Compensation: It’s a philosophy thing
Organizations have different philosophies about payment. Some want to be industry leaders; some want to be competitive but not leaders, while others want to trail the market. Some reward seniority, while others want to focus exclusively on merit. As a manager, it is crucial to carefully choose the mode of compensation depending on the growth strategy and type of company, while considering the costs, benefits, impact on HR, staffing and company profitability of each approach. Before making this decision, a manager has to ascertain that the method chosen is in line with the company’s goals and objectives for future success.
As a manager, my approach to compensation would be on merit. Here, payment is purely based on employee accomplishments, and advancement is never guaranteed unless good results are produced. Every employee aims to grow in their career and advance to positions that offer better benefits and higher pay. To give them an incentive to better the company while at the same time, achieve their goals, I would reward outstanding top-performing employees. This approach creates healthy competition among the employees, which will benefit the company. This method encourages creativity as employees continuously invent new ways to be the best and increase their output while at the same time helps identify underperforming employees (Gaille, 2015). This approach is commonly used if the company’s goal is to be an industry leader.
The downside of this merit-based reward system is that teamwork is discouraged. In pursuit of rewards, employees may avoid working together towards a common goal, resulting in internal conflicts. It may also create discrimination as high performing employees could avoid associating with those that are not considered as high performing (Gaille, 2015).
In the long run, I believe compensation based on merit is best as the overall benefits to the company far outweigh the demerits and is an excellent motivator to employees.
References
Brandon Gaille (2015). 8 Merit Pay Pros and Cons. Retrieved on February 9th, 2020 from https://brandongaille.com/8-merit-pay-pros-and-cons/