World over, business organizations face several challenges ranging from dwindling competent human resources to increased economic challenges, including recession. The organizations strive to outdo each other over limited top talented human capital and gain a significant competitive advantage over their rival. Brown et al. (2019, p. 47) highlight that organizations that aim to survive and increase their performance during the harsh economic times must consider effective remuneration systems such as offering monetary and non-monetary packages such as medical care housing to their employees. However, implementing remuneration and performance management for employees is not easy because it involves various issues. For instance, organizations must consider ways of tackling economic challenges due to the coronavirus epidemic. The paper highlights the issues and theories underpinning remuneration and performance management.
Issues Arising from Remuneration and Performance Management
The topic of remuneration and performance management presents organizations with various challenges. First, remuneration gives the organizations the challenge of maintaining their interests and sustainability and the employees’ interests. According to Morozova (2019, p. 23), the business organization must balance offering wages and salaries to promote retention and development of the most talented employees and realize the organizational profitability and objectives. The organizations must cautiously address the employee benefits, including salaries and wages, to virtually attend to the remuneration challenges. The organizations are left vulnerable and armed with less gifted and inadequate employees. On the other hand, the organizations may witness unprecedented, unsustainable employee remuneration costs, leading to business organizations’ losses. Therefore, the organizations must develop effective remuneration processes that promote the organization’s employee retention and growth simultaneously, even amid unfriendly economic environments such as the recession.
Apart from the collision in employees’ interest and the organizations witnessed with remuneration, performance management (PM) alternatively presents the challenge of disharmony, rivalry, and competition amongst the employees. Moreover, the traditional PM techniques heighten the hostility between senior and junior employees when employees are rewarded based on merit instead of experience and hierarchy. For instance, Brown et al. (2019, p. 50) posit that the organizations’ performance management designs need to move from the traditional annual ratings to short term objectives that underscores the employee and employer consistent negotiations. Continued negotiations between the employers and employees will eliminate hostilities, employee turnover and promote teamwork among employees as all the employees’ inputs are considered individually. Furthermore, Iqbal, Guohao, and Akhtar (2017, p. 3) opine that the cost of recruiting new employees is much higher; hence, the organizations must strive to enhance employee job satisfaction through offering benefits and improved salary to retain the employee. The positions of Iqbal, Guohao, and Akhtar (2017, p. 3) reiterates the need for harmonized relationship and negotiations between the employees and employees to guarantee the improved performance and actualization of the workers and organizations interests simultaneously.
Analysis of Remuneration and Performance Management Using Theories
Even though implementing remuneration and PM raises several issues as witnessed above, the two concepts present genuine advantages to the organizations when implemented effectively. First, the remuneration system and various employee benefits elevate the organizations to enjoy a significant competitive advantage in the labor markets. According to Urbancová and Šnýdrová (2017, p. 357), the remuneration policy that is well designed fundamentally contributes to the ability of the organization to retain and attract vital employees capable of leading the organizations market competitiveness. Moreover, Nahar and Zayed (2019, p. 1) allude that remuneration in monetary and non-monetary rewards serves as the primary motivation for employees for their extraordinary performance. The highly motivated employees record higher job satisfaction ratings leading to exceptional organizational success. Accordingly, Iqbal, Guohao, and Akhtar (2017, p. 3) posit that motivational theories such as the hierarchy of needs “A theory of Human Motivation” by Abraham Maslow succeed in unearthing the factors that influence the actions of human beings. Maslow’s hierarchy highlights that individuals are motivated to satisfy basic needs before advancing to meet higher requirements. The theory underpins the remuneration concept as satisfying employees’ needs will enhance their potential to improve their performance and contribute significantly to the organization’s success.
Second, the concept of performance management provides the organization with a considerable ability to effectively utilize the employees to succeed in the organization’s objectives, especially during tough economic times. The study by Kanwal (2018, p. 1) presents that an improved performance management techniques that focus on the workers’ engagement, development, and communication hinged on the principles of the stewardship theory will significantly contribute to the well-being and improved employee performance. Furthermore, Subramanian (2018, p. 91) reiterates that stewardship behavior demonstrated by the organization leadership, including the managers’, results in its success amid economic action. The stewardship theory developed by Donaldson and Davis advances that the organization needs to incorporate stewardship into its leadership culture to advocate for the company stakeholders’ interests, including owners and the employees.
Moreover, Bakotić (2016, p. 120) underpins that boosting the employees’ morale impacts the organization’s success, and employees record more work satisfaction. Apart from stewardship theory, social cognitive theory (SCT) postulated by Albert Bandura reiterates that the individuals’ performance and ability to act accordingly are incredibly motivated by the active processing and comprehension of information (Macinati, Bozzi, and Rizzo, 2016, p. 1020).
Therefore the organizations must ground their performance management techniques on the employee potential, enhancing theories to record extraordinary success and survive the current economic challenges.
Application of Remuneration and Performance Management
In the modern era, organizations must possess significant competitive advantages and establish strategies to survive unfavorable external environment factors. One such scenario includes the emergence of Covid-19, popularly referred to as coronavirus. The coronavirus pandemic has contributed to the unprecedented economic slowdown making it the most severe economic recession comparable to the Great Depression and worse than the Global Financial crisis of 2008 (Gopinath, 2020, p.1). The organizations must adopt appropriate remuneration and performance management techniques to ensure the survival of the organizations and motivation and employees’ job satisfaction during economic downturns, as witnessed during the Coronavirus periods. Faced with financial challenges, the organizations may adopt non-monetary remuneration benefits such as medical care and housing to guarantee retention, reduce employee turnover, and promote organizational production (Aliyu, Bello, and Bello, 2018, p. 3). Accordingly, Iqbal, Guohao, and Akhtar (2017, p. 3) note that the expense of losing talented employees is more significant than hiring and developing new employees for the organization, reiterating the need for the organizations to adopt adequate remuneration and performance management techniques. Therefore, the significance of remuneration and performance management to organization survival and success remains valid.
Recommendations to Realize Effective Remuneration System and Performance Management Designs
The organizations need to establish remuneration systems and performance management designs that promote employees’ development and wellbeing and the company’s growth and success. First, the organization should employ a remuneration system that emphasizes ensuring the employees’ good health and wellbeing by offering medical care coverage and vulnerable employees’ housing needs. Muchai, Makokha, and Namusonge (2018, p. 132) highlight organizations that prioritize the employees’ comfort and interest satisfaction record exemplary success performance. Similarly, the theory of human motivation exposing the hierarchy of needs reiterates the significance of adequate remuneration towards encouraging organization success by satisfying employees’ unique needs.
Similarly, the organizations must design the most practical performance management systems away from traditional performance appraisal techniques. The organization needs to formulate the performance appraisal design that encourages ongoing negotiation between the managers and the employees on the best ways of promoting the employee output and encouraging teamwork between employees. According to Brown et al. (2019, p. 50), new performance management design emphasizes collaboration and dialogue between the management and employees, enabling the organizations to survive increased competition in the market and economic downturns. Furthermore, the stewardship theory highlights that organizations can experience increased success and survive recession if the company leadership adopts the stewardship concepts of promoting stakeholders’ interests, including employees and owners.
Conclusion
Remuneration and performance management are critical agendas for the organizations in the contemporary economic business environment.
The organization’s sustainability and success depend significantly on the employee remuneration and performance management techniques adopted by the organizations. The organizations’ effective remuneration systems enable it to retain and develop the best talent in the labor market, thus offering the organizations a competitive edge over their rivals. Similarly, performance management enhances teamwork and employee retention, which are among the factors that guarantee organizations to survive the competition and the downturn of the economy witnessed in the modern world.