A study of the performance management system with performance related pay in a public utlility

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A study of the performance management system with performance related pay in a public utlility

 

Author: Lai, Yiu-kwong Peter
Title: A study of the performance management system with performance related pay in a public utlility
Degree: M.B.A.
Year: 1997
Subject: Employees -- Rating of
Performance awards
Public utilities -- China -- Hong Kong -- Finance -- Case studies
Hong Kong Polytechnic University -- Dissertations
Department: Dept. of Management
Pages: v, 80 leaves : ill. ; 30 cm
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b1256911
URI: http://theses.lib.polyu.edu.hk/handle/200/1259
Abstract: In this research project, a large public utility was selected as the target company for the case study. The company was established for a long time and the rules and regulations set up long time ago could no longer cope with the dynamic business environment. This drawback could adversely affect the performance of the company. To tackle with this problem, the management introduced a performance management system ("PMS") incorporated with performance related pay ("PRP"). The aims are to clarify performance expectation between management and employees, to improve communication and to award employees according to their performance. This case study was conducted after the PMS with PRP had been implemented for one complete cycle which included four steps namely, performance agreement, performance plan, monitor and review, and performance review. The objectives of this study were to evaluate whether PMS works by assessing the impact on the areas namely link pay to performance, increased understanding of job/performance expectation, cultural change and motivation of employees. Then, it looked into the factors contributing to the motivation of employees by means of establishing a model in which the relationship between demographic factors, goal clarity, effort-performance, performance-reward and motivation were assessed. Expectancy theory was selected as a suitable framework to explain the rationale to implement PMS and to assist in evaluating the model because the elements in the expectancy theory, i.e., valence, instrumentality and expectancy, were closely associated with the variables in the model. The survey was conducted by means of questionnaire in which the items were extracted from previous studies for the measurement on various independent and dependent variables. The sample with the size of 130 consisted of employees from different functional areas and job grades across departments in the company. Data collected were then analysed statistically by means of comparison of mean value, correlation matrix, t-test, ANOVA and regression. It was then found in the survey finding that PMS did not work satisfactorily in the company. It was due to the facts that PMS could not impose any impact on cultural change. Furthermore, there was negative effect on the size of PRP and performance-reward linkage was very weak although there was perceived improvement in feedback, goal clarity and effort-performance linkage. The motivation of employees could not be enhanced because, according to expectancy theory, two elements out of three, i.e., valence (size of PRP) and instrumentality (performance-reward linkage) could not be met despite the fulfillment of expectancy (effort-performance linkage). Regarding the model established, it was also observed that some demographic factors associate with the motivation of employees, while goal clarity, effort-performance, performance-reward associate with the motivation of employees positively. To improve the PMS being implemented, it was recommended that open communication should be established to clarify how the PRP or other PMS related policies were operated to improve the performance-reward linkage and hence the perceived amount of PRP. Size of PRP should also reflect the level of performance and at the same time, the inflation factor should be taken into account. Besides, line managers should adopt optimum objectives and take into account both long term and short term goal for subordinates to aim at. Finally, training was an effective method to eliminate or regulate the factors which obstructed the successful implementation of the system. These were recommended as steps to enhance the overall effectiveness of the system.

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