In many organizations across the world, the final pay given to employees is commensurate to their levels of performance in their respective departments where they work. In this kind of a pay system, employees with outstanding performance are paid more while their counterparts who perform relatively low will get less pay. Although this strategy is employed in many organizations today as a motivational tool, there are a number of drawbacks associated with it as advanced by Robert Behn and his management journal, Performance, People and Pay. According to Behn, “the system of paying for performance actually hurt performance because it undermines individual morale thus reducing collective performance” (p.3). Pay for performance undermines organizational performance in several ways as discussed in the following sections of this paper.
How Pay for Performance undermines Organizational Performance
Most people think they are outstanding in their performance and that they are way above average in their contributions towards the objectives of the company. Given higher pay, employees develop the false sense of conviction that they are above average hence they see no need to work harder or improve their efficiency through job training as deemed appropriate. The growing numbers of employees tend to bask in the glory of others’ success yet they do very little to contribute towards the group success. As such, the company continues to register diminishing levels of productivity. In this sense, pay for performance is the number one factor that undermines the organizational performance.
The system of pay performance is known for its selectivity in improving the performance of employees who are doing better but drastically reduces the performance of those who seem to be doing poorly on the same scale based on the company’s assessment. Fully aware that they are underperformers based on their pay, a section of employees, classified as poor performers based on the internal assessment, will lose their morale and ego to stay on in working in the organization. The subsequent loss of ego, self-concept, emotional and psychological damages caused to the disgruntled lot of employees will result into job dissatisfaction and further disloyalty to the company visions and goals. In the long run, the company loses personnel with a lot of potentials.