The Use of Merit Pay and Incentives

The purpose of this paper is to explore the use of Merit Pay and Incentives
as motivators for increased productivity. The key focus is the system at
Richmond Memorial Hospital. To do so, one must begin at the beginning…..
The use of financial incentives (financial rewards) paid to workers whose
production exceeds some predetermined standard was popularized by Frederick
Taylor in the late 1800s. As a supervisory employee of the Midvale Steel
Company, he had become concerned with what he called "systematic soldiering".
This was the tendency of employees to work at the slowest pace possible and the
fact that some of these same workers still had the energy to run home and work
on their cabins, even after a hard 12-hour day. Taylor knew that if he could
find some way to harness this energy during the workday, huge productivity gains
would be achieved (REFERENCE?). Thus was born the concept of motivational and
incentive systems.
What is "motivation?" The root word is "move" which would mean that anyone
who is moved to do something is motivated. Therefore, sitting on a tack, or at
least the pain associated with it is a motivator. For those of us in Graduate
School, we are aware that without a "B" average we will be eliminated from the
program. Maintaining that average is our motivator. Attaining the certificate
of graduation is our incentive. In psychology, at its most basic, a motivator is
that which impels or compels an individual to act toward meeting a need. On a
physiological level, thirst, hunger and sex are motivators or drives. They are
basic needs which must be met.
Relating this to a hospital environment, it is not base compensation which
drives the employee, but what the base compensation can satisfy in a higher
level of needs. Money can\'t buy love, but it can buy some security such as
insurance benefits. After basic and security needs are met, compensation is
not the motivator, but what compensation represents is (REFERENCE?).
One statement that must be made before continuing is that needs are varied
and can occur concurrently or over a period of hours or days, etc. And, needs
are mixed. Hunger is a drive: The satisfaction of hunger can take several
forms and, usually, when one is hungry one also is a little thirsty. Then, if
the book, Tom Jones (AUTHOR, YEAR), was any indicator, food and drink enhance
IT RELATES IN CASE SHE HASN\'T READ IT). Sooner or later, one has to rest...and
so it goes. But, do note that a number of needs or motivators may be "acting"
at the same time. In hospital settings, especially those that are undergoing
restructuring needs are highly varied. The same employee who is driven by a
salary motivator may now be driven by a long term security need as a motivator
Many times, if one is given a bonus for a job well done, the money is not
the motivator, but the recognition is. Initial motivation can occur with the
use of bonus or profit sharing. However since bonuses and other such incentive
compensations occur perhaps as little as once a year, there must be other
motivators at work to get an individual to work towards established goals. This
is an important concept which must be understood in order to have any incentive
compensation system work for the company and individuals (REFERENCES???).
Implementing pay for performance plans, good management, and incentive
plans will motivate personnel to perform at the peak levels necessary to bring
about improvement in the bottom line which is what interests most corporations
With flatter organizations, and in most cases fewer employees, companies
need to motivate their remaining employees to make a value-added contribution,
take ownership, and be held accountable for their work (REFERENCE?).
Historically, employees have been rewarded with increased base pay, promotions,
and titles (REFERENCE?). However, organizations today are finding other means
of motivating employees. Companies are recognizing the need to change their pay
philosophies, from paying for position or title to paying for people. In
accordance with this changed philosophy, and increasing number of organizations
have taken the step of truly linking pay to performance, through such programs
as variable pay, where a percentage of pay is "at risk," depending on the
employee\'s achievement of predetermined measurable production, operations, or
other goals (REFERENCES??).
Merit pay systems which are based on past performance are flawed by their
very nature and do not work effectively as a reward