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Cautions for introducing a pay system
Much advice about pay is wrong (Kerr, 1995).
Many executives learn that the employees will certainly work more effectively in case that the company gives them higher compensation. Pfeffer said that the executives may not be “spending
as much time and effort as it should on the work environment-on defining its jobs, on creating its culture, and making work fun and meaningful” (Six Dangerous Myths About Pay, 2000).
Sometimes, companies pay well to create proactive work environment and get new innovative ideas in return. This policy does not surely work, especially when the top executives and employees
are lacking of trust with each other.
Pay systems need to align with the company culture.
The top management should adjust the pay system when it is not fit with the current business strategy. However, changing the internal culture is a wrong idea because it is embedded in the
employees’ minds. The confusion can make the growth of the company stagnant.
Implementing the reward system is hard and takes management time
Most companies believe that employees will work effectively when they get rewards for their efforts. Because of this concern, the HR managers cannot maintain the policy in compensation.
From Mercer survey, “nearly three-quarters of all the companies surveyed had made major changes to their pay plans in just the past two years” (Pfeffer, Six Dangerous Myths About Pay,
2000). In addition, an example of changing reward system occurred in Sears. Sears had to eliminate its commission system because Sears’s employees wanted high commission, so they offered
unneeded services to customers.