The Impact of Contemporary HR Practices: Fair and Performance Based Management



Fair and Performance Based Management is the fourth Human Resource best practice. It has everything to do with compensation and benefits. 

According to the research done by Vulpen (2022) first and foremost, if you hire the appropriate people, you should pay them more than average. You want to keep them and pay them decently since they will contribute the most value to your business. This is an illustration of how various best practices—in this case, selective hiring, contingent compensation, and employment security—combine to deliver greater value than they would alone. Paying workers more than usual could have some drawbacks as well. For instance, it deters unsatisfactory employees from quitting. However, if you're continuously bringing on top talent, above-average compensation is a requirement. 

This type of compensation package may include base salary in money and benefits for the employees. Since many of the greatest workers could originate from different job categories, you must keep up with market trends in both your field and related fields. The typical pay rate and the position of your organization in the compensation offer will then be clear to you.

Second, you should align personal rewards with the various contributions that employees make. These are incentives based on performance (Vulpen, 2022).

Organizations are significantly impacted by modern HR policies, notably in the area of equitable and performance-based compensation. To recruit, keep, and engage employees, there has been a shift in recent years toward more adaptable, dynamic, and innovative approaches to HR operations (Kutieshat & Farmanesh, 2022). To successfully accomplish these objectives, fair and performance-based compensation policies must be implemented (Groysberg et al., 2021).

Companies that offer fair remuneration are more likely to recruit and retain talented people, which can have a good effect on productivity, profitability, and competitiveness (Tenney, 2023). Companies that pay fair compensation foster an environment where employees feel valued and respected. Fair compensation might not, however, be enough on its own to inspire workers to give their best effort (Chamorro-Premuzic, 2014).

By rewarding employees for their performance, on the other hand, they are more likely to be motivated to improve their skills and produce better results, which can lead to increased productivity, improved work quality, and greater innovation (Pathak, 2019). Performance-based compensation, on the other hand, offers a powerful incentive for employees to strive for excellence in their work.

Fair and performance-based compensation practices are both crucial, but employers must strike the right balance between the two to guarantee that their compensation procedures are equitable, transparent, and fair while also offering substantial incentives for high performance (Chicago Area Partnerships, 1992).



Conclusion

The implementation of fair and performance-based compensation practices allows organizations to recruit, retain, and motivate talented employees, which can have a positive impact on overall organizational performance and success (Khoreva & Wechtler, 2018). As a result, the impact of contemporary HR practices, particularly in the areas of fair and performance-based compensation, cannot be understated. 


References

  •        (1992) Pathways and Progress: to Ensure Fair Compensation. publication. Chicago: Chicago Area Partnerships, pp. 1–35(Accessed: April 14, 2023).
  •        Chamorro-Premuzic, T. (2014) Does money really affect motivation? A review of the research, Harvard Business Review. Available at: https://hbr.org/2013/04/does-money-really-affect-motiv(Accessed: April 14, 2023).
  •        Groysberg, B. et al. (2021) Compensation packages that actually drive performance, Harvard Business Review. Available at: https://hbr.org/2021/01/compensation-packages-that-actually-drive-performance(Accessed: April 14, 2023).
  •        Khoreva, V. and Wechtler, H. (2018) HR practices and employee performance: The mediating role of well-being, Employee Relations. EMERALD GROUP PUBLISHING LIMITED. Available at: https://www.emerald.com/insight/content/doi/10.1108/ER-08-2017-0191/full/html (Accessed: April 14, 2023).
  •        Kutieshat, R. and Farmanesh, P. (2022) The impact of New Human Resource Management Practices on innovation performance during the covid 19 crisis: A new perception on enhancing the educational sector, MDPI. Multidisciplinary Digital Publishing Institute. Available at: https://doi.org/10.3390/su14052872 (Accessed: April 14, 2023).
  •        Pathak, P. (2019) Creativity and Innovation in Reward & Compensation Practices - ResearchGate Available at: https://www.researchgate.net/publication/337195974_Creativity_and_Innovation_in_Reward_Compensation_Practices(Accessed: April 14, 2023).
  •        Tenney, M. (2023) Why compensation is important for employee retention - business leadership today, Business Leadership Today - The resource for leaders working to build and sustain world-class teams and organizations in today's business environment. Business Leadership Today. Available at: https://businessleadershiptoday.com/why-compensation-is-important-for-employee-retention/ (Accessed: April 14, 2023).
  • Vulpen, E.van (2022) 7 human resource best practices (a mini-guide to HRM), AIHR. Available at: https://www.aihr.com/blog/human-resource-best-practices/#Extensivetraining (Accessed: April 16, 2023).


Comments

  1. Anonymous20 April 2023 at 01:01

    Interesting topic Janaka. There are still issues with the performance-management process in many organizations, but improvements have been made. Two-thirds of the respondents to our recent poll changed their performance-management systems significantly over the preceding 18 months. Human resources departments are increasingly abandoning unpopular "forced curve" rating systems, changing roughly equal pay scales, and analyzing extensive employee data to uncover the true drivers of motivation and success. (Hancock, B; Hieo, E; Schaninger, B. 2018)

    ReplyDelete
    Replies
    1. Janaka Madushan20 April 2023 at 11:04

      Hi Piumi. In order to sustain in the industry organisation must give more value for their best performing employees. So I suggest following a better systematic performance evaluation process will give fair pair for each employees and to prevent from unwanted favouritism.

      Delete
  2. Prasad Fernando20 April 2023 at 08:08

    Well written Janaka. Fair and performance-based management is a widely debated topic in the field of human resource management. While performance-based management is often viewed as an effective way to incentivize and reward employees, there are concerns that it can lead to bias, discrimination, and a focus on short-term results over long-term growth. The following comment will discuss the advantages and challenges of fair and performance-based management, supported by citations.

    On the one hand, fair and performance-based management can provide numerous benefits for both employees and employers. By aligning performance with rewards, employees are incentivized to work harder and achieve better results (Krausz, 2020). Additionally, performance-based management can help organizations identify top performers and provide opportunities for career advancement (Bussin, 2020). Furthermore, research suggests that employees who perceive their performance management systems as fair are more likely to have higher job satisfaction and commitment to their organizations (Dai et al., 2013).

    On the other hand, there are challenges associated with fair and performance-based management. One of the biggest challenges is ensuring that performance assessments are fair and unbiased. Research has shown that performance assessments can be influenced by various factors, including race, gender, and age, which can lead to discrimination (Johnson et al., 2018). Additionally, performance-based management can create a focus on short-term results over long-term growth, which can be detrimental to an organization's overall success (Sahai, 2021). Finally, it can be challenging to develop effective performance metrics that accurately capture an employee's contributions and impact on the organization (Van Zelst, 2019).

    In conclusion, fair and performance-based management can provide numerous benefits for both employees and employers. However, there are challenges associated with ensuring that performance assessments are fair and unbiased, and that the focus remains on long-term growth rather than short-term results.

    ReplyDelete
    Replies
    1. Janaka Madushan20 April 2023 at 11:01

      Yes Prasad it's difficult to sudden change from traditional method to modernization for an organization to use tech for fair performance management evaluation. But it helps for long-term planning to invest to systematised performance based management to recognize the best employee in an organisation.

      Delete
  3. George Fernando20 April 2023 at 09:56

    This academic blog post presents a comprehensive discussion of fair and performance-based compensation as one of the best HR practices. The article provides a clear explanation of the importance of paying employees more than average, aligning personal rewards with employee contributions, and striking a balance between fair and performance-based compensation practices. The author also highlights the benefits of implementing such practices, including attracting and retaining talented employees, increasing productivity, improving the quality of work, and enhancing competitiveness.

    Overall, the article is well-written and informative, providing insights into how contemporary HR practices can impact organisational success. However, it would be helpful to see some examples of organisations that have effectively implemented fair and performance-based compensation practices and the specific strategies they used to achieve success. Additionally, the article could benefit from a more critical analysis of the potential drawbacks of implementing such practices, such as the possibility of creating unhealthy competition among employees or the risk of overlooking the value of non-monetary rewards.

    My question to you Janaka, What are some of the challenges that organisations may face when implementing fair and performance-based compensation practices, and how can they overcome these challenges?

    ReplyDelete
    Replies
    1. Janaka Madushan20 April 2023 at 10:57

      Dear George. Thanks to using your valuable time to read my article. In contemporary HR Practices organization start using technology to overcome these issues for an example Oracle system to communicate and save data for fair performance based evaluation. So I suggest it's better for long term planning HRM use these kind of technology to overcome these issued in modern world.

      Delete
  4. K.P.AMILA SUDARSHANA PERERA20 April 2023 at 17:12

    This is a very important article to read even though most of the companies in Sri Lanka stop paying performance-based compensation as most of the companies performances have drastically decreased due to the current economic crisis, and as a result of this, most of the employees are demotivated, lose focus, and reduce morale in the workplace, which highly affects organizational productivity.
    In this article author highlighted things have been summarized with proof evidence as below

    Performance Management is a continuous and systematic approach that ensures the achievement of organizational business goals by streamlining employee performance and efforts to match the set goals efficiently. Performance Management builds a communication system between a Manager and an employee that occurs throughout the year, in support of accomplishing the strategic objectives of the organization. (HRHelpBoard, https://www.hrhelpboard.com)

    According to the Armstrong and Baron Performance Management is “A strategic and integrated approach to increasing the effectiveness of organizations by improving the performance of the people who work in them and by developing the capabilities of teams and individual contributors”
    Employees earn a traditional salary but performance-based compensation seeks to reward them for their high performance above their job requirements. Performance-based compensation is most often awarded as a year-end bonus, though bonuses throughout the year are possible.(Chen,2023)
    Performance based compensation can act as an incentive to increase employee performance and efficiency, through goal-setting, as employees want to achieve the best pay increase. will help to improve motivation, focus and morale in the workplace and It can assist to achieve a strong bond between employee and company.(Doolin, https://www.cloverhr.co.uk/)

    ReplyDelete
  5. Janaka Madushan21 April 2023 at 08:07

    Hi Amila thanks making time to read my article. Yes as you said organization which ignoring a proper organizational performance management will lead to downfall of the employees performance. Its better concern about this more to retain best employees.

    ReplyDelete

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