Bringing the Team Concept into Compensation-or Not
One of the first things Sandy Caldwell wanted to do in his new position at Hathaway Manufacturing was improve productivity through teamwork at every level of the firm. As the new human resource manager for the suburban plant, Sandy set out to change the culture to accommodate the team based approach he had become so enthusiastic about in his most recent position.
Sandy started by installing the concept of team management at the highest level, to oversee the operations of the entire plant. The new management team consisted of manufacturing, distribution, planning, technical and human resource executives. Together they developed a new ...view middle of the document...
After consulting with CEO Regina Cloffi, Sandy sent a memo to all employees announcing the change to team-based pay for performance.
The reaction was immediate and 100% negative. None of the employees was happy with the change, and foremost among their complaints two stood out. First, because the 360-degree feedback system made everyone responsible in part for someone else's performance evaluation, no one was comfortable with the idea that pay raises would be linked to peer input. Second, there was a widespread perception that the way the change was decided upon, and the way it was announced, put the firm's commitment to team effort in doubt. Simply put, employees felt left out of the decision process.
Sandy and Regina arranged a meeting for early the next morning. Sitting in her office over their coffee, they began a painful debate. Should the new policy be retracted as quickly as it was adopted, or should it be allowed to stand?
1. Does the pay-for-performance plan seem like a good idea? Why or why not?
Pay-for-performance plan is a good idea because the reason for the plan is that the management wants to provide an incentive for the team performance. Since the management had draft a new mission for becoming customer driven and team based, the employees are called upon to raise their level of commitment and begin to act as “owners” of the firm. The performance and morale of the employees had improved and the productivity began to thick upward. Based on the good performance that has been shown by the employees, they are deserved to get paid.
However, before the management has decided to implement the plan, they should consider involving the employees in the decision making. From the case, we can see that the employee give a negative responds to the plan because the employees felt left out of the decision making. As a team member they have the right to speak their mind and stand. When the change was decided upon and the way it was announced, put the firm’s commitment to team effort in doubt.
The management also has to take into consideration about how the evaluation of the performance will be held. This is because the firm is embraced the 360-degree feedback, in which an employee’s performance evaluation is obtained from supervisors, subordinates, peers and internal or external customers. That makes the employee not comfortable with the idea that pay raises would be linked to peer input. Peer ratings have a disadvantage as it has a potential for friendship to bias ratings. Another disadvantage is that when the evaluations are made for administrative decisions, peers often find the situation of being both rater and ratee uncomfortable.
There is an increasing recognition that pay programs may affect the nature and composition of an organization’s workforce. An organization that links pay to performance may attract more high performers than an organization that does not link the two. There may be similar effect...