Pay for Performance through Strategic Planning
Because studies have shown time and again that pay represents one of the most important factors involved in retaining qualified employees, it is little wonder that there has been a great deal of attention focused on how best to compensate employees for their performance in recent years. Moreover, because employee performance and productivity is inextricably related to organizational profitability, these issues have assumed new relevance and importance in the current economic environment. There have been some mixed reviews concerning pay-for-performance approaches to enhancing employee performance, though, that suggest there is ...view middle of the document...
The following journal articles provide some valuable insights into the challenges and obstacles that have been identified in this regard, and these sources, together with the tips and guidance offered by the authors, can help provide a set of best practices that organizations of all types can follow when considered implementing such an incentive pay approach to rewarding top performers. A summary of the research and salient findings are provided in the chapter conclusion.
Pay for Performance Schemes
From Bayley’s (2006) perspective, pay-for-performance programs, also known as incentive pay or merit pay, are a solid approach to rewarding top-quality performance by employees in many types of organizations including healthcare settings. This author also qualifies this characterization, though, by emphasizing, “Pay for performance programs are not one thing, they are many [but] pay for performance is only the next best thing. The very best thing would be to stop playing the current game and design a system--a cost-worthy, predictably priced and quality-rewarded system--that works for everybody” (p. 1). Given the challenges associated with developing such an approach, though, “the next best thing” provided by pay-for-performance programs may represent the optimum tactic for many types of organizations today. This has been especially true in the field of education where incentive pay initiatives have become a topic of hot debate among educators and policymakers alike.
The same constraints and challenges that typify pay-for-performance in other types of organizations, though, are also present in the nation’s school systems and are particularly pronounced when it comes to measuring teacher performance because of the enormous number of confounding factors involved. For example, Lavy (2013) reports that, “Tying teachers' pay to their classroom performance should improve the current educational system both by clarifying teaching goals and by attracting and retaining the most productive teachers. But implementing pay for performance poses many practical challenges, because measuring individual teachers' performance is difficult” (p. 87). The experiences of the Denver school system suggest that this approach is doomed to failure unless all of the stakeholders involved are actively involved in its formulation, implementation and execution. According to an analysis by Gratz (2013), the Denver school board elected to implement a merit pay regimen without soliciting feedback from the affected teachers and they ultimately regretted their decision to implement such a program as well as their lack of soliciting educator feedback. Moreover, the merit pay program used by the Denver school system was marked by many of the same obstacles that other schools have experienced when attempting to implement such an initiative in terms of accurately measuring teacher performance when there are so many confounding variables involved (Gratz).
Indeed, different class...