England College. In addition the New England College, based on this alternative, could do agreement with potential recruiters, to give priority for student graduated from the college as they can ensure their Intelligence level. This will give an advantage to overcome any possibility of discrimination and to be more fair for poor and minorities, as it will be based on real evaluation for intelligence level for students.
2. Keep existing selection criteria. As Alex has no prior experience in college admissions, and in the same time she didn’t eave enough time to collect all data and verify It by real study. All her reservations about using SAT scores based on concerns, the only evidence Is that coaching improves the SAT score. So keeping the current selection criteria will overcome the risk of failure in case of any change in the process of selection, also as the people who design the SAT argue forcefully that these test scores are valid predictors of how well a person will do in college. But Alex could gain time during keeping the current selection process to collect and analysis data before thinking about other alternative o challenge this argue.
3. MIX between current method and Intelligence test. As SAT Is only three sections Mathematics, Critical Reading, and Writing. It Is preferable also to measure the intelligence of the students. For this it’s required to redistribute the scoring as per the below. High school grades (20 %); Scholastic Aptitude Test (SAT) scores (30 %); Intelligence tests scores (30 %); Extra-curricular activities and achievements (10 %); And the quality and creativity of a written theme submitted with the application.

This alternative will make the selection criteria based on measuring the mathematics; critical reading and writing in addition to the proper intelligence level, and avoid discrimination for poor and minorities. Taking into account the students character and their ability to manage activities and have achievement, and their ability to express their writing capabilities and creativity. Also, this alternative will have the advantages of first alternative. Recommendations: To use the third alternative by having mix between current methods and intelligence test.

The profit margin on sales ratio tells us the ability of the firm to convert its sales into profits. A low profit margin on sales indicates high expenses which consume most of the revenue earned by the firm. In such a case, the firm needs to analyze and point out areas which are producing more expenses than usual. The higher the ratio, the better it is for the company. From the perspective of Electrolux there is a significant moment is reviewed in the year 2008. Electrolux’s net profit margin is almost dipped downwards in the year 2008 as compare with the year 2007 because of margins in selling, administration expenses, R;D expenditure, etc.

In that case Electrolux still has a room for improvement in the net profit margin. Moreover in the year 2008, because of rough economic and business condition, Electrolux efficient business running strategy hit badly in terms of net profit margin. It is viewed that Net Profit margin rate will increase in years to come. The management strategy has helped generate more revenue but there has been significant impact made on the net profit Myers, Brealey and Marcus (2001). PRICE EARNING RATIO The price earning ratio is a very important ratio for the investors in the stock market.

The ratio helps the potential investor compare the stock with other similar stocks in the market. The lower the ratio, the better it is. In an ideal situation, all the stocks in the stock market should have similar price earning ratios, otherwise there would be profit earning opportunities on the shares. If the value for this ratio is low, it means that the investor needs to invest less money to get the earning Besley, Brigham, Scott, Eugene F. (2001). The price earning ratio of Electrolux in the year 2008 as compare with the year 2007 tells us that the stock is low priced in the year 2008 because of volatile and fragile business condition.

Moreover, Electrolux price/cash flow ratio in the year 2008 gives us an idea that the ratio is slightly low as compare with the industry trends and suggest that the company’s growth perspective are below average. DEBT GEARING RATIO Dependency on debt financing is not a bad habit but it has consequences if you rely on more. In the year 2008, Electrolux debt gearing ratio is on the higher in comparison with the year 2007 primarily due to the factors of business volume, increment in sales, fulfillment to pay the suppliers and acquisitions of fixed asset.

Due to the expansion in business, Electrolux has plenty of financial obligations, most of which has been acquired through debt. In 2008, Marks and Spencer reliance more on debt financing as compare to the year 2007. CURRENT RATIO The current ratio tells us about the liquidity of the company. It is the ratio which tells us the company’s ability to pay off its liabilities using the current assets in case the company is liquidated. Higher the current ratio, the better it is.

Electrolux current ratio is slightly on a higher side year by year from the year 2008 in comparison with the year 2007. This ratio indicates a higher margin of safety with respect to meeting current obligations. Electrolux’s current ratio will allow them to take more debt as compared to previous years practices. Although, Electrolux has made short-term investments due to which the current ratio is reported on the higher side and looks stable and healthy as compared to the previous years Besley, Brigham, Scott, Eugene F. (2001).

Electrolux current ratio has strong current ratio and its gives a strong and positive signal to the creditors that company’s business operation is running on a right path. The current ratio of Electrolux suggests that company have sufficient and ample reserve cash or liquid asset and Electrolux can utilize the excess or reserve cash on their ongoing business. RETURN ON EQUITY (ROE) An ROE of 2. 23% and 18. 24% (Annual Report, 2008) in the year 2008 and 2007 respectively indicates that Electrolux is less dependent on equity financing and company is heavily relying on debt financing.

The Electrolux’s return on equity (ROE) in the year 2008 and 2007 reported volatile growth rates in because of Electrolux’s internal policies or due to macro factors. Company’s inconsistent performance in the shape of net profit year by year not make a significant impact on the ROE of the company in contrast with the industry as we know that the stockholder equity, which includes retained earnings, also makes a reflection on the company’s stock prices. SHARE PRICE FLUCTUATIONS The closing stock price of Electrolux in the year 2008 and 2007 is SEK 66. 75 and SEK 108.50

Electrolux Share Price (2008). If I am the broker I would prefer to hold rather than sold because on some grounds which is stated below: • Not out of the woods but small improvements in sales and margins and return to basics could translate into more upside. • In the year 2008 company’s earning is on the lower side as compare with the year 2007. So, it is very evident fact that Electrolux’s performance and its earnings have decreased but there are some indications that earnings will grow in years to come. Moreover, lower net earnings subsequently had a significant impact on its stock price.

In addition, this little increment in net earnings will make a strong reflection in the years to come and also this has had a positive influence on the investor, as the company has managed to keep its returns higher than that of the entire sector. • If I am the investor, I would invest the company, because I belief the company will actually deliver on recent proposals and meet current consensus forecasts. Also because the company’s recent market analysis shows that the company’s stock has been trading at a higher price than the entire sector.

CONCLUSION

Although Electrolux portrays a very strong and positive position in the markets place and without doubt this company has an ability to challenge its rivals to have a girds to become the market leader in the near future. There are certain areas where Electrolux should pay attention to like in the area of stock prices, debt management, net profit margin, etc on consistent basis and assist in increase its investor’s confidence towards the organization. Moreover, extra efforts need to be concentrated towards improving the product quality which really helps in uplifting the sales.

Also company formulates the strategy to overcome the macro factors like economic recession etc that really troubles the company’s future. REFERENCES Besley, Brigham, Scott, Eugene F. (2001). Principles of Finance. Florida: Harcourt College Publishers. Brealey, Richard A. , Stewart C. Myers, Alan J. Marcus (2001). Fundamentals of Corporate Finance. 4th ed. New York: McGraw-Hill. Electrolux (2008). Annual Report. Available: http://www. electrolux. com/financial_data. aspx Last accessed 30 May 2010. Electrolux (2008). Share Price. Available: http://www. electrolux. com/share_price. aspx Last accessed 30 May 2010.

A major challenge for every business owner or manager is to have employees who are passionate about what they do and constantly strives to perform at their best. Many managers take the integrated approach known as Performance Management, to manage the performance, consisting of setting goals, training employees and then appraising and rewarding them (hrm). It can be explained as a process that consolidates goal setting, performance appraisal and development into single, common system, the aim of which is to ensure that the employee’s performance is supporting the strategic aims. (hrm book 315)..

A performance management system would be only effective when the employees in Mambo are clear about their duties and job standards and the organizational goals so that they work with their full potential to meet organizational objectives. Mambo should develop a well planned performance management system as it will provide information on taking decision about the promotion and salary of the new as well as currently employed staff members. Moreover it would provide the senior management (Brett and Simone) to review the employee’s work related behaviour and developing a plan for correcting any deficiencies both for manager and employee as well.

During the implementation of the performance management system the organisation has to expressly pay attention to fostering and improving the behavioral factors of performance management, in order to increase the chances of better result by the use of performance management system. A key element of Performance Management System is Performance Appraisal as it identifies, evaluates and develops employee performance to meet employee and organizational goals Brett and Simone have to choose an appraisal method so that actual performance can be measured as to what has been set in the organisation.

Selecting one appropriate method from many is not easy as. It is The classification of appraisal methods helps make it more straightforward. If conducted properly appraisals can achieve a number of benefits for all parties. The organization, the manager and the appraisee can: establish current levels of performance and benchmark across departments or functions; identify ways of improving performance, individually and collectively; set clear goals for the future; assess potential and desire for development; establish the appropriate means of motivation; and improve communication throughout.

Mambo would be benefited in reviewing the performance of the employees by using the balance scorecard method as it is a measurement –based management system that translates organizational vision and strategy into action. (hrm 321). Under the balanced scorecard system, financial measures are the outcome, but do not give a good indication of what is or will be going on in the organization.

Measures of customer satisfaction, growth and retention is the current indicator of company performance, and internal operations(efficiency, speed, reducing non-value added work, minimizing quality problems) and human resource systems and development are leading indicators of company performance(hrm 321) A performance measurement system such as the Balanced Scorecard allows an agency to align its strategic activities to the strategic plan. It permits — often for the first time — real deployment and implementation of the strategy on a continuous basis. ( balance score card, bsc,and performance management, David Chaudron, oct 2000 (www. articles911. com/Performance_Management/Balanced_Scorecard) By this approach Mambo can track and improve its strategic performance and results by developing, measuring, collecting and analyzing the data from both internal business processes and external business processes and can get feedback needed to guide the planning efforts. This method not only analyses how the organisation has been doing, but also how well it is doing (“current indicators”) and can expect to do in the future (“leading indicators”).

It provides a clear picture of reality. As their current strategy is to focus on the global competition they are about to face from the existing players of the market they need to integrate the performance appraisal into an ongoing culture of communication where regular feedback is part of a culture of success. Ultimately, goal of Brett and Simone, when conducting performance appraisals should be to impart a true appraisal of the employee’s performance (including behavior and attitude) from management’s perspective. Employees typically are anxious at the prospect of receiving negative comments on their work, and managers may be uncomfortable offering that criticism. When done correctly, however, appraisals can be positive experiences that motivate staff members to reach their potential and achieve their professional goals. In addition to assessing past performance, appraisal meetings provide an ideal opportunity to look at future objectives. Encourage employees to stretch their abilities, yet make sure goals are realistic.

Performance evaluations allow employer to reinforce expectations and communicate with your staff one-on-one about their career objectives and simultaneously provides an overview to establish the standards of remunerating employees. An increasingly large number of corporations have explored how rewards, particularly money, could be linked to desired behavior and/or performance outcomes to improve effectiveness. This has led to widespread and growing development of pay for-performance plans. “Pay for performance” refers to any compensation system that links pay and performance. A pay-for-performance system is only as successful as the performance management program on which it depends. There are two categories of pay merit pay and variable pay. The type of performance evaluation most often associated with merit pay plans are appraisals that focus on individual performance and typically use a combination of quantitative and qualitative performance elements thus Brett and Simone must use the concept of merit pay, which would link the individual performance with the mission of the organization. pay for Performance: Your Performance Management Program Is the Foundation, jay Schust, april 2007 , http://www. work911. com/cgi-bin/links/jump. cgi? ID=773) However attracting, motivating and rewarding employees is about much more than wages and salaries. Mambo should establish a clear line of sight between business strategies and total reward philosophies so that an effective strategy can be formulated for attracting, motivating and retaining employees(hrm 373) Total rewards refer to monetary and non monetary rewards made up of salaries/wages and benefits an employee get for performing a certain job.

As the employees with high salary and incentives are less likely to quit the organisation and work with their full potential to reach organizational goal. (hrm 373), thus Brett and Simone should make an effective pay structure for the employees. They should offer bonus on top of the salaries to the employees, if they achieve the desired targets set by the company. This can be done during performance appraisal by balance score card approach as it measures the performance of employees in terms of strategic improvement of the organisation.

Title: The effect of performance management on the organizational results of a bank Author(s): Andre A. de Waal, Vincent Coevert Journal: International Journal of Productivity and Performance Management ISSN: 1741-0401 Year: 2007 Volume: 56 Issue: 5/6 Page: 397 – 416 DOI: 10. 1108/17410400710757114 Publisher: Emerald Group Publishing Limited title Performance appraisal across organizational life cycles. Chen, Hai-Ming1 Kuo, Tung-Sheng Human Systems Management; 2004, Vol. 23 Issue 4, p227-233, 7p sorce Time to Reappraise Performance Appraisals. Find More Like This

Receivables Report for America’s Health Care Financial Managers; Jun2007, Vol. 22 Issue 6, p10-11, 2p By Lauren Stiller Rikleen .( balance score card, bsc,and performance management, David Chaudron, oct 2000 (www. articles911. com/Performance_Management/Balanced_Scorecard Developing Effective Performance Reviews. By Max Messme, business source complete, .( Getting the most from appraisals — from both sides of the desk. Find More Like This Yemm, Graham1 Source: Management Services Management Services, Spring2005, Vol. 49 Issue 1, p36-37, 2p, 2c; )

Several factors affect our sporting performances, some of which are ‘natural’ factors, and some of which we cause.

An example of a natural factor is our gender. We do not choose to be male or female and therefore it is something that occurs naturally.

An example of a factor caused by ourselves is our diet- what we eat and drink. We can decide what we want to eat be it healthy or not healthy, the decision is ours.Age is a natural factor affecting performance.

When you are very young, your bones and muscles are still growing and because your bones are still growing they are a lot softer than a fully-grown adults are. This helps young children to be very flexible and very supple, which in turn affects their performance. But being fully-grown in some sports is better than young and supple. Because adults are fully-grown, they are a lot stronger than a child is. All the muscles are developed properly and so in a sport such as cycling it would be an advantage to be a fully-grown adult than a developing child, whereas in gymnastics it would be an advantage to be very supple because of the certain exercises involved.

Our gender affects our performance a great deal.A mans frame is generally wider and taller than a woman’s is.

Women after they reach puberty develop wider hips which hinders their running ability, whereas a man develops larger muscles due to the increased level of testosterone in their bodies.

Women generally have muscles smaller than a mans, so men have a head start already in any power sports such as weightlifting or sprinting which require a lot of physical strength.

The size of your internal organs affects performance, in that if you have for example larger than average lungs, you can inhale an awful lot of air which contains oxygen, and so more oxygen can be sent to the muscles to keep them going for longer.

Similarly if you have a healthy heart, it can pump the blood to your muscles quicker. And contained in the red blood cells is the oxygen that your muscles need to keep working.

Having a healthy heart and large lungs can be a great advantage in an endurance sports event such as rowing or cross-country running.The use of drugs, banned substances, cigarettes and alcohol all effect the way in which we perform in sports.

Drugs affect our performance in a positive way. They make us more alert, bulk up muscles and improve strength, increase speed and stamina, and get lots of oxygen to our muscles.

Apart from cheating by taking drugs, they ruin our internal organs such as the liver and kidneys. In some cases drugs ruin your fertility because of the effect they have on the body.

Cigarettes affect the way the heart and lungs work. The lung capacity of a smoker is considerably less than a non-smoker. Because the lung capacity is less than normal, this means that less oxygen enters the body and less oxygen goes into the red blood cells which are supposed to take oxygen to the muscles. Because of the lack of oxygen in the muscles, they can’t work as well as usual. And if the muscles aren’t working properly you can’t play any sport well.

Alcohol slows down reaction time and de-hydrates the body.If your reactions are slowed down in a fast game such as squash, it is likely that you will lose because you have to be alert at all times and if alcohol is present in the body, your performance will be affected.

Your diet is very important if you want to stay fit and healthy.

If a professional athlete changed their diet to one with sweet and fatty foods it would affect their performance, because too much sugar and fat in the body is unhealthy and it makes you gain extra weight to carry around when you are in action.

If the diet you currently have has too many bad things in it, it can start to strain your heart.

If you have a very well balanced diet, which is full of fresh fruit and vegetables it keeps your body healthy and full of energy.

Also, if your diet lacks a certain amount of sugar, you can have low energy levels which makes your body work slower and not up to speed.It is good to take certain vitamin supplements to make sure that your body is totally up to scratch and eating plenty of foods with iron and different minerals.Illness is quite a major factor in your sporting performance.

If you have just started to recover from flu or a bad virus, your body will be very weak from fighting off the virus because lots of your energy is taken up by getting better, so if you went down to a football pitch and tried to play 90 minutes of football the chances are that your performance will be very poor because your muscles will be tired, you won’t be very alert and you will be fatigued and lethargic.

An athlete who is clear from illness is far more likely to give a very good performance because they are fully fit, alert, and not tired.The environment makes a difference in most outdoor sports.

Athletes who train at high altitude have an advantage, because there is a higher level of oxygen in the air and so more oxygen gets into the blood and to the muscles so they can keep going for longer in for example a marathon run or rowing.

A high level of pollution in the air also means that there is difference in oxygen level, but instead of being higher like in high altitude, it is lower due to the impurities in the air. If there is less oxygen, less can be brought into the body, and so the muscles don’t receive the necessary oxygen, so they can’t work as well.

The weather also makes a difference in performance outdoors.

During a sprint race, if there is a wind blowing towards the athletes, it will be harder for them to run at a world record pace, because they have to work harder to run into an opposing force.

Heat affects sprinters as well, if it is too cold, their muscles sometimes are not warm enough, so they could get injured or pull a muscle.

If it is warm or even hot when they are running, their bodies and muscles will already be warm and ready to go, so when they are running, their muscles will be working at their best.Your lifestyle is a very important to keeping fit and healthy.A good active lifestyle will result in a healthy body.

If you do plenty of exercise and eat healthily you can train for a sport easier, and your body has already set the foundations to keeping fit and keeping up with training.

If you get little exercise and stay indoors most of the day, your body will be used to not doing anything too energetic, so if you suddenly go out and do an intense training session the chances are that your body will not be able to cope.

Starbucks Corporation, one of the top performing multinational companies in the United States, is currently included in the “Top 100 Best Companies to Work For” of Fortune Magazine due to its premium treatment on its employees, normally addressed as “partners” (Money. cnn. com, 2007). Through motivating its employees, Starbucks has been able to maintain its reputation for providing high quality products and services to its customers, the primary reason why Starbucks’s customers keeps on visiting its stores (Anstett et. al, 2007).

Starbucks believes that their employee plays a vital role in order for them to achieve impressive growth and profitability, and this has been the main reason why they continuously providing programs that would motivate their employees. Starbucks’s management never fails to provide reasonable wages, working benefits, career development, and incentives to their employees in order to keep and boost their performance. Through this, Starbucks employees always give their “best shot” on their respective roles which later on satisfies their customers and provide high profit to the company.

At the end of the day, these good performances of motivated employees of Starbucks bring the said company among the fastest growing companies not only in the United States but also around the globe. In this regard, it is therefore clear that Starbucks is a good epitome of a company that successfully used motivation principles in order to attain impressive growth, achievement in the form of high profitability, and customer as well as employee satisfaction.

Performance Based Pay Plans

As organizational structures have become more complex to keep pace with the ever increasing complexity of the business environment, it has become crucial to institute an effective and efficient compensation system that provides not just offers fair rewards to employees but also motivational incentives.

The two basic types of compensation plans in practice today are the pay for performance and pay for skill based systems. The mechanics of both these compensation plans stem from prior motivational research conducted.

Before proceeding to a discussion about the mechanics of the different kinds of compensation plans, it is imperative to study the basics of motivational theory, since all compensation plans, whether skills based or performance based, find their roots in Motivational Theory.

The basis of motivational theory is that all actions of an individual are stimulated by unsatisfied needs that prompt action that would lead to their fulfillment. In other words, according to motivational theory, human behavior can be understood simply as goal directed behavior, where all actions are undertaken with the sole purpose of need satisfaction.

Of the multitude of motivation theories that abound, expectancy and equity theories of motivation have been considered the most important in designing different types of compensation plans.

Proponents of expectancy theory contend that an individual has conscious control over the majority of his/her actions and hence that course of action will always be selected from among the available options that lead to the best possible rewards desired by that individual. The two main tools on which the Expectancy Theory of motivation hinges are valences and expectancies.

Expectancies are the beliefs of an individual about the possible outcomes, while valence is the importance that an individual assigns to a particular outcome. However, despite the fact that at first look the expectancy theory of motivation answers all questions that top management might have about the ideal compensation plans, yet there are some crucial faults with the basic assumptions of the theory itself.

The most crucial of all deficiencies in the theory is the implicit belief that motivation is a completely conscious process and thus all of it can be perfectly understood and controlled by an individual. In many cases motivation may occur completely as a subconscious process with actual realization coming quite late.

Secondly, the theory does not specify what kind of outcomes or benefits would be most desired by a particular individual. It is close to impossible to make generalized assumptions about what truly drives an employee to work, and the motivation is not always dependent upon extrinsic rewards such as bonuses or pay increases.

In the case of non-profit organizations specifically, like my organization, it would not be wrong to conclude that for majority of the people working there (mostly on a volunteer basis), the nature of motivation is extrinsic.

Equity Theory on the other hand simply views the organization and its relationship with the employee in terms of inputs and outputs. If any inequity or discrepancy exists between the inputs and outputs, the employee is forced to take some action to correct the balance.

Inputs are simply what the employee brings to the organization in terms of his skill set, performance levels and effort of performance. While outputs can simply be understood as pay increases or enhanced job status.

Considering the case of non-profit organizations as opposed to public sector organizations, equity theory has more of a role in designing of the compensation plan. The only modification that would have to be made to the theory would be the description of outputs. In the case of a non-profit organization it would be simply be a successful fund raising activity, press conference, or some other form of publicity or success in creating more awareness about a particular issue.

The volunteers involved would make a conscious evaluation of the extent of effort they put into a particular task, and the extent of success achieved as a result of it. In most cases however, it usually takes a long time for a particular issue to gain the awareness it deserves, and hence non-profit organizations tend to have a very long-term view on gauging the relative success of their efforts.

The basic condition of Pay for performance plans is that they establish a direct connection between an employee or a workforce team’s performance and goals achieved to financial benefits. A further differentiation that has been established in pay for performance compensation systems is that of bonus systems and value based systems.

These further classifications of the plan assist an organization in dealing with two different tiers of its management. The middle and top management of most organizations have major differences in their job descriptions and responsibilities and hence the motivating factors for both cannot be clumped together and dealt with by the same type of compensation plan.

Bonus Plans tend to have a short term focus since the payment of the bonus is contingent upon the accomplishment of specified quantitative and qualitative goals. This plan can thus be successfully administered to the middle management of most organizations.

Value based plans on the other hand, are based on the creation of the maximum value for the organization’s stockholders in terms of judging performance of the top management by evaluating the value created in terms of dividend payments and market capitalization.

While the main goal of non-profit organizations is not the generation of the maximum amount of profits to be distributed to its stockholders, but the provision of some basic social service or work toward the accomplishment of a pre decided social objective.

The proponents of pay for performance plans state that the very nature of the plan is such that it has motivational effects on those to whom it is administered. From a psychological viewpoint, pay for performance plans encourage the performance of those actions that lead to organizational goal accomplishment, thereby increasing both efficiency and effectiveness of the entire operation.

This type of pay plan also receives support from micro economists who explain the plan effectiveness by using the relative price paradigm. Pay for performance plans set out clear and precise goals that are the target for the employees and the achievement of which will lead to increased monetary rewards. By default, this implies that any actions or performance that does not conform to the specified goals would go unrewarded.

Again going to the psychological viewpoint of human behavior, motivational theorists insist that all human want to achieve the maximum rewards possible for their actions. Thus, they are most likely to perform those actions that will reap the maximum rewards for them.

Successful administration of a pay for performance pay plans requires the presence of certain factors. First and most important of all the goals, (qualitative or quantitative) must be clearly specified and understood by all concerned personnel.

Secondly, the goals specified at the individual or departmental level must be congruent i.e. the achievement of each goal should contribute towards the overall organizational goals. And last but most important, the employees should be judged only for those goals over which they have control.

In non-profit organizations it has become more and more important to raise the highest possible income from fund raising events and minimize the cost of operations in the process. But the downside of the application of pay for performance plans is that there may be incompatibility and/or incongruity between different goals and hence the overall efficiency of the organization may be harmed severely.

Yet another important consideration highlighted is that pay for performance plans can be successful only when an individual has extrinsic and not intrinsic motivation linked to the goal set. Intrinsic motivation allows an individual to be motivated to perform any activity and that activity only is the desired reward for that person.

Pay for performance plans therefore rely on the pre-existence of extrinsic motivation and also the fact that the stated reward has high valence for the concerned individual. A skill based pay plan on the other hand, focuses not on the actual performance outcomes of an individual, but on the variety and extent of the individual employee’s skill set. A skills based pay plan can be perceived to be the compensation plan of choice in a recessionary period, where almost all organizations are downsizing.

Numerous benefits are there to be gained when such a pay plan is employed by any organization. Primarily the focus of the employees shift from doing one core job perfectly to managing a multitude of tasks with some degree of competence.

From the standpoint of a non-profit organization, a skill based seems to be the more relevant plan since the organization would benefit from having employees who are able to perform a variety of jobs as the needs arise, and the organization would not be forced to hire more employees as its human resource needs diversify.

It has also been pointed out that since the nature of operations and requirements of non-profit organizations, like other business organizations change rapidly, it would be a more feasible option if the existing set of employees are encouraged to adopt a variety of skills, so the operations run smoothly and the employees get intrinsic satisfaction of knowing that their contributions make a strong impact on the organizational outcomes.

References

Pomeroy, A. (2004) Performance-based pay plans, HR Magazine. Retrieved on July 16th, 2010 from http://findarticles.com/p/articles/mi_m3495/is_6_49/ai_n6076880/