Performance Evaluation Compensation And Benefits : In general, corporate stockholders play a distinctive role in America. Stockholders do not take benefits out of their investments till all other related parties have been paid for their part of total investments. For this reason, stockholders have the right to establish the contributions to be made and rewards to be received by the corporation’s employees.
Performance Evaluation : Although maximizing stockholder value is the foremost objective of profit oriented companies, employees are not naturally concerned with stockholder welfare. Therefore, incentives must be given to employees to motivate them to maximize their own capital while synchronously maximizing that of the stockholders.
In the past, compensation was often based exclusively on individual performance and short-run financial results. Because of operational changes and shifts in managerial viewpoints, performance evaluation and their related rewards now involve group success, non-financial performance aspects, and long-run considerations. Some of the rewards offer short-run satisfaction like merit pay and bonuses, whereas others give long-run satisfaction like common stock ownership or stock options. Pay plans are available that encompass current compensation, deferred compensation, and perks.
Three important dimensions of pay plans are incentive effects, tax effects, and ethical considerations. Incentive effects differ from plan to plan. The periodic pay plan is the least effective in directly motivating employees to perform and provides the weakest link between performance and reward. At the other extreme, the piece rate pay plan affords a direct link between the work accomplished and the employee reward, as long as it promotes quality and group cooperation.