RUPALI GROUP

Rupali Polyester Limited

THE ROLE OF INCENTIVES IN PERFORMANCE MANAGEMENT

PRESENTED TO RANA NADIR

PRESENTED BY MASOOD AHMAD

ROLL#022(MHRM)

INSITUTE OF ADMINISTRATIVE SCIENCE

UNIVERSITY OF THE PUNJAB, LAHORE

The Rupali Group

The Rupali Group is a leading business group in Pakistan with diverse

commercial interests ranging from manufacturing, exporting and indenting to
banking and trade financing. The Rupali Group is also the largest producer of
polyester filament yarn and a leader in production of staple fiber in Pakistan.
Managed by the Feerasta family, the Group's activities reflect the changing
business environment and emerging needs of the economy.

The philosophy of the Group is to build on its the strength and quality while
maintaining reliability. Products and services offered by the Group are
acknowledged by customers with the highest standards.

People are central to Group’s growth strategy. A large in-house pool of

intellectual capital is the driving force behind Rupali Group’s rapid growth, and is
one of its competitive advantages.

Today, the Group is managed by highly qualified team of professionals with vast
experience in their respective fields. Every department is headed by a
professional, qualified and experienced executive.

Growth opportunities and competitive compensation packages offered by Rupali

Group enables it to attract and retain excellent talent.
Location
History

The Rupali Group in Pakistan dates back to 1948 when its first manufacturing
concern was established in Narayangang, East Pakistan (now Bangladesh)
which subsequently expanded in 1956 to manufacture the well known brand of
"Consul" socks.

In 1969, the Group acquired Crescent Wooden Spool Manufacturing Company

Limited in technical collaboration with a renowned Japanese company.

The Filament yarn and staple fiber industry was forecasted for rapid growth in the
1980's. With increasing demand for its products, Rupali Group entered into the
local manufacturing of polyester filament yarn at Rupali Polyester Limited (RPL)
in 1980.

The initial production capacity of Rupali Polyester Limited set-up at a cost of Rs.
150.06 million (US$ 15.157 million) was 7.5 metric tons of polyester filament yarn
per day. Rupali's research and development team quickly developed variations of
filament yarn to counter the less than ideal operating conditions of filament
weaving in the country. The local R&D efforts rapidly bore results and Rupali's
filament yarn quickly gained wide acceptance and captured a large share of the
local filament market. This continues to be one of the strengths of the Group.

Products

Texturised Yarn
Denier Filament Luster
45 24 BTL
45 24 BTL
75 24 OSD
75 24 OSD
150 48 BTL
160 96 OSD
 Dope Dyed
Denier Filament Luster
75 24 OSD
75 24 OSD
150 48 OSD
150 48 OSD

Twisted Yarn
Denier Filament Luster TPM
75 48 OSD 800 TPM
75 48 OSD 1500 TPM
75 72 OSD 1000 TPM
75 72 OSD 1300 TPM
75 72 OSD 1500 TPM
150 48 OSD 1000 TPM
150 48 OSD 1500 TPM

Production Capacity

Rupali Polyester Limited - Plant Capacity and Actual Production

Annual Capacity (In Three Shifts) In Metric Tons

Years 2008 2007
Yarn 10,100 10,100
Fiber 12,000 12,000
Actual Production
Yarn 12,311 12,166
Fiber 22,761 24,168

Research & Development

The Philosophy of the Company's Management is to grow on the strength of
Quality and Reliability. To achieve this objective, it is maintaining a well equipped
Research and Development Center for standard maintenance, innovative
improvements in its products and achieving economies in production techniques
without compromising on standard and quality of products. Products and
Services offered by the Company are acknowledged by the customers as quality
and reliable products and are the first preference of customers. The various
products of Rupali are in fact import substitutes as they were previously imported
from Japan, Taiwan and Korea. Rupali, through its in-house expertise and
innovative research, developed techniques for producing them indigenously.

Rupali's research and development team has developed variations of filament

yarn to counter the less than ideal operating conditions of weaving in the country,
while its finest quality fiber is excellently processed under local conditions. The
local R&D efforts continue to bear results and the Rupali brand is the preferred
choice of local weavers and processors.

The Company's innovative approach to R&D continues to be one of its strengths.

We also implement extensive quality control at all levels of the organization to
maintain our reputation for excellence. The Company gives high priority to
customer's satisfaction, tries to maintain uninterrupted supply for its products and
provides after sales services, technical support for the trouble shooting.

Quality Control
The philosophy of the company’s management is to grow on the strength of the
quality and reliability. To achieve this objective, it is maintaining a well equipped
Research & Development Center for standard maintenance, innovative
improvements in its products and achieving economies in production techniques
without compromising on standard offered by the Company are acknowledged by
the customers as quality and reliable products and the first preference of
customers.

The company gives high priority to customers, satisfaction, tries to maintain

uninterrupted supply of its products and provides after sales services, technical
support for trouble shooting.

Corporate Structure
 Board of Directors

Jafferali M. Feerasta
Chairman

Nooruddin Feerasta
Chief Executive

Muhammad Rashid Zahir Muhammad Ali H. Sayani

Amin A. Feerasta Abdul Hayee

Syed Ali Zafar

Secretary

S. Ghulam Shabbir Gilani

Audit Committee

Jafferali M. Feerasta Muhammad Rashid Zahir

Chairman Member

Amin A. Feerasta
Member / Secretary
 Bankers

Bank Al-Habib Limited Citibank, N.A

Habib Bank Limited MCB Bank Limited

Meezan Bank Limited NIB Bank Limited

Soneri Bank Limited The Royal Bank of Scotland

Limited

Auditors

Qavi & Co
Chartered Accountants

Shareholding Info
As at 30 June 2010

No of
Shareholding Total Shares Held
Shareholders
From To
115 1 - 100 6,343
123 101 - 500 36,670
97 501 - 1,000 64,405
71 1,001 - 5,000 154,310
11 5,001 - 10,000 80,245
2 10,001 - 15,000 23,000
3 20,001 - 25,000 67,345
1 25,001 - 30,000 28,950
2 30,001 - 35,000 66,000
3 35,001 - 40,000 113,500
1 40,001 - 45,000 44,500
2 45,001 - 54,000 97,500
1 95,001 - 100,000 99,000
2 110,001 - 115,000 230,000
1 115,001 - 120,000 117,000
1 130,001 - 135,000 134,500
2 180,001 - 185,000 367,210
1 190,001 - 195,000 194,000
1 205,001 - 210,000 209,490
1 225,001 - 230,000 230,000
1 260,001 - 265,000 262,530
1 350,001 - 355,000 352,811
1 470,001 - 475,000 472,022
1 480,001 - 485,000 483,918
1 485,001 - 490,000 488,010
1 655,001 - 660,000 658,545
1 1,085,001 - 1,090,000 1,085,316
1 1,230,001 - 1,235,000 1,233,944
1 1,600,001 - 1,605,000 1,602,223
1 1,650,001 - 1,655,000 1,610,422
1 2,055,001 2,060,000 2,056,869
1 4,110,001 4,115,000 4,111,012
1 8,515,001 8,520,000 8,519,800
1 8,725,001 8,730,000 8,727,124
455 Total 34,068,514

Categories of Shareholders Number Shares Held Percentage

Individuals 423 2,753,286 8.08
Joint Stock Companies 6 268,920 0.79
Investment Companies 2 1,500 0.00
Directors, Chief Executive Officer and their
9 3,293,848 9.67
Spouses and Minor Children
Mr. Jafferali M. Feerasta 2,319,260 6.81
Mr. Nooruddin Feerasta 500 0.00
Mr. Muhammad Rashid Zahir (Nominee Director)
0 0.00
SAPICO
Mr. Muhammad Ali H. Sayani 488,010 1.43
Mr. Amin A. Feerasta 500 0.00
Mr. Abdul Hayee 1,150 0.00
Syed Ali Zafar 10 0.00
Mrs. Roshan Ara Sayani w/o Mr. Muhammad Ali H.
483,918 1.42
Sayani
Mrs. Amyna N. Feerasta w/o Mr. Nooruddin
500 0.00
Feerasta
3,293,848 9.67
Executives
National Bank of Pakistan, Trustee Deptt 3 3,252,645 9.55
Investment Corporation of Pakistan 200 0.00
 Financial Highlights

Rupees in Thousand
2004 2006 2007 2008 2009 2010
Sales (Net) 2,584,908 3,210,297 3,649,631 3,525,961 4,115,381 4,224,019
Gross Profit 247,800 341,783 270,879 172,822 205,049 258,133
Operating Profit 115,024 253,106 102,667 170,219 167,705 229,752
Profit before tax 134,643 304,715 258,721 169,119 165,044 227,539
Profit after tax 50,659 188,602 182,274 110,774 103,038 171,023
Income Tax – Current 55,192 111,915 97,080 12,660 19,879 56,428
- Prior Years (1,213) 11,872 (12,681) (115) - (52,002)
- Deferred 30,005 (7,674) (7,952) 45,800 42,127 52,090
Gross assets employed (excluding
2,179,466 2,243,895 2,108,825 2,324,824 2,630,359 2,925,136
capital work-in-progress)
Net current assets 1,402,283 1,630,550 1,415,379 1,352,120 1,200,412 1,288,578
Share capital 340,685 340,685 340,685 340,685 340,685 340,685
Reserves 1,435,615 1,495,615 1,495,615 1,495,615 1,495,615 1,495,615
Unappropriated profit 11,671 3,999 186,273 194,841 212,708 298,560
Shareholders equity 1,787,971 1,976,573 2.022,573 2,031,141 2,049,008 2,134,860
Long term loan - - - - - -
Gross profit % 9.59 10.65 7.42 4.90 4.98 6.11
Net profit to sales % 1.96 5.87 4.99 3.94 2.50 4.04
Debt / Equity ratio 00:100 00:100 00:100 00:100 00:100 00;100
Current ratio 6.14:1 12.24:1 7.94:1 7.85:1 3.62:1 3.49:1
Return on quity % 2.83 10.25 9.01 5.45 5.03 8.01
Earnings per share before tax Rs. 3.95 8.94 7.59 4.96 4.84 6.68
Dividend % 20 40 30 25 25 30
Production volume (M. tons) 30,362 33,326 32,608 31,906 36,334 35,072
Number of employees 1442 1095 1068 1181 1256 1158

RUPALI POLYESTER LIMITED was incorporated at Karachi in May 1980 as a

Public Limited Company and is listed on all stock exchanges of Pakistan. It owns
and operates composite facilities to manufacture Polyester Fiber and Filament
Yarn. It produces quality products by using latest technology and best quality of
raw materials. The Company has the privilege of being one of the pioneers in
Pakistan for manufacture of Staple Fiber of highest quality. Since its inception,
the Company has been growing steadily through expansion and diversified
operations. The assets of the Company have increased to over Rs. 2,931 million
from the initial capital outlay of Rs. 150 million.

The Company has a polymerization unit with a capacity of 105 metric tons per
day, polyester filament yarn capacity of 30 metric tons per day and a polyester
staple fiber capacity of 65 metric tons per day. The various products of Rupali are
in fact import substitution as these were previously imported from Japan,
Indonesia, Taiwan and Korea. Now the Company is importing the basic raw
materials only and through value addition is producing the highest quality
products locally.

Since inception, the philosophy of the Company’s management is to grow on the

strength of quality and reliability. To achieve this objective, it is maintaining a well
equipped Research & Development Centre for standard maintenance, innovative
improvements in its products and achieving economies in production techniques
without compromising on standard and quality of products. Products and services
offered by the Company are acknowledged by the customers as quality and
reliable products and are the first preference of customers.

The Company gives high priority to customers’ satisfaction, tries to maintain

uninterrupted supply of its products and provides after sales services, technical
support for trouble shooting. AL HAMDO LILLAH, the Company enjoys high
prestige and reputation in the business community, banks, financial institutions
and customers. It is also amongst major contributors to the national exchequer.

Career

Rupali Group holds a prime position in the business sector and is a preferred
employer amongst prestigious nationals and multinationals. We recruit highly
qualified and experienced individuals - both at entry level and for vacancies
arising at various levels - who would prove to be assets for the organization. We
provide opportunities for improving personal capability to enable staff to take on
greater responsibility. Having a rich and diverse history, we encourage our
employees to venture forth in new and dynamic areas leading to organizational
progress along with individual growth.

Incentives for Employees in Rupali Group

• Pay, Salaries, “efficiency wages” etc.
• Direct financial benefits, such as , illness/health/life insurance; allowances
(Clothing, housing, etc.), subsidies, gain sharing, pensions (through EOBI)
• Indirect financial benefits such as subsidized meals/clothing/ accommodation/
Transport, scholarships, (through Labour department),
• Study leave, holidays, vacation, etc.
• Work environment/conditions, occupational health, safety, recreational facilities
• Amenities, school access(through Labour department), infrastructure,
transport,
etc.,
• Job security; Career/ professional development/ training opportunities
• Feedback, coaching, valued by organization
• Solidarity, socializing, camaraderie, affection, passion
• Status, prestige, recognition(Long service awards)
• Sense of duty, purpose, mission
• Security, opportunities, stability, risk

Incentives and Performance Management In Rupali Group

When designing a performance management system, does it make

sense to link goal accomplishment to monetary incentives? How does
incorporating incentives into such a system affect workers?
Performance, motivation, and attitudes? What shape should such
incentives take? The purpose of this document is to summarize the
highlights of empirical research that addresses these questions.

What do incentives add to a performance management

system? Are monetary incentives necessary, or are goals and
feedback enough?

From the substantial body of research on goal-setting we know that

workers who are given goals that are specific and difficult outperform
workers who are given a "do your best" goal or no goal at all (Latham
& Lee). Goals do four things: direct attention; mobilize task effort;
encourage task persistence; and facilitate development of task
strategies (Locke; Locke & Latham). In other words, goals provide us
with a clear direction; inform us that we need to try hard; remind us
that an end is in sight; and encourage us to think about the process of
reaching that end.

From the body of research on feedback we know that workers given

information about how they perform generally outperform workers who
are not given such feedback (Enzle & Ross; Harackiewicz).
Furthermore, we know that comparative feedback is especially useful.
In studies that compare task feedback that allows a worker to compare
his/her competence relative to others versus task feedback that allows
a worker to assess his/her competence in isolation only, the
comparative feedback has a stronger impact on workers? feelings of
effectiveness (Sansone). The research does not give a clear answer
regarding the impact on actual effectiveness; the dependent variables
in most feedback studies are related to motivation (self-perceived
effectiveness) rather than performance (actual effectiveness).

We also know that a combination of goals and feedback has a more

powerful effect on task interest and persistence than either goals or
feedback alone (Bandura & Cervone). When goals and feedback are
combined, we know whether we are on the right path, and we know
how much farther we need to go to reach our goal.

What happens when monetary incentives are added to the mix? While
goals and feedback clearly boost performance, adding incentives can
enhance task interest and persistence further still (Locke, et al.). The
key word is "can" ? whether incentives will have a positive effect on
motivation depends upon the nature of the incentives.

What impact do monetary incentives have on motivation?

Early research suggested that when extrinsic rewards such as

monetary incentives were linked to performance on interesting and
appealing tasks, intrinsic motivation decreased. The reason for this
effect was that when workers were rewarded for doing work they
already enjoyed, they observed themselves accepting a reward and
inferred that they must be working for the reward rather than for
intrinsic enjoyment of the task. Extrinsic rewards thus dampened
intrinsic interest (Deci; Lepper, et al.). This finding received a great
deal of attention, but subsequent research, however, provided limited
support. One review of 24 relevant studies found that while 14
reported a negative impact of extrinsic rewards on intrinsic motivation,
10 reported no such impact (Boon & Cummings). It is now clear that
extrinsic rewards can impair or enhance intrinsic motivation,
depending upon how the rewards are constructed and construed.
Harackiewicz, Manderlink, and Sansone explain that rewards have
three aspects: evaluation, performance feedback, and reward value.
Each aspect can have a different impact on intrinsic motivation. The
evaluation aspect promotes feelings of external control and thus
reduces intrinsic motivation. The feedback aspect promotes feelings
internal control and thus enhances intrinsic motivation. The reward
value aspect? The incentive as a symbolic cue of achievement? makes
competence salient and thus enhances intrinsic motivation. In a series
of experiments, Harackiewicz and colleagues showed that introducing
contingent rewards can enhance, inhibit, or have no effect on intrinsic
motivation, depending upon which of the three aspects is made most
salient. Other researchers have obtained similar results (Enzle & Ross).
Researchers are just starting to address the most interesting question:
under what conditions will a given aspect be most salient?

When are rewards likely to have a strong effect on a worker?s

motivation and effort?
The dominant model for understanding and predicting whether a
reward is likely to affect worker motivation and effort is Victor Vroom?s
expectancy model. Several decades of research have largely
substantiated the accuracy and robustness of this model. Vroom
asserts that the strength of a reward?s impact on worker motivation
and effort are a function of three factors: expectancy, instrumentality,
and valence. Expectancy is the worker?s perception of the strength of
the link between effort and performance. If I work hard and put myself
out, will that translate into enhanced task performance?
Instrumentality is the worker?s perception of the strength of the link
between performance and the reward. If my performance is strong, will
I receive commensurate rewards? Valence is the value a worker places
on the reward. Will the rewards I receive be things I really care about?

Vroom?s model highlights the fact that, in order for an incentive

program to have a strong impact on worker motivation and effort, the
worker must believe that effort will lead to performance, that
performance will lead to rewards, and that the rewards will be
desirable. A manager who wants to design an effective incentive
system must take into account the worker?s perceptions along each of
these three dimensions. Empirical research has shown that the
strength of these three factors can in fact predict a worker?s effort and
performance level (Mitchell; Katzell & Thompson). If any one of these
factors is weak, the incentive system is not likely to have a meaningful
positive impact.

The research I have cited until this point is primarily on the individual
level. That is, it focuses on the impact of incentives on individual
workers. (Actually, the research participants are usually college
students rather than workers.) What about the organizational level? Do
organizations that introduce incentives perform better? The evidence is
mixed. Some researchers firmly conclude that linking pay to results
leads to enhanced organizational performance (e.g. Lawler; Ehrenberg
& Bognanno; Kahn & Sherer; Mitra et al.; Zenger & Marshall). Other
researchers conclude that contingent pay has no appreciable impact
on organizational performance (e.g. Milkovich & Wigdor; Pearce,
Stevenson, and Parry; Pearce & Porter; Shay). Part of the reason for
the lack of consensus is that these studies encompass a broad array of
incentive systems, such merit salary increases, one-time bonuses,
gain-sharing programs, and profit-sharing programs. Furthermore,
these studies operationalize performance in very different ways, such
as quality of output, quantity of output, financial status, worker
perceptions, etc. Indeed, recent literature reviews (Heneman;
Milkovich & Wigdor) note that it is too early to draw firm conclusions
about the impact of incentives on firm performance.

Predicting dysfunctional effects of incentives

In an ideal world, incentives lead to enhanced motivation, effort, and

performance. In the real world, however, incentives can have
dysfunctional effects. The dysfunctional effect that has received the
most study is the worker?s lament, "It?s not fair!" When rewards are
contingent on performance, workers are finely attuned to issues of
fairness, and a distribution of rewards that is perceived as even slightly
unfair can lead to significant problems (Greenberg).

Researchers have tried to understand when workers are likely to

perceive their rewards as unfair, and how they are likely to react. A
useful model for understanding these issues is Stacy Adams? equity
theory, which has been supported and refined through decades of
research. Adams? theory, simply put, is this: To assess whether I am
being rewarded fairly, I compare myself to others. I compare not only
the rewards I receive (known as "outcomes" in equity theory) but also
my inputs, and the ratio of my rewards to my inputs. Inputs include
such things as effort, talent, and tenure. If my ratio is smaller than
yours, I perceive the distribution of rewards as unfair. I will try to
redress this injustice by changing the elements of our two ratios to
make them equal. Research has indicated that the most common
approach to equalizing the ratios is decreasing my inputs ? that is,
reducing my effort (Campbell & Pritchard, 1976). When I try to affix
blame for my unjust situation, I am likely to blame external factors,
such as my supervisor, the organization, or the incentive system,
rather than myself (Taylor & Pierce). Not surprisingly then, when
workers feel relatively undercompensated they are more likely to
engage in theft, sabotage, politicking, and turnover (Summers &
Hendrix; Martin; Greenberg).

On the other hand, when assessing the fairness of the distribution of

rewards, it is possible that I will discover that my ratio of rewards to
inputs is bigger than yours. Adams? theoretical framework predicts
that in this situation of relative overpayment, I will react by increasing
my inputs ? effort ? in order to bring our ratios in line. The evidence for
this prediction is mixed. In the short term, workers may indeed react to
feeling overpaid by expending more effort to justify their rewards. Over
the long term, however, workers are likely to simply change their
perception of their deservedness, rather than sustaining an increased
effort level (Campbell & Pritchard).

When I compare my reward-input ratio to yours, it is much more likely

that I will perceive my ratio as too small rather than too big. This is
because people generally have exaggerated perceptions of their
performance (Meyer); this is a fundamental cognitive bias. On top of
that, people generally are prone to compare their pay to others who
are perceived as comparable in performance, but who earn more
(Martin). Given these tendencies, the odds are good that I will be
dissatisfied with my rewards and perceive myself as unjustly
undercompensated.

Coping with dysfunctional effects of incentives

How can a manager cope with the seemingly inevitable dissatisfaction

that performance-contingent rewards will thus produce? One approach
is to reduce the intensity of the pay plan ? that is, to reduce the
proportion of a worker?s pay that is contingent on performance. But
this approach also reduces the positive impact of incentives on
motivation and performance (Zenger & Marshall). Research suggests
the most effective way to cope with a worker?s sense of "distributive
injustice" is by establishing "procedural justice." Distributive justice
concerns the relative size of my rewards; procedural justice concerns
the process by which the size of my rewards was determined.
Greenberg studied the simultaneous impact of distributive and
procedural justice, and discovered a fascinating interaction. Workers
perceived a high pay level as fair regardless of the process by which
the pay level was determined. Workers perceived a low pay level as
fair only when the process by which the pay level was determined was
fair. In other words, workers tolerated a distribution of rewards that
they felt was unfair so long as the process of determining the
distribution seemed fair.

What contributes to workers? sense that a process for determining

rewards is fair? A process is more likely to be perceived as fair when it
is open and transparent, and when workers can contribute to the
process by providing relevant information (Lind & Taylor; Kanfer et al).

How should incentives be structured? What key contingencies

have been identified?
Given the level of interest in contingent pay in both the public and
private sectors, there is surprisingly little research into how best to
structure an incentive system. There are very few studies that
compare the effectiveness of different incentive plans (Milkovich &
Wigdor). This may be due to the difficulty of conducting comparative
research. Comparing the impact of different incentive structures
requires recruiting many organizations into a study. This is costly in
both time and effort. It is much easier for a researcher to focus on the
incentive scheme at one particular organization, although such
analysis does not yield direct information about how one type of
incentive scheme compares to another, or the conditions under which
a particular type of incentive scheme makes sense. As noted earlier,
Zenger & Marshall have found that schemes with greater incentive
intensity (percentage of pay that is contingent on performance and
thus at risk) have a larger positive impact on motivation and
performance than schemes with lesser incentive intensity. We also
know that, when designing group-based incentives, the smaller the
group, the greater the impact of the incentives on motivation (Zenger
& Marshall). But only one feature of incentive system design has
received sustained attention :whether and when incentives should be
individual or team-based.

a. Structuring incentives: Individual versus group

Should incentives be based on individual or on group performance?

Research shows that both approaches have benefits and both have
costs. Basing rewards on individual performance is generally
associated with increased pressure on individuals to perform and to
accept responsibility for their own actions, and increased risk-taking
behavior (Milkovich and Newman). When individualistic schemes
successfully distinguish between high and low performers, such
systems provide a valuable source of performance feedback, and
foster the sense of a meritocracy. Individual rewards can be especially
useful in large organizations where workers might otherwise feel lost in
the system, according to Lawler.

When incentives are based on group performance (which typically

means every group member receives an equal reward) group members
report greater liking and respect for one another, enhanced self-
esteem and perceptions of control, lower anxiety, and more task
enjoyment (Johnson & Johnson). Slavin found greater communication
among team members when rewards were group- rather than
individual-based, even when the task did not require any interaction.
Mesch et al. found higher levels of learning and information sharing
among group members when rewards were based on group
performance. Several investigators have found that group-based
rewards foster cooperation and helping (Milkovich & Newman; Miller &
Hamblin).

Both the individualistic and the egalitarian, group-based approaches

have serious shortcomings. Under the individualistic approach,
resources and information are more likely to be hoarded than shared.
Individualistic systems can exacerbate the sense of a two-tiered
society of organizational winners and losers. Outstanding performance
appraisals are, at least in theory, reserved for a select minority. This
can alienate the very people who most need to improve (Drennan).
Instead of trying harder, low performers may rationalize their poor
performance evaluations as merely a sign of incompetence or bias on
the part of those conducting the performance appraisals. The
organization can produce a residue of disgruntled people who feel they
owe it nothing; indeed, they may
wish it ill (Gabris & Mitchell). High performers also can suffer under
individualistic pay schemes. Several classic case studies of incentive
plans, from that of Roethlisberger & Dickson to William H. Whyte, have
documented the ostracism and other negative social sanctions high
performers must sometimes endure.

Group-based rewards can have dysfunctional effects as well. Group-

based incentives can promote regression to the mean rather than
outstanding contribution (Milkovich and Newman). Low performers
may have little incentive to obtain training and raise their contribution.
So as not to be taken advantage of, high performers may hold back
from exerting themselves (Harkins) or leave the organization
altogether. Alternatively, high performers may become vigilant police
officers who pressure the low performers to try harder (Drabman,
Spitalnik, & Spitalnik). As a result, low performers may feel tremendous
pressure and scrutiny from other group members (Ames), which may
further inhibit improvements in low performers? output. Furthermore,
the group product could suffer if low performers feel their low status
gives them little right to exert influence or express their individual
perspective.

Given the compelling data both pro and con, what can be inferred from
this body of research? Incentives should be team-based when
cooperation and knowledge-sharing are critical to task success, such
as in cross-functional product development (Balkin & Gomez-Mejia;
Milkovich & Wigdor). Task complexity is likely to shape the need for
cooperation and the extent of interdependence among workers. When
task success hinges on individual excellence, individual incentives are
appropriate. This is likely for tasks that are simpler and less
interdependent. The nature of the work should drive the design of the
incentive system.

b. Structuring incentives: Types of worker

How should the design of an incentive system vary based on the type
of worker? Several decades ago, sharp distinctions were drawn
between the types of pay plans appropriate for senior managers,
middle managers, and line workers. Those distinctions have now
largely fallen by the wayside. Only a small amount of research speaks
to this question (and the research addresses the question only
indirectly). Gomez-Mejia & Balkin found that performance-contingent
pay is less appropriate for workers who have a low willingness to take
risks. Placed under a variable compensation regime, such workers are
likely to withdraw, either cognitively or behaviorally. Igalens & Roussel
report that exempt employees are more likely to experience
contingent pay as motivating than are non-exempt employees.
Bushman, Indejejikian, & Smith found that incentive intensity (the
percentage of pay at risk) is greater at higher levels in an
organizational hierarchy than at lower levels. Bushman et al. argue
that this is appropriate, since people at higher levels have greater
influence over the organization?s success.
 A study on” The Role of Incentives In Performance Management” in
MIAN TYRE & RUBBER COMPANY LIMITED

Research Questionnaire

Dear Mr./Ms./Mrs. Masood Ahmed (Manager Industrial Relations & HR)

Assalam-o-Alaikum!

I am a student of MHRM at Institute of Administrative Sciences (IAS), University

of the Punjab. As part of my project of RMT subject, I have been asked to carry
out “A Study on the Role of incentives in Performance Management “Mian
Tyre & rubber Co. LTD” For that purpose I have been allowed to choose your
Organization. I would like to have an understanding of your perceptions/views as
to have incentives can play a role in perform Management, which will serve as a
fundamental basis for my research. You are therefore, requested to give your
valuable input by going through and answering the items tabulated in several
sections of this questionnaire.

I would assure you that your response to this questionnaire will be kept
confidential and will be not be disclosed or used in any manner other than the
research purpose as stated above.

Thanking you for your valuable time and help for this research study.
SHA
HAB
ALI

Maste
rs of
Huma
n
Resou
rce
Mana
geme
nt
Instit
ute of
Admi
nistra
tive
Scienc
es
Unive
rsity
of The
Punja
b
Roll
No.
24
(2009-
2011)
Section One: Demographic and Attributes, Please Tick the appropriate box
0. Name of Employee / Department Masood
1. Position /Designation Ahmed (Manager Industrial Relations & HR)
2. Qualification Masters in IR & HR
Ph.D M. Phil/MS Masters √ Bachelor
3. Experience in Job (years) 8 Years with current Organization 05
5. Age (years) 36
6. Gender:
Male √ Female

Section Two: Role of Incentives in Performance Strongly Agree Partially agree/

Management agree partially disagre
7. I have a clear understanding of organizational vision and √
mission
8. In my organization departmental performance goals are √
developed in line with organizational vision and mission
statement
9. In my opinion, performance management system is in √
existence in my organization
10 I am aware of the objective of current performance related √
. reward offerings
11 Following type of performance based incentives (PBI) are currently offered by the organization to boos
.
Financial Non financial
12 Following financial performance based incentives (PBI) are currently offered to me: (tick the applicable
.
___________ Accelerated √ Salary increment √ Special prize √

Promotion In case of other pl

Sponsored Sponsored Training and Sponsored recreation /

Travel √ Education √ entertainment
13 Following non-financial performance based incentives (PBI) are currently offered to me: (Tick the app
.
Assignment of Issuance of Employee of the Acknowledgement of
additional charge / Certificate of year award performance in official
authority Merit / honor / publication
Appreciation √
Ceremony arranged Enclave / place Other please
in recognition of ascription in the specify
performance √ name of an
excellent employee

Section Two: Role of Incentives in Performance Management Strongly Agree Partially agree
agree partially
disagree
14 I think that existing performance based incentive system is √
. compatible with other similar organizations in Pakistan
known to me
15 I feel satisfied with the current availability of performance √
. based incentives system
16 Implementation / reinforcement of performance based √
. incentive system based on performance suggested by
higher management is suitable.
17 In my view there should be a noticeable difference in √
. reward increases among employees based on performance
18 Audit should be given higher weightage in my √
performance evaluation
19 When an employee receives a performance incentive the √
. other employees are motivate to exert extra effort.
20 Performance based incentives are distributed less √
. frequently
21 My suggestions and reservations relating to PBI are duly √
. considered by the concerned authorities.
22 I fully understand the results / outcomes expected from me √
. to do my job.
23 My supervisor who evaluates my performance is √
. competent enough to discharge such function with due
care
24 My supervisor who evaluates my performance is generally √
. biased and unfair
25 In my view serious attempts are made to mitigate the risks √
. and challenges faced by performance based incentives
system
26 I am given proper briefing / feedback regarding √
. performance targets, reward entitlements, performance
evaluation and reward distribution mechanism
27 In my organization a fair budgetary allocation is available √
. for award of performance based incentives system to the
employees
28 Funds allocated for performance based incentives system √
. can be used as a tool to payroll cost
29 I feel that performance based incentives system can √
. improve institutional competitiveness
30 Higher I am satisfied with performance based incentives √
. system, higher will be its impact on my performance
31 Please tick against the type of other risks and challenges √
. faced by PBI system, which need to be addressed:

Lack of vision and Lack of employees Imposed Lack of funding

strategic direction involvement in the implementation and resources
process √
Lack of Highly optimistic Ineffective PBI Others please
Transparency and and difficult to system monitoring specify
Fairness achieve standards
Lack of Supervisory Lack of HR Un-controllable
competence management elements hindering
√ performance
organizational,
departmental and
individual goal
alignment
Lack of awareness in Vague or
employees √ ambiguous policies
and procedures

32. Followings are my suggestions for PBI improvement, which may be helpful in creating higher and pos
employee performance :

- KPI Should be developed

- Awareness Program must be developed
- The negative gap should be filled in through performance management.