arp
to fail if additional payments are given to some employees but not to others, for example in areas where there are skill shortages. The scheme is unlikely to induce improved effort from the majority as it will not be seen to be rewarding better performance.
What are the benefits of ARP?
As employers seek to compete more effectively to meet customer requirements they are increasingly examining methods of improving workforce flexibility and engendering a culture of high performance in their organisations. By making a distinction between individuals’ pay on the grounds of properly measured criteria and by linking reward more closely to performance, employees may be encouraged to increase productivity. Resources can be better targeted to recognise effort and achievement, and to reward and retain more effective employees. Properly introduced, ARP can be used as a mechanism for promoting greater employee involvement and commitment to an organisation. Improved quality and customer service can be additional benefits.
Employees may welcome the introduction of well designed and implemented ARP schemes as a fairer means of recognising that more effective performers should receive higher pay. There is thus a more direct link between effort and reward which may in turn lead to an improvement in morale.
What are the difficulties with ARP?
lf not suitably designed and introduced sensibly into an environment where trust is high and there is a readiness to adapt to the change, employee relations may suffer. ARP may not only fail to motivate but may in fact demotivate. Employees may soon become discouraged if they are not aware of the levels of performance they need to attain or where ARP awards are not applied consistently across the eligible participants. There may be doubts about the credibility of the scheme where financial constraints, for example by the use of budgets or ‘quotas’, unnecessarily restrict the extent or amount of ARP awards. A carefully developed scheme should minimise the scope for complaints about subjectivity in assessment and divisiveness in operation.
In particular, the ARP scheme should be designed to avoid any tendency to mark higher each year to retain employees during periods of labour shortage. Any beneficial link between performance and reward may be lost with pay costs rising but without a corresponding rise in corporate or individual performance. Employers are also advised to consider how the scheme will fit with the management style and culture of the organisation.
For example, many employers emphasise the need for teamwork and cooperation. It has been argued that introducing pay based on individual performance runs contrary to that approach. Yet many individuals work in teams and employers will need to make clear how the scheme will continue to encourage and reward individual accountability within the team. An alternative is the piloting of team-based payment systems where performance is linked directly to productivity.
Employers may also need to overcome a disinclination among some employees to move around an organisation where learning the skills required by a new job may jeopardise their ARP awards. Employees may prefer to remain in a job where they have [next page]