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Performance Related Reward Systems Published: Sunday, July 30, 2000 By: Dr. Manuel Angel Morales

What is our experience while designing performance related reward systems? Simple. A scheme that provides monetary incentives for achieving short-term targets gives positive direction and motivation to people. Longer-term aspects of performance also need to be monitored. This can be done by a more qualitative general appraisal of overall performance, which gives much more significant rewards in the longer term by means of promotion. Where the system work less than perfectly the cause seems connected to the methods adopted by some organizations. There should be a balance between establishing high but achievable standards and emphasizing realistic measures of performance. It is very important to educate managers and supervisors in using quantitative targets to motivate people to perform to the best of their abilities.

There are two key warnings to bare in mind.

  • Quantitative targets should capture many of the units` objectives.
  • The emphasis should be on short-term targets.

The targets should be well tailored to the particular circumstances of all units. The point is that greater participation in target setting can be very beneficial. Targets sometimes require revision during a year period. We strongly suggest extending the system to everybody within the organization, with the exception of top people.

On balance, our experience with designing the PRRS is that the positive effects appear to considerably outweigh its negative influences. The positive side is that in most instances, it has achieved general support of nearly all the managers and supervisors, and they believed that it was a useful tool in making the organizational culture more appropriate to the new environment in which the organization operates. It has helped managers and supervisors to focus on key short-term issues and has helped encourage better cooperation as individuals realize how their work jointly contributes to achieving specific targets. On the negative side, one has to be careful at not imposing unilaterally the targets because people want to participate in this kind of venture.

The performance related reward system is a useful tool in helping organizations to achieve managerial and supervisory focus and attention to short-term performance on a number of crucial areas. Its purpose is to assist the cultural transformation process and move it toward values that emphasize attaining competitive standards for performance on a changing environment. As we have said a thousand times, managers and supervisors are all in the business of managing behavior. Our concrete experience with these behavioral technologies is that they are very useful for constructing theories with broader organizational applicability.


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