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Read the two case studies (SAS Institute and Lincoln Electric) and answer the following questions:

For both questions, use your critical thinking ability to organize and analyze your answers.

  • When is Pay-for-Performance effective? How does PFP work so well in Lincoln Electric? Use specific examples from the case study to explain. From research, find one other organization that use PFP and compare/contrast its system with Lincoln Electric.
  • How does SAS design its system and culture that stays away from PFP? Use specific examples from the case study to explain. From research, find one other organization that stays away from PFP and compare/contrast its system with SAS.

Analyzing PFP

SAS Institute is a software-based organisation. The product is related to analyze data from agricultural experiments. Lincoln Electric, on the other hand, is an electrical product manufacturing company involved in welding tools and suppliers around the world.

In the following report Pay for Performance or PFP is analyzed under the scenario of the above mentioned companies. Various facts and findings are reviewed and presented in this study.

PFP gets effective during evaluating how well an individual, teams and organization has any performance towards any specific purpose or goal. This helps in assuring that every employee performing gets higher salaries that must be more than those people who have not been playing well enough. This has also been transferring different loads from the firms to employees. This must be in the sense that as employees never performs any salary that has never been high (Conrad et al., 2018). Furthermore, these companies never users that benefits to save extra money. However, it must be reminded that one controversial and enduring issue is the importation of different private sector tools of compensation. This has been linking performance of employees for some aspect of employee compensation for government personnel.

Besides, merit plans are the instance of pay for performance that is determined in an initial cell. Here, they are ties to various individual performance level measurements, like ratings of performance appraisals (Gerhart, 2017). Moreover, there have been different payouts allocated within merit plans that are added commonly to a distinct base salary of employees (Han, Bartol & Kim, 2015). Since, there have been drastic economic reversals in this business world, current organisations have become cautious. They must think they have been not the organisations who have been sufficient to reap different rewards of a pension plan and various options for long-term savings.

The efficiency has also been coming to reality while motivating their employees in any organisation for reaching targeted goals and getting rewarded afterwards. Here, from the study of Lincoln Electric, incentive system has been centred on four things that are based n wages on any piecework output. This has also been including bonus paid every year. This also involves assurance in employment and limited benefits. Here, the four components acted as extrinsic motivation for employees through some people have never been of much interest in a job (Urech et al., 2015). This is due to additional money. This would be helpful to gain from those incentive systems that have been propelled. This is needed to be performed and get into the target goals of the organisation.

Further, Pay-for-Performance has been working effectively under Lincoln Electric as per the philosophy of James Lincoln over human motivation. Here, management processes and incentive compensation systems get emanated. It is also believed here that there must be an enquiry from higher management towards their subordinates to any organisation with an adequate incentive in place. This helps in motivating individuals while they feel any sense of growth in them as they meet up with targeted goals and then being getting rewarded afterwards (Kuvaas et al., 2018). The management style of Lincoln has been equal for every position. Here there has been particular regards to any location, and this has also been in a method where every individual are approachable. This is done while developing any sense of cooperation among various employees. Here an open-door policy for every people has also been present (Belogolovsky & Bamberger, 2014).

Lincoln Electric PFP system

Here, the case study of D&B Hoovers, Canada is analysed using PFP. Then it is contrasted with that of Lincoln Electric. It is an American Business research institute, providing data over industries and companies around their preliminary platform for a product under the name “Hoovers”. Here, the initial step has been to create viable economic planning. This is from different organisational and operational developments. This is deployed while the project life-cycle goes on. As they possess any targeted economic aim, they have reviewed the contribution of the overall goal (Harrison et al., 2014). This has created KPIs to calculate them. This is also useful in tracking tools regarding grading processes. Then they have set up a “share” system while every employee owns one share of the pool of PFP. Next, they have sat with each employee. This is done individually and analysed how they have earned value with those kinds of shares.

However, as compared to Lincoln Electric, D&B Hoovers has let their employees know the methods to create large money. Lincoln, on the other hand, has set clear and various concise expectations. Then, Lincoln has assured that those expectations have been measurable and used to drive those PFP plans. Next, as that business gets success, every people are intended to get success. However, for D&B Hoovers, a company has been coming first (Doran et al., 2014). Here, a well found PFP is the key towards assuring the fact that business reaches their minimal profits, ownership and potentials. This also includes employees who are rewarded regarding exceeding that level. Further, Lincoln Electric has always been involved in asking for help from their advisors while developing any PFP plans.

SAS has never expected to provide bonuses and incentives for entire organizations making every people with every people working harder. This is also a traditional academic belief having doubtful applications that are practical. Here the spurs have been mattering for them where those tasks have been allowed to clear different definition of results. These tasks have been more prevalent as they move towards hierarchy (Maltarich et al., 2017). Using incentive budgets on the proper set of a job as opposed to spreading that has been around the total workforce. Here the most vital thing has been to assure that various award targets get tied to different realistic aims of performance. Here, very often performance goals have been reflecting on being ambitious (Stanowski, Simpson & White, 2015). Further, some quantity of incentives that are paid out in spite of those aims being achieved. This is because all the people know that those ambitions are on the top. This has taken the entire trust in SAS. Here simple mathematical models have been aligning to PFP opportunities towards proper levels of stretch within targets. Lastly, long-term incentives have been driving performances and not retentions.

Here, a significant reward has been accrued to different top performers in SAS over various years in traditional. This has been including better retention that where many people have been paying money of conservation (Li et al., 2014). Lastly, the incentives and teamwork have been possessing disconnected ideas. This has been vital for SAS to create a culture where people have been able to work together for a common goal. This has been vital to assure that incentives have been providing for recognising different achievements.

For example, SAS has been ranked as one of the largest software developers in the world. According to a founder of SAS, he has been treating their staffs as they make a difference to a company. This has made differences to those companies. SAS has reviewed their salaries every year, to remain competitive. Here their staffs have been eligible for a different rise in performance-based-pays and different bonuses (Ljungholm, 2015). Having a host of various onsite daycares, all the coverage of health insurance premiums, and spacious fitness centre and free centre of healthcare, there is no wonder that their annual employee turnover has been less than about 4%.

To understand the scenario better, the example of Environics Research is taken. It is a Canadian market research and polling company. It is a generation Y company and pays for performance has never worked for generation Y (Petersen, 2014).

The reason that why pay for performance has not worked is merit has increased matrix game. First of all, it is to be considered, on what basis their salary has risen or not risen in due time. The ways in which decisions are made regarding the payments are to be determined along with the way they have rewarded for results. For this performance addressed is to be found out. Environics Research has consisted of rating systems for determining whether they have been meeting expectations (Gooderham et al., 2018). These must be great, good, fantastic, wonderful and outstanding. They have needed improvements wishing that they are gone. One cannot actually believe that this nominal differentiation has been motivational and driving results of performances.

Now, why the alternative of PFP, pay for potential has been working on them, as discussed hereafter. This has been trying a level of playing the field on the basis where an employee has been bringing jobs and the manner in which those competencies are leveraged. This is an idea to get rid of more and more years to work. Here, more money is to be made. Thus the individual potential and talent are to be determined (Pohler & Schmidt, 2016).  Since this has been challenging for Boomers in accepting new ways of thinking regarding compensation here, pay for potential has been far way regarding the best plan for connecting and engaging with those millennial.

The ways it has been working has been writing computer programs. This is because they have been paid less than people who have been some years or real-world experiences. The reason is that the potential and talent has never been counting in a current workplace of the 20th century, till one demonstrates through performances (Holmström, 2017). As, Environics Research moves to the 21st century and believing in the pay-for-potential, rewarding that skills and competencies have been bringing in along with distinct resources of age and years of workplace experiences. Thus, their salary has been reflecting the actual prizes.

Conclusion:

The above report has helped in understanding whether the philosophy of the above organisations has been towards PFP or away from it, various considerations are applied. The above discussions on SAS Institute and Lincoln Electric, have highlighted that there are plenty of scopes to research compensation and hone the skills. They should maximise their baseline salaries and know that non-monetary compensations have been as valuable as salaries. This must be mainly as it includes the time off. Mostly, the settlement has been actually negotiable and stating various cases. They should understand how their organisations have been making money. Moreover, they must be aware of their company policies about compensation. Here, some of the companies might have limited budget constraints, and provide raises at particular times of any year.

References: 

Belogolovsky, E., & Bamberger, P. A. (2014). Signaling in secret: Pay for performance and the incentive and sorting effects of pay secrecy. Academy of Management Journal, 57(6), 1706-1733.

Conrad, D. A., Milgrom, P., Shirtcliff, R. M., Bailit, H. L., Ludwig, S., Dysert, J., ... & Cunha-Cruz, J. (2018). Pay-for-performance incentive program in a large dental group practice. The Journal of the American Dental Association, 149(5), 348-352.

Doran, T., Kontopantelis, E., Reeves, D., Sutton, M., & Ryan, A. M. (2014). Setting performance targets in pay for performance programmes: what can we learn from QOF?. BMJ: British Medical Journal (Online), 348.

Gerhart, B. (2017). Incentives and pay for performance in the workplace. In Advances in Motivation Science (Vol. 4, pp. 91-140). Elsevier.

Gooderham, P., Fenton-O’Creevy, M., Croucher, R., & Brookes, M. (2018). A multilevel analysis of the use of individual pay-for-performance systems. Journal of Management, 44(4), 1479-1504.

Han, J. H., Bartol, K. M., & Kim, S. (2015). Tightening up the performance–pay linkage: Roles of contingent reward leadership and profit-sharing in the cross-level influence of individual pay-for-performance. Journal of Applied Psychology, 100(2), 417.

Harrison, M. J., Dusheiko, M., Sutton, M., Gravelle, H., Doran, T., & Roland, M. (2014). Effect of a national primary care pay for performance scheme on emergency hospital admissions for ambulatory care sensitive conditions: controlled longitudinal study. Bmj, 349, g6423.

Holmström, B. (2017). Pay for performance and beyond. American Economic Review, 107(7), 1753-77.

Kuvaas, B., Buch, R., Oslo Metropolitan, U., & Dysvik, A. (2018, July). Individual Variable Pay for Performance, Incentive Effects, and Employee Motivation. In Academy of Management Proceedings (Vol. 2018, No. 1, p. 12393). Briarcliff Manor, NY 10510: Academy of Management.

Li, J., Hurley, J., DeCicca, P., & Buckley, G. (2014). Physician response to pay?for?performance: Evidence from a natural experiment. Health economics, 23(8), 962-978.

Ljungholm, D. P. (2015). Pay-for-performance in the Public Sector. Geopolitics, History and International Relations, 7(1), 90.

Maltarich, M. A., Nyberg, A. J., Reilly, G., Abdulsalam, D. D., & Martin, M. (2017). Pay-for-performance, sometimes: An interdisciplinary approach to integrating economic rationality with psychological emotion to predict individual performance. Academy of Management Journal, 60(6), 2155-2174.

Petersen, L. A. (2014). Can pay for performance improve physician practice?. Health Policy Research newsletter, 9(2).

Pohler, D., & Schmidt, J. A. (2016). Does Pay?for?Performance Strain the Employment Relationship? The Effect of Manager Bonus Eligibility on Nonmanagement Employee Turnover. Personnel Psychology, 69(2), 395-429.

Stanowski, A. C., Simpson, K., & White, A. (2015). Pay for performance: are hospitals becoming more efficient in improving their patient experience?. Journal of Healthcare Management, 60(4), 268-284.

Urech, T. H., Woodard, L. D., Virani, S. S., Dudley, R. A., Lutschg, M. Z., & Petersen, L. A. (2015). Calculations of financial incentives for providers in a pay-for-performance program: manual review versus data from structured fields in electronic health records. Medical care, 53(10), 901.

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