You can not talk about variable remuneration, if not first talk about reward and recognition, both with regard to their concepts, as their differences.
According to Kohn, the rewards were already used long before formulating a theory to explain it and to systematize your practice. Watson recalled his start with a series of lectures he delivered at Columbia University in 1912. More a summary report much like the “do this and get that” – the so-called Law of Effect. According Marcelino Assisi (Member of the World Organization Remuneration – WorldatWork), rewards programs have a feature of objectivity, with goals and objective and well-defined rules – has a basis.
The main feature of rewards is your direct link between the cause (achieving or exceeding targets) and effect (premium). On the other hand, recognition mechanisms are in their predominance subjective. In these mechanisms, the cause and effect relationship occurs due to the lack of a basis, finally, the recognition occurs through a trial.
The practice of variable compensation strategies has grown considerably within organizations, because it is a practice that focuses on the performance of individuals and teams. The authors Coopers & Lybrand, the adoption of performance linked remuneration policies has been increasing worldwide. The origin of these practices is the awards for productivity or piecework, used since the last century. For them, these forms, as practiced today, can be classified into two major groups: the participation in the profits and remuneration for results.
The first is based on the overall results of the company; The second half goals and objectives negotiated between company and employees. The objectives of the variable remuneration are divided into three: link performance and reward to encourage the individual and the group to seek continuous improvement; share the good and bad results of the company and transform fixed costs into variable costs.
One of the main reasons for the use of the variable remuneration is to unite the reward to the efforts made to achieve certain performance or results. Therefore, the more defined for this union, the better for the system, the better for the company and better for the employee, emphasizes Coopers & Lybrand. You can associate the growth of variable remuneration policies to organizational change processes that companies are going through. Quality programs and productivity and restructuring projects. Assisi, the plans for salary classification and position, and reward and recognition programos, in line with other company’s actions help in order to cause or respond to these different stimuli.
“The wages rarely pays creativity – for example – and is far from compensating the potential, as we have seen, because it is (in most cases) impersonal, regular and inflexible, while creativity is personal, not always regular and therefore flexible “.
It is therefore clear that the variable remuneration is increasingly seen as a way to increase productivity, creativity and satisfaction within organizations. This argument is fully consistent, since people are different, work differently and reach different results. If someone also reward people of different results, is being unfair to the person who could perform better and, what is worse, with time these people realize that its differentiated effort to add anything to your reward, causing an unfair and unfavorable environment professional and organizational growth.
By André Carneiro