Unit 9 Final

Running head: PAY FOR PERFORMANCE PLAN 1

PAY FOR PERFORMANCE PLAN 1

Pay for Performance Plan

Stephanie A. Gillmer

Purdue Global University

HR 435-01 Compensation

Dr. Ileana Felipe

September 8, 2020

Performance Plan

Having background knowledge within BNSF is vital to having a fair pay for performance plan. Compensating employees with appropriate compensation for their performance should be taken into consideration for BNSF to maintain and hire dedicated employees. Other railroads such as Union Pacific are competitive and might adequately compensate the top-performers better. BNSF needs to motivate and recognize its employees by having a base level and variable pay system with an equal balance. If they pay performance were to get out of balance, it can lead to dissatisfied employees (PayScale, 2020).

In order to design the pay for performance plan, BNSF should determine what section of the competitive market they intend to choose. For BNSF to remain competitive versus Union Pacific, they should choose leading the market strategy. Leading the market has a total compensation package above other labor markets in a similar position (Koss, 2020). Since BNSF is a Class-I railroad, it would be beneficial to pay more to hire and retain more experienced employees. Below is a comparison of the three market strategies (Koss, 2020).

Pay Policies: Advantages and Disadvantages
Compensation Policy	Advantages	Disadvantages
Lag: Pay lags the market	1. Lower costs. 2. Money can be used for benefits.	1. Hard to attract employees. 2. Trained employees leave for your competitors.
Match: Pay matches the market	1. Pay and costs match the competition. 2. During good financial times, you can share bonuses and short-term incentives.	1. May not be able to attract star performers when the labor market is tight. 2. May not be able to keep emerging stars.
Lead: Pay leads the market	1. Able to attract and keep stars. 2. It can promote the perception of the organization as an employer of choice.	1. Must be financially able to afford it. 2. During financial hard times, they may not be able to change financial commitment quickly.
Source: Solving the Compensation Puzzle, by Sharon Koss, SHRM Publications, 2008

The proposal to BNSF will have to define and decide who is eligible. Areas of consideration would be train crews having to meet deadlines, intermodal loading and unloading freight goals, maintenance workers keeping trains running, and track repair personnel. The time of service in the company will matter to show loyalty to long time employees. Job classifications are also a factor in distinguishing better salary and exempt employees. Have a plan for reaching goals by incentives for employees, and figuring out what the payout will be—for example, bonuses, matching a portion of 401k, stock, or cash options.

The purpose of the proposal has two goals; to create a system of evaluating employees to advance in higher operation functions and creating a measure that assesses the level of an individual’s job performance to pay adequately for work done (2001). The performance plan will help BNSF commit to changing the culture of their employees. It will sustain and improve the retention of employees. Employees will become proud and feel that there is fairness in compensation. It will also show results in individual and organizational performance (McPhie, n.d.). Issues that pay for performance system can bring up is that not all employees are motivated by money (Spraggins, 2017). Some employees would instead be motivated by praise, recognition, or opportunity for advancement in the company.

In order for the pay for performance to be effective, BNSF needs to meet specific requirements. The system can only be successful and effective if the employees value the pay and understand it is a return for high performance. With a sound system in place, BNSF will state the requirements of the employees and believe desired performance goals are achievable (McPhie, n.d.). BNSF can then recognize and reward the employees for performance.

The incentive plan used for BNSF should be nondiscretionary bonuses, awarding when the employees, teams, or the organization as a whole meets the pre-defined objectives and goals. The best-suited incentive plans are company-wide bonuses and team-incentive bonuses (Harrison, 2019). The company-wide bonus is what BNSF currently uses; it focuses on specific goals such as meeting customer goal deadlines and safety (accidents and injuries). The better the results it rewards the employees with more of a yearly bonus. The team-incentive bonus would work well for BNSF, too, in different job areas. Each section would have different goals to meet; if employees are reward based on their performance in their craft, it will improve performance and morale.

References:

Harrison, C. (2019, June 28). What is Pay-for-Performance Compensation? Retrieved September 07, 2020, from https://www.salary.com/blog/what-is-pay-for-performance-compensation/

Koss, S. (2020, February 28). How a Pay-for-Performance Compensation Strategy Pays Off. Retrieved September 07, 2020, from https://www.shrm.org/resourcesandtools/hr-topics/compensation/pages/payforperformancepaysoff.aspx

McPhie, N. G. (n.d.). Designing an Effective Pay for Performance Compensation System. DOI: https://www.mspb.gov/mspbsearch/viewdocs.aspx?docnumber=224104&version=224323&application=ACROBAT

Milkovich, G. T., & Wigdor, A. K. (2001). Pay for Performance: Evaluating Performance Appraisal and Merit Pay. Retrieved September 07, 2020, from https://eds-b-ebscohost-com.libauth.purdueglobal.edu/eds/ebookviewer/ebook/bmxlYmtfXzEyMzNfX0FO0?sid=e76603ed-cb03-46f3-8524-c17d2eb9f212@pdc-v-sessmgr05

PayScale. (2020). Evaluating and Rewarding Employee Performance - eBook. Retrieved September 07, 2020, from https://www.payscale.com/hr/evaluating-and-rewarding-employee-performance?_bt=316409529571

Spraggins, C. (2017, October 03). The top 4 problems with performance pay. Retrieved September 07, 2020, from https://www.payscale.com/compensation-today/2014/09/the-top-4-problems-with-pay-for-performance