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Tying compensation with performance measures

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The President of EEC has decided to adopt the balanced scorecard. The balanced scorecard translates an organization's mission and strategy into operational objectives and performance measures for 4 different perspectives. You received an e-mail from him asking about tying compensation with performance measures. Discuss the following in your response:

•Discuss unethical behavior that can result if the wrong performance measures are used to tie performance measures to compensation.
•How can EEC avoid these behaviors?
•How should EEC tie performance measures to compensation?
•Who is responsible for establishing the performance measures?

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1. Discuss unethical behavior that can result if the wrong performance measures are used to tie performance measures to compensation.

Although most organizations offer incentives for performance, it should not be used as the basis for driving motivation. Organizations should evaluate their current strategy to determine how employee talent is managed in order to ensure adequate performance measures. Most organizations seek cost effective measures while simultaneously reaching corporate objectives.

Consider a pet-owner relationship for example, it is stated that when training pets, you should eliminate treats from the equation because treats persuade the animal to follow commands but does not enforce or encourage obedience. Once the treats are gone the animal no longer follows the commands or may not obey the owner without a treat present. In essence, instead of maintaining discipline the treat encourages poor behavior. Not to refer to human beings as animals but the same principle applies. Instead of working for an organization for an exciting, enriching, value adding experience of being employed, an employee may perform well based on bonuses and incentives, but remove either one of those elements and an employee may search terminate his or her relationship with your company for the competitor.

Often, people are compelled to work hard for the reward at the end of a completed task. If an employee acknowledges what can be gained if they fulfill their obligations they will focus on meeting or exceeding corporate expectations. In other words there are stakes involved. There is a tangible reason for the employee to come to work everyday (to provide for the family or him or herself) to ...

Solution Summary

The tying compensations with performance measures are given. How the EEC should tie performance measures to compensations are given.