PAYMENT SYSTEMS AND PERFORMANCE IMPROVEMENT: DESIGN AND IMPLEMENTATION
| Published date | 01 April 1988 |
| Pages | 17-23 |
| Date | 01 April 1988 |
| DOI | https://doi.org/10.1108/eb055127 |
| Author | Richard Thorpe,Angela Bowey |
| Subject Matter | HR & organizational behaviour |
PAYMENT SYSTEMS AND
PERFORMANCE IMPROVEMENT
DESIGN AND IMPLEMENTATION
by Richard Thorpe
Department of Management, Manchester Polytechnic, UK, and
Angela Bowey
Pay Advice and Research Centre, Gibraltar
Introduction
Recent years have seen an increase in the debate on the role of payment systems and participation in
performance improvement. Using important recent research, this article sets out to explain how payment
systems can be designed and implemented to give the best possible chance of success, and how, by means
of a participative approach to change, beneficial consequences can ensue for organisations, sometimes in
unexpected ways.
Payment Systems and Productivity
Studies of wages systems have provided insight into the
behavioural patterns associated with different kinds of
payment systems, and have resulted in a body of
knowledge to help managers find a "best-fit" system
for their own organisational circumstances Most of
these studies have been detailed examinations of an
existing system, or of the transition period between two
different systems. They did not answer questions such
as "What are the relative merits of different kinds of
payment system?"; "In what circumstances do
particular kinds of payment system have the best
results?"; "What contributes most to the success of a
payment system?".
This article is about research which sets out to answer
these questions. The material is based on many years
of research and advisory work on pay and productivity
undertaken by ourselves and our colleagues. The most
important findings were first identified from a study of
63 organisations which introduced incentive payment
schemes in the late 1970s at a time when many UK
organisations were attempting to improve productivity
by self-financing productivity schemes Further work
since then has involved putting the results into practice
and verifying the usefulness of the approach advocated,
as well as formulating ways in which our findings can
be best communicated to trainers, managers, students
of management and those wishing to better their
understanding of incentive payment systems [1] In the
next few months, as a result of the 1987 Finance Act,
a number of companies will be introducing profit-related
payment systems. The first schemes to be registered
will run to the end of 1988, or more probably to March
1989.
As a consequence, the lessons learned through
this research will be even more pertinent to pay system
administrators, academics and consultants.
Previous Research into Pay
Previous studies of wage payment systems and their
results are incorporated into our approach. The
Strathclyde University study, which compared 63
companies that had all introduced new payment
systems at approximately the same time, studied the
resultant processes of change in behaviour. The
emphasis was placed on how the type of scheme
adopted and the methods of design and implementation
affected the success of the scheme over a period of
time Earlier research [2,3,4] has provided a great deal
of insight into some of the behaviour patterns which
explain the failure of an incentive payment scheme to
motivate higher performance They have also provided
understanding of the problems of people at work which
can be caused by an inappropriate payment system.
There are three popular misconceptions about payment
systems. Managers who have seen an incentive
payment scheme working
well,
where the employees
concerned were producing high performances, often
believe that they will obtain the same benefits if they
introduce an identical scheme somewhere else.
However, they are usually disappointed with the result.
Secondly, many managers still believe that so long as
an incentive scheme is designed, maintained and
operated in accordance with the principles of good work
measurement practice, higher performance will follow
automatically Again, they are frequently disappointed
And thirdly, it is commonly believed that the benefits
This article is one of a series of two that detail recent and
continuing research into payment systems. This first article
will detail some of the main features found to be important
in scheme success, whilst the second "Participation in
Payment System Design" will detail how the research results
can be translated into practice
ER 10,4
1988
17
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