The use of contingent forms of reward has become increasingly prevalent in modern organizations as a means to motivate and incentivize employees. However, the ethical implications surrounding such practices cannot be overlooked. This essay critically examines the potential ethical issues arising from the utilization of contingent forms of reward, with a focus on the criticality of clear criteria, ensuring objectivity in measures of performance and skill, hazards of differential outcomes, scope for divisiveness and pay secrecy, and debates surrounding the erosion of employee voice in decision-making processes.
Clear Criteria and Objectivity:
One of the fundamental ethical challenges in employing contingent forms of reward lies in the establishment of clear criteria for performance assessment. Without clearly defined and transparent criteria, subjective biases may seep into the evaluation process, leading to unfair outcomes. Research by Snell and Dean (1992) emphasizes the importance of objective measures in performance appraisal systems to minimize the potential for favoritism and discrimination. Organizations must ensure that performance metrics are consistently applied and evaluated based on predetermined standards, thereby promoting fairness and equal opportunities for employees.
Differential Outcomes and Inequity:
Contingent forms of reward, such as performance-based pay or bonuses, may result in differential outcomes among employees. While such differentiation can be justified based on individual performance and contribution, it can also create inequities and breed feelings of unfairness. The Equity Theory, proposed by Adams (1965), suggests that individuals compare their own input-to-output ratios with those of their peers. When employees perceive inequity in the distribution of rewards, it can lead to decreased motivation, increased turnover, and a decline in overall organizational effectiveness. To mitigate these ethical concerns, organizations should ensure transparent communication about reward systems and provide avenues for employees to voice their concerns.
Divisiveness and Pay Secrecy:
The practice of pay secrecy can exacerbate the potential divisiveness caused by contingent forms of reward. When employees are unaware of each other’s compensation, it becomes difficult to assess the fairness of reward distribution. This lack of transparency can lead to feelings of mistrust, suspicion, and a sense of organizational secrecy. Rousseau’s (1995) psychological contract theory highlights the importance of open and honest communication between employers and employees to establish a sense of trust and promote ethical behavior. Therefore, organizations should strive for transparency regarding compensation practices to foster a culture of fairness and trust.
Erosion of Employee Voice:
The implementation of contingent forms of reward can also lead to the erosion of employee voice in decision-making processes. When reward allocation is solely based on individual performance, it may undermine the value of collective decision-making and collaboration. Theories of organizational justice, such as procedural justice and interactional justice, emphasize the importance of employee participation and voice in decision-making (Leventhal, 1980; Bies & Moag, 1986). Organizations need to strike a balance between individual performance-based rewards and the inclusion of employee perspectives, ensuring that decision-making processes are participative and take into account the diverse needs and aspirations of employees.
The use of contingent forms of reward in organizations presents a range of ethical considerations that must be carefully addressed. Clear criteria and objective measures of performance are essential to minimize biases and ensure fairness. Organizations must also navigate the challenges of differential outcomes, pay secrecy, and the potential erosion of employee voice, taking proactive steps to foster transparency, trust, and inclusivity. By addressing these ethical concerns, organizations can create a positive work environment that promotes fairness, motivation, and long-term employee engagement.
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