points with her observations on performance pay in the Netherlands. Ingraham notes that managers covered under the plan needed more direction from a central authority, and that there was a wide variation concerning 'awareness of the system and its intent' across managers work¬ing in the same ministry. Not surprisingly, the plan did not work well. We have also found in our own fieldwork that making sure that emplo¬yees are not only aware of the performance pay plan but also understand its workings can assuage employee apprehension about switching compensation systems. It is critical for employ¬ees to understand the institutions that govern their pay at work. Information must not only be disseminated heavily at the beginning of the performance pay plan but also throughout the life of the project.
In complex organizations trust can be crucial to attaining organizational goals, and it must come by example from leadership (Miller, 1992). If leaders demonstrate that they are aware of employee concerns and can be trusted to address them, a norm of trust may arise within the organization. Therefore, strong leadership may be the most critical element in implement¬ing effective performance pay plans. If emplo¬yees do not trust management to conduct accurate appraisals, to secure enough money for all high performers, or to change the perfor¬mance pay plan if it falters, then the likelihood of establishing an effective pay system is very low. Management can address these issues by making sure that enough money is available to satisfy all high performers (Milkovich and Wigdor, 1991), by allowing employees a voice in creating the plan (Perry, 1995), and by soliciting feedback from employees regarding the plan while it is in effect.
When leadership fails to convince employees that the performance pay plan is fair, accusations follow fairly quickly. We have observed this in our own fieldwork, where we have heard employees negatively characterize performance pay plans as tools of management, used to satisfy a particular group within the organization over another. We have also heard employees misiden¬tify some of the most basic rules of the perfor¬mance pay plan as much as two years after its inception. Top management is not solely respon¬sible for these complaints. After all, employees have a duty to understand the environment of their workplace. However, preemptive moves by leadership can improve the situation.
There is no doubt that performance pay plans will remain oft-used tools within the public sector for years to come. The pressure for greater
points with her observations on performance pay in the Netherlands. Ingraham notes that managers covered under the plan needed more direction from a central authority, and that there was a wide variation concerning 'awareness of the system and its intent' across managers work¬ing in the same ministry. Not surprisingly, the plan did not work well. We have also found in our own fieldwork that making sure that emplo¬yees are not only aware of the performance pay plan but also understand its workings can assuage employee apprehension about switching compensation systems. It is critical for employ¬ees to understand the institutions that govern their pay at work. Information must not only be disseminated heavily at the beginning of the performance pay plan but also throughout the life of the project.
In complex organizations trust can be crucial to attaining organizational goals, and it must come by example from leadership (Miller, 1992). If leaders demonstrate that they are aware of employee concerns and can be trusted to address them, a norm of trust may arise within the organization. Therefore, strong leadership may be the most critical element in implement¬ing effective performance pay plans. If emplo¬yees do not trust management to conduct accurate appraisals, to secure enough money for all high performers, or to change the perfor¬mance pay plan if it falters, then the likelihood of establishing an effective pay system is very low. Management can address these issues by making sure that enough money is available to satisfy all high performers (Milkovich and Wigdor, 1991), by allowing employees a voice in creating the plan (Perry, 1995), and by soliciting feedback from employees regarding the plan while it is in effect.
When leadership fails to convince employees that the performance pay plan is fair, accusations follow fairly quickly. We have observed this in our own fieldwork, where we have heard employees negatively characterize performance pay plans as tools of management, used to satisfy a particular group within the organization over another. We have also heard employees misiden¬tify some of the most basic rules of the perfor¬mance pay plan as much as two years after its inception. Top management is not solely respon¬sible for these complaints. After all, employees have a duty to understand the environment of their workplace. However, preemptive moves by leadership can improve the situation.
There is no doubt that performance pay plans will remain oft-used tools within the public sector for years to come. The pressure for greater
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