paper 5: sustainable organisation (metawie)
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AN EXAMINATION OF THE ROLE, DYNAMICS AND OUTCOMES OF PERFORMANCE-
RELATED PAY (PRP) IN THE PUBLIC SECTOR IN THE UK: AN EMPLOYMENT RELATIONSHIP
PERSPECTIVE
Miral Metawie
Kent Business School
Dr. Mark Gilman
Senior Lecturer in Industrial Relations/HRM
1. Performance-Related Pay in the Public
Sector: History and background
2. Rationale of PRP
3. Theoretical justification
4. Problems and Gaps in existing research
5. The Employment Relationship Framework
6. Method
7. Findings
8. Conclusion
9. Suggestions and Questions
Overview
•Traditional reward systems merely based on job evaluation
•Historically salary increments and rewards were seniority-based
•Unsuccessful attempts of the application of performance reviews
in 1970s
•Change in technological, economic, political, and social forces
increased pressure on government to become more accountable
while lowering costs
•Conservative Governments 1979 – 1997
•Changes to pay determination
•Emphasis on performance measurement
•Extension of PRP to whole of Civil Services
•Traditional reward systems merely based on job evaluation
•Historically salary increments and rewards were seniority-based
•Unsuccessful attempts of the application of performance reviews
in 1970s
•Change in technological, economic, political, and social forces
increased pressure on government to become more accountable
while lowering costs
•Conservative Governments 1979 – 1997
•Changes to pay determination
•Emphasis on performance measurement
•Extension of PRP to whole of Civil Services
Performance-Related Pay (PRP) in the Public Sector: History and Background
Objectives of PRP
– Attract, motivate, retain employees• Equitable reward systems that reward
employees according to their performance • Improve communication• Increase commitment
– Tool for reinforcing cultural change in the public sector
• Reflection on individualism • Weakening trade union power • Decrease of collective bargaining
Linking performance to pay through rewards
motivates employees to work harder – improving
performance and increasing productivity
Linking performance to pay through rewards
motivates employees to work harder – improving
performance and increasing productivity
Rationale of PRP
ORGANISATIONAL-PSYCHOLOGY
ORGANISATIONAL-PSYCHOLOGY
Expectancy TheoryExpectancy Theory
Goal-setting TheoryGoal-setting Theory
expecte
d re
ward
s
Motivation Effort
Agency
costs – d
irect e
ffort
Equity TheoryEquity Theory
Fairn
ess
PERFORMANCE
Agency TheoryAgency Theory
ECONOMIC THEORYECONOMIC THEORY
PRP: Theoretical justifications
Economic perspective:
1. Managerialist perspective
2. Regards the relationship as transactional
3. Overlooks the ongoing nature of the relationship and dynamics of
pay
4. Clinical approach to human motivation – rational and self-
interested.
Economic perspective:
1. Managerialist perspective
2. Regards the relationship as transactional
3. Overlooks the ongoing nature of the relationship and dynamics of
pay
4. Clinical approach to human motivation – rational and self-
interested.
Problems and Gaps with Existing Studies
Psychological perspective:
1. Simplistic approach of the link between pay and performance.
2. Negative motivational impact vs. Government’s extension plans
of PRP in the public sector.
3. No evidence of a link between PRP and increased performance.
Both perspectives:
1. Nature and intensity of effort ignored.
2. Political factors and forces influencing the application of PRP
have been ignored.
3. The psychological contract and social exchange issues
overlooked.
4. Only few research have examined the role of PRP in areas of the
employment relationship, on an issue-by-issue basis.
Psychological perspective:
1. Simplistic approach of the link between pay and performance.
2. Negative motivational impact vs. Government’s extension plans
of PRP in the public sector.
3. No evidence of a link between PRP and increased performance.
Both perspectives:
1. Nature and intensity of effort ignored.
2. Political factors and forces influencing the application of PRP
have been ignored.
3. The psychological contract and social exchange issues
overlooked.
4. Only few research have examined the role of PRP in areas of the
employment relationship, on an issue-by-issue basis.
Problems and Gaps with Existing Studies
The Employment Relationship Framework
Method and Research Design
Qualitative Approach: Case Study of Kent County Council (KCC)
3-stage data collection
Stage One: Initial Fieldwork
Informal Interviews
Documentary Evidence
Feedback Forums (Focus Groups)
Stage Two: Explanatory Fieldwork
Semi-Structured Interviews with Line-Managers
Stage Three: Typicality and Descriptive Analysis
Employees Survey
Qualitative Approach: Case Study of Kent County Council (KCC)
3-stage data collection
Stage One: Initial Fieldwork
Informal Interviews
Documentary Evidence
Feedback Forums (Focus Groups)
Stage Two: Explanatory Fieldwork
Semi-Structured Interviews with Line-Managers
Stage Three: Typicality and Descriptive Analysis
Employees Survey
Total Contribution Pay (TCP) at KCC
•First implementation of PRP in 1990-1995
•1995 abolishment of PRP and return to automatic increment
•2003 Total Contribution Pay Agreement
•TCP – Phased approach
•2005 first application to senior level management
•2007 extension of TCP to all employees (more than 30000)
•First implementation of PRP in 1990-1995
•1995 abolishment of PRP and return to automatic increment
•2003 Total Contribution Pay Agreement
•TCP – Phased approach
•2005 first application to senior level management
•2007 extension of TCP to all employees (more than 30000)
Total Contribution Pay (TCP)
Five distinctive characteristics:
1. Additional assessment categories: •Ways to Success•Wider Contribution
2. Equal weighting on all assessment categories: award of any above average rating conditional on the achievement of above average in additional assessment categories
3. Removal of cash awards previously associated with wider contribution
4. Shorter Pay Grades
5. Moderation linked with a quota on the number of employees who can be rewarded above average
Five distinctive characteristics:
1. Additional assessment categories: •Ways to Success•Wider Contribution
2. Equal weighting on all assessment categories: award of any above average rating conditional on the achievement of above average in additional assessment categories
3. Removal of cash awards previously associated with wider contribution
4. Shorter Pay Grades
5. Moderation linked with a quota on the number of employees who can be rewarded above average
Findings
Significant gap between the rhetoric and the reality of TCP
TCP has several unstated (in some instances even reversed) roles:
1. Demonstrate political accountability
2. Control the wage-bill (higher performance for lower pay)
3. Increase managerial prerogative to manage employees’ job
contents
4. Renegotiation and widening the zone of acceptance
Significant gap between the rhetoric and the reality of TCP
TCP has several unstated (in some instances even reversed) roles:
1. Demonstrate political accountability
2. Control the wage-bill (higher performance for lower pay)
3. Increase managerial prerogative to manage employees’ job
contents
4. Renegotiation and widening the zone of acceptance
Findings
Significant gap between the rhetoric and the reality of TCP
TCP has several unintended and distorted outcomes:
1. Demotivation
2. Intensification of Labour
3. Withdrawal of discretionary effort
4. Diversion of effort
5. demoralisation
6. Breach in the psychological contract
7. Intention to quit
Significant gap between the rhetoric and the reality of TCP
TCP has several unintended and distorted outcomes:
1. Demotivation
2. Intensification of Labour
3. Withdrawal of discretionary effort
4. Diversion of effort
5. demoralisation
6. Breach in the psychological contract
7. Intention to quit
Findings
Significant gap between the rhetoric and the reality of TCP
Dynamics of TCP:
1. Negative procedural justice
2. Negative distributive justice
3. Lack of trust
4. Lack of employee discretion
5. Overt control of TCP budget/lack of TCP fund
6. Increase in managerial prerogative and frontiers of control in
employer’s favour
7. Imbalance of control over task and HR domain
Significant gap between the rhetoric and the reality of TCP
Dynamics of TCP:
1. Negative procedural justice
2. Negative distributive justice
3. Lack of trust
4. Lack of employee discretion
5. Overt control of TCP budget/lack of TCP fund
6. Increase in managerial prerogative and frontiers of control in
employer’s favour
7. Imbalance of control over task and HR domain
Conclusion
The employment relationship provides a bridge between the economic
theories of the firm and organisational behaviour theories.
The political dimension provides a lens through which external factors which
have affected employers’ and employees’ frontiers of control can be
examined.
An examination of task discretion indicates that PRP may contribute to
higher performance through labour intensification
An examination of the norms of reciprocity and negotiation of the zone of
acceptance indicates that PRP may lead to a withdrawal in discretionary
effort leading to lower quality
PRP can cause a breach in the psychological contract
The employment relationship provides a bridge between the economic
theories of the firm and organisational behaviour theories.
The political dimension provides a lens through which external factors which
have affected employers’ and employees’ frontiers of control can be
examined.
An examination of task discretion indicates that PRP may contribute to
higher performance through labour intensification
An examination of the norms of reciprocity and negotiation of the zone of
acceptance indicates that PRP may lead to a withdrawal in discretionary
effort leading to lower quality
PRP can cause a breach in the psychological contract
Suggestions and Questions