Research Findings

The report aims at providing at insight into the impact of organizational culture on the performance of the employees. The report will help in discovering that there exists a relationship between the organizational culture and performance. It will also help in understanding that a strong employee responsive culture can lead to efficiency in performance. The constant growth in the nature of global business acted as the primary catalyst in studying organizational culture that over time has affected the success and the behavior of the teams, individuals and organizations. Organizational culture has received increased attention due to the key role it has in the determination of the employee level and their performance (Alvesson, 2016). The reports will also analyze the importance of pay for performance compensation plans and performance evaluation system.

In the twenty first century, corporate culture has received wider acceptance with each of its aspects affecting the various systems and subsystem of an organization. Globalization, increased competition, alliances and creation of workforce department has led to greater requirement of organizational culture. This made it an important aspect for the development of the company. Culture however represents a common bond that helps in generating the sense of belongingness amongst actors within an organization (Awadh & Alyahya, 2013). The research would try to discover how the organizational culture puts forward a shared system that forms the basis of communication and mutual understanding thereby contributing to organizational performance.

Organizational cultures that emphasize performance rather than tenure

According to Alvesson & Sveningsson (2015), the idea of organizational culture must be shared within the purview of the organizations. Awadh & Alyahya (2013) stated that organizational culture is based on the cognitive systems that help employees in decision making and thinking. He also identified different levels of culture based on multifaceted values, beliefs and assumptions that determine ways for an organization in conducting business. Nicolini (2016) however defined organizational culture as the normative glue that holds the entire organization together. Organizational culture also acts as the base for determining the difference between the organizations that does business within the similar national culture. According to Hogan & Coote (2014), two essential factors build up an organizational culture. These include the structural stability of the group and the integration of a single item into a superior standard. According to Nica (2013), culture represents a system based on common values at various levels within organization. The norms and values of put forward by the organizational culture have a stronger impact on the organizational performance. Although norms remains invisible but it plays an important role on improving performance.

The Importance of Pay for Performance Compensation Plans

Alvesson (2016) overviews the organizational culture as shared patterns of assumptions, expectations and beliefs of the members of an organization. He also mentions it as collective programming of mind that helps in distinguishing one category or group of people from the other. Belias & Koustelios (2014) identifies the organizational culture that focuses on the performance instead of tenure. These include the competitive culture, cooperative culture and the adhocracy culture.  

Competitive Culture represents an organizational culture that encourages employees in attaining newer levels of achievement, quickening competition amongst the fellow employees along with encouraging them in taking charge (Jones, George & Langton, 2013). A company representing such culture rewards those who are capable of attaining certain predetermined standards. Such a culture also helps in encouraging employee decisiveness and in the creation of an environment of higher expectations.

Cooperative Culture on the other hand represents a culture that promotes the independence of the employees based on goal setting and the initiatives used (Tsai et al., 2015). This type of culture values the employees and ensures the distribution of power and authority based on the trust. Besides, the cooperative norms also ensure encouraging the behavior including the maintenance of personal standard and integrity, realization of goals along with the factor of work enjoyment. In other words, this type of culture encourages teamwork and performance.

Adhocracy Culture primarily depends on creativity and energy. In this type of culture, employees remain encouraged in taking risks and the leaders’ acts as the entrepreneurs or the innovators (Haffar, Al-Karaghouli & Ghoneim, 2013). Here, the organization is made to undergo experimentation by emphasizing on freedom and individual ingenuity. In this culture, the core values depend on agility and change. This type of organizational culture also emphasizes on the performance factor.

Pay for performance compensation plans 

According to Ederer & Manso (2013), while adopting reward philosophy based on employee contribution within organization it is necessary to determine right balance between the short term and the long-term compensation and the variable versus the guaranteed compensation. The concept involved in the development of such philosophy represents the extent to which payment remains tied to the specific performance. This particular issue will vary across organization. Nevertheless, all business should have the capability to identify the performance objectives to be fulfilled by the workforce along with the achievement of the financial outcomes on the attainment of the results.

Shields et al., (2015) stated that the development of the pay for performance compensation plan becomes easier with the understanding on what the approach intends to achieve. Thus, the effective construction of the pay for performance compensation plan helps the company in fulfilling the mentioned objectives. This includes:

• Recruiting and retaining highest quality of the employees
• Communicating and  reinforcing the goals, values and objectives of the company
• Engaging the employees in defining the success within organization
• Ensures  rewarding the contributors for their successful achievements

Different Types of Organizational Cultures and Their Effects on Employee Performance

Thus, the Pay for performance compensation plan represents a method used for creating a line of sight between the elements related to the purpose and culture of the company. However, for implementing the plan, compensation should reinforce the desired behavior within the company’s strategic framework in a manner convincing enough for producing desired level of performance. This is accomplished based on five essentials (Kim, Sutton & Gong, 2013):

Essential 1: This includes tying the performance rewards to the financial objectives of the shareholders. This is because most of the companies have financial responsibility towards shareholders. Therefore, the evaluation of a compensation plan should be like the other investments of the company and within context of financial outcomes expected by shareholders.

Essential 2: This involves in employing the accurate mix of the compensation elements. The accurate blend of the compensation elements is vital for drawing relationship between the key outcomes that the growing companies seek to achieve. This includes, increase in productivity, fulfilling the needs of the employee and the company through meeting satisfaction quotient and achieving the retention goals.

Essential 3: This involves modifying the employee behavior that implies that compensation should not only be meaningful but motivational for the recipient and align with the goals and expectations of the shareholders. This balance however varies across companies.

Essential 4: This involves embracing performance with the payment of the employees. This is essential because if the employees are not able to create the impact asked for, the plan will result in no compensation investment for the company.

Essential 5: This involves undertaking effective communication and reinforcing rewards as they act as the key for creating a long-term commitment and focus within the organization. Compensation rewards puts forward a means for reminding the employees about the importance in striving for the goal.

Performance evaluation systems 

According to Estampe et al. (2013), performance evaluation systems represent a systematic process for examining the degree of performance of an employee in his or her job. The word systematic implies that the performance evaluation process is planned in a manner that allows formal feedback. It is also termed performance assessment, performance appraisal or employee appraisals. An organization should implement a systematic performance evaluation system for the following reasons:

1. The evaluation process encourages positive behavior and performance
2.  The evaluation process represents a way of satisfying the curiosity of the employees about the performance of their jobs
3. It is used as tool for developing employees
4. It also helps in providing a platform for promotions, pay hikes and disciplinary legal action.

Thus, the basic goals of performance evaluation system lie in providing equitable measurement of the contribution of the employee towards the workforce. It also helped in producing accurate documentation for protecting both employer and the employee along with attaining a higher level of quantity and the quality of work produced.  The following five steps are followed for creating a performance evaluation system for any practice. These steps include:

1. Development of  the evaluation form
2. Identification of the performance measures
3. Setting guidelines for the feedback
4. Creation of disciplinary and termination procedures
5. Setting a schedule for evaluation

The Five Essentials in an Effective Pay for Performance Compensation Plan

Recommendations on the Choice of Performance Evaluation System

The most suitable choice for performance evaluation system would be 360-degree appraisal (Bracken & Church, 2013). This is because it provides a comprehensive feedback on the performance of the employees in forming deeper insights. This performance evaluation system involves gathering required feedback from the multiple parties that involves coworkers, managers, vendors and even customers. Accuracy in the performance review is determined with the collection of more information that brings the picture more into the focus. This process of performance evaluation system is not only time consuming but also laborious when compared with the other techniques. Employees however prefer this appraisal system because here the data remains unbiased and it leads to the creation of multidimensional vantage point. The 360-degree appraisal form for the manager is as follows:

Grading  Manager	A	B	C	D
Supervises  others well
Projects a Professional Image
Sets Example through performance
Communicates   Well
Makes decision easily Handles problems and pressures effectively
Organized and Efficient

Figure 1: 360 Degree Appraisal Form for Managers

Source: (Karkoulian,  Assaker & Hallak, 2016)

Compensation Plan Addressing All Issues 

Compensation plan represents the manner in which all components of the compensation package such as salaries, benefits and wages paid (Chung, Steenburgh & Sudhir, 2013). It also determines the purpose for which employees receive bonus, incentives and salary hike. Implementation of voluntary deferred compensation plan helps in addressing all issues.

Here employees remain eligible for participating in the tax-sheltered supplemental in investment programs through deduction of payroll. Such investment plans allows the employee in saving for his retirement either on after tax or tax deferred basis. As the income received after retirement is lesser than the income while they are working so they often receive tax advantage.  

An Analysis of the Credibility of the Plan 

This compensation plan seems credible for the following reasons (Sirkin & Cagney, 2017):

• It helps in lowering taxes. Employees’ makes a contribution towards the plan before taxes are deducted which implies they are taxed on smaller amounts.
• Ensures compounding interest and tax deferred growth. This plan enables accruing of earnings and interest deferring tax. The compound interest will enable quick growth compared to the savings in the taxable account where earnings and interest are taxed every year.
• Ensures planning for future since the other sources of the income like the social security and the pension plans amended by state hardly replace the final salary of the person on retirement

Conclusion: 

On a concluding note, one can say that an organizational culture has a deeper impact on employee performance that not only helps in enhancing productivity but also organizational performance.  A thorough analysis of the report will put forward that there exists a positive association between performance improvement and the presence of strong organizational culture. Adoption of the organizational culture helps the employees in doing their work not only effectively but also efficiently. Employee performance has contributed to the increase in the net organizational profit. Positive development is easy to achieve when every individual remains in a common path within the organization. Through the report, one will also be able to understand how the stronger organizational culture acts helpful for new employees in understanding the competitive advantage. Group efficiency and employee commitment plays a vital role in adopting the beliefs and values of an organization and in enhancing its performance. One can also understand the essentials required for designing the pay for performance compensation plans. One also gets to know why the 360 degree appraisal form is one of most suitable performance evaluation plan. The report also portrayed how the chosen compensation plan proves credible.

References:

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