Performance Based Pay Essay

3266 Words Oct 20th, 2005 14 Pages
Performance Management and Performance Based Pay

Compensation and Benefits
MGT 548
Cardinal Stritch University
Group MSM 3-356
Instructor: Rafael Viscasillas
7/25/05
Table of Contents Performance based pay is an effective way to adequately distinguish between the best and worse performers within the company structure. Commonly referred to as merit pay or skill based pay, performance based pay is a compensation system designed to reward employees for attaining additional skills or for completion of specific goals.
"The concept is attractive to many employees since there is a direct link between their compensation and the work-related skills they may learn and use – and since service time with the company and job title are
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ELCABOP is judged based on how these employees handle their job when working with the Lutheran ministers and lay employees. Because of this it is important to record and measure the performance of the employees to make sure customer satisfaction is achieved. Until recently, this was difficult to do because the ELCABOP did not have a formal evaluation policy in place.
In the past, the ELCABOP conducted performance appraisals annually at the end of their fiscal year. Managers would meet with their employees on an individual basis, write up a summary of the employee's performance for the previous year, and submitted it to the Human Resource Department to keep in the employee's file.
Employees did not have specific standards to meet and had no real sense of their own accomplishments or shortcomings. Without an understanding of how individual performance influences the organization's contribution to the company's mission, employees have no feeling of connection to the organization. This lack of connection decreased both employee loyalty to the organization and employee morale. "Department goals, which support the corporate goals, are set by managers and their teams. Individual goals, which support company and department goals, are set by each employee together with their manager. All goals must be achievable, measurable and aligned with the corporate strategy." (Wells, HR Magazine, 2005, p. 79-80)

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