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The Competitive Edge Of New Pay Systems

The United States has been in an economic boom for the last eight years. One of the results of this economic expansion is the low unemployment rate. The unemployment rate is below five percent, and in some regional labor markets even lower than that! This figure holds steady across all labor markets (with the exception of the high technology sector, which has so few available workers, it has been lobbying congress to raise the limits on non-U. S. citizens working in the United States). A Company can no longer offer mediocre benefits and sub-par working conditions while expecting to retain top quality employees.

For Human Resource professionals, this challenge is worthy of study. The general trends in pay are to provide not only a fair salary, but also providing added benefits like flextime and strong medical benefits. Incentive pay and pay-for-performance is on the rise. The more important emerging question is how does the HR professional implement compensation plan that rewards the employee who is going above and beyond, while at the same time improving the performance of an employee not doing as well?

Performance appraisal is a topic that has been around for quite some time; however, employees are not too happy with the current state of affairs when it comes to appraisals. (Davis and Landa, 1999 p 18) The old way of appraising employees with a paper intensive and top down orientation in communication are falling by the wayside. Appraisals that allow customers, employees and managers to rate each other are becoming more and more popular. Companies like Disney and Honda are installing appraisal systems that do just that.

Human resource professionals are learning how to leverage technology to assist their organizations in being able to appraise performance in just such a way. Otis Elevator Corporation was able to do just that by leveraging its existing investment in technology (specifically the internet and its own intranet) and using a third party to bring a sense of trustworthiness to the process. For Otis elevator “ using a contractor also meant that performance evaluation would be administered by an objective third-party…Managers only trust it if they are confident of its objectivity and confidentiality.

A third-party system has obvious advantages in these respects. ” (Huet Cox et al. May 1999 p. 94) The level of consensus at Otis is very high that it is a program that works. It actually can help shape behavior in a positive way. There are a host of companies introducing off the shelf software products to help a company install and maintain an appraisal process that can be trusted by all the participants as well as improving behavior through the appraisal system.

If an employee knows that she or he is going to be rated not only by their manager, but also their peers and customers, they may begin to see areas in their own behavior they can improve upon. Using an intranet and the Internet is defiantly the state of at in this area. This is partly due to the fact that most companies did not have connection to the Internet, as well as a sophisticated enough intranet system to help with the appraisal process. As more and more companies are investing in these technologies, more and more of them will see the benefit in using the intranet as a communication tool.

My organization does not do these things particularly well. However, all the pieces are in place for some type of similar appraisal process to be implemented. We regularly survey our customers (the students) and we have an intranet already set up. Currently, their manager gives the employees of the University of Phoenix an appraisal twice a year, although it is no longer tied to pay. If we could combine the information we already have at hand, and use it to get more accurate appraisals and a better understanding of where to improve our behavior, I think we all would be more satisfied.

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