Question: At present your organizations is subscribing to the entitlement philosophy.

As a HR
Manager, you are given the task to study the reward system practiced by
McDonalds (pay-for-performance philosophy) and to make recommendations to the
Head of Department whether the existing reward system in your organizations
should be maintained or otherwise.
a)

Explain the reasons for your recommendation.

Introduction
As a Manager of Human Resource Department for Vads Berhad, I recommend that

my company to change their philosophy from entitlement philosophy to pay-for-performance

philosophy. There are several reasons for my recommendation that I strongly believe will
help my company to attract and retain managers and senior-level employees.
1st Reason
First reason is in term of considerations. McDonalds currently conduct annual
performance appraisals. These appraisals, when properly administered, are based on
performance standards where it is what an employer wants an employee to accomplish to
meet the company's expectations. With these appraisals, McDonalds will be able to evaluate
their employees performance more accurate since it is easy to focus on single employee.
We can compare this philosophy with entitlement philosophy where for entitlement, the
evaluation can be considered as general performance and employees who perform
satisfactorily do not receive special treatment for their performance. Their company may
value them as equal with other employees that may not perform satisfactorily since they are
valued as a team. It can lead to dissatisfaction since other employees may receive the same
or nearly the same percentage increase each year.
Examples
For example, if McDonalds requires manager at each branch to achieve at least
minimum RM50, 000 sales per month, he may do everything he can to exceeds the minimum
requirements. He will encourage his subordinates to work hard so that he will achieve the
target, be rated as exceeding expectation and avoid being labels as falling or below
expectations. For a pay-for-performance system to be effective so McDonalds and
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employees reap the benefits of tying performance to compensation, McDonalds must clearly
communicate their expectations and conduct performance appraisals according to
performance standards.
2nd Reason
Second reason is guidelines. For this reason, McDonalds had given workers and
managers a set guideline on how the pay-for-performance system is connected to
performance ratings. The advantage of setting guidelines for pay-for-performance systems is
to address questions about the type of wage increase, bonus or other incentive an employee
receives for meeting or exceeding expectations. If McDonalds don't communicate the
company's standards and guidelines to employee, they are creating a pay-for-performance
system that is likely to fail because their employee will not aware about McDonalds
expectation and type of benefits. Compare with entitlement, the employees will fell that they
dont have to worry about performance ratings because if they just perform same as previous
year with no improvement, they also will receive the same ratings and rewards.
Examples
For examples, McDonalds intend to apply pay-for-performance for each of their staff,
therefore their staff will want to know anything about it and good guidelines will enables them
to fully understand about it and how to achieve or exceed the expectations in order to gain
the rewards. McDonalds already set up the guidelines at a place where their staff will able to
acknowledge it and remembered what they should do to earn a good rating from McDonalds.
3rd Reason
Third reason is consistency. With a pay-for-performance system, McDonalds
employees receive increments and bonuses for achieving performance goals. For an
employee to receive the base wage increase, he must meet McDonalds performance
expectations. If he exceeds expectations, it improves his chances of receiving additional
monetary incentives. Consistency in performance appraisals is keys in pay-for-performance
systems where supervisors and managers must conduct their subordinates' performance
appraisal in the exact manner approved by the McDonalds Human Resources department or
executive leadership team. The jury are a selected individual from within McDonalds that
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posses great ability and skills to valuate people with consistency. Compare with entitlement,
it is not consistent in term of performance appraisal because the employees are in a team
and it is difficult to evaluate each and every one of them. The conduct for their performance
appraisal might be unbalanced and biased.
Examples
For examples, with pay-for-performance, McDonalds have to ensure that people, who
are responsible for their subordinates performance appraisals to be very specific, balance
and not biased to anyone. For this purposes, they chose a selected person from various
position such as General Manager, Assistant General Manager and Manager to help with the
evaluation. This selected person possesses great capability and ability to evaluate all
employees with great consistency.
4th Reason
For fourth reason, it is about incentives where McDonalds and employees get similar
benefit from pay-for-performance that provides incentives for job performance. Employees in
such a system strive for higher ratings by working harder and hopefully smarter. While
incentives push employees to achieve higher performance ratings, consistent application of
performance standards and pay-for-performance guidelines encourage employees to
maintain those high ratings. However, the one who show strong performance but drop off
after they have received their raise or bonus, should be warned that their incentives or
benefits may be in jeopardize in the future if they fail to maintain their high ratings as before.
Comparisons with entitlement shows that since the incentives are shared among all group
members, not every employee will try to maintain their high rating previously due to
perceptions that any other employees who maintain their ratings will just be enough to cover
for their performance.
Examples
For examples, since McDonald implements pay-for-performance, every employee will
strive for high ratings and maintain it for years to come to receive the incentives. They will
work hard, work smart and push their limit since McDonalds will evaluate them by person and
everyone is responsible for themselves only. When employees able to maintain their
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performance for many years, the incentives may be higher than usual because it shows that
McDonalds appreciate their employees who always strive for success with add on incentives
such as medical benefits and allowance.

b)

In cases where pay-for-performance reward system are used, what kind of

reward do you prefer and why? Individual-based reward, team-based reward or
combination of both? Discuss.
For pay-for-performance, I would prefer to implement the individual-based reward

whereby it can be used to boost the performance and improve the quality of work. It has
unique advantages that can be use by Vads Berhad to improve employees performance and
encourage them to achieve targets in term of individual that guarantee personal satisfaction.
1st Reason
The first reason is it relates pay to performance of individual. The performance of
individual will be evaluated as single units since it is focus on single employees. This
provides more payment to high achieving employees and less payment to low achieving one
plus it allows for competition among employees for prestige and pay which provides a strong
incentive to perform well. It also avoids punishing employees based on the poor performance
of fellow team members, thus resulting in better morale for the individuals. This
compensation may seem more personal especially to higher-performing employees because
it is earn based on their excellent performances.
Examples
For examples, if Vads Berhad figure out that one of its manager had perform below
expectations, he may be introduced with individual-based performance to improve his result
because maybe he is in comfortable zone due to excellent achievement in the past. This will
act as a reminder for him on what his company expect him to perform in term of sales, quality
of work or performance of his department.

2nd Reason
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The second reason is it helps retain best performers. Rebuilding engagement after
a difficult economic period and developing and retaining an engaged workforce should be a
top priority for every company. Employees will spontaneously look to their leaders for a
motivation and use their examples as guidance. The good attitudes, emotions and comments
from leaders that specifically stated for individual will act as an automatic encouragement.
Employee will feel appreciated and there exist a sense of belongings among them towards
company.
Examples
For examples, Vads Berhad intends to prevent their assets from leaving for other
competitor. Therefore they come up with ideas to implement individual-based-performance
so that the employee will feels satisfy with company policy. This will ensure they will feel
comfortable and less intention to leave due to comfortable zone they are in now. The policy
itself must be relevant, easy to follow and employees-friendly so the employee fell secure
and safe.
3rd Reason
Third is it suitable for individualistic culture. Individualistic culture is a society which
is characterized by individualism not collectivism. Individualistic cultures are oriented around
the self, independent instead of identifying with a group mentality. They see each other as
normal co-worker and value personal goals above that of the group. It tends to have a more
diverse population and is characterized with emphasis on personal achievements plus a
rational assessment of both the beneficial and detrimental aspects of relationships with
others. Individualistic cultures have such unique aspects of communication as being a low
power-distance culture and having a low-context communication style that prefer to work on
their own. It doesnt mean that they are not willing to involve in teamwork, it just they feels
comfortable doing work on their own in the way that they rated very efficiently.

Examples

For examples, in Vads Berhad they encourage individuals based reward where in term
of decision making, it requires small period to make it. The individual itself doesnt have to
listen to others, can predict the outcome on their own and feels very confident about it. In
term of power distance, it considered as low power distance where employee and their
supervisor like manager and general manager are characterized by relatively equal power
sharing and discourage attention to status difference and ranking. Everyone is treated as
equal and is free to express their opinions, feels and decision making without any
constraints.
4th Reason
The last reason is it provides equitable distribution of compensation. It can be
measured in term of employment layoff and remuneration on par with workload. Employees
who are laid off are entitled to unemployment benefits provided they meet the criteria of
"available and able to work." The actual amount is based on the employee's salary and
number of dependents where it should satisfy the employees. It is important to apply for
unemployment benefits as soon as they are laid off to prepare for future plan such as
searching for new job as soon as possible. The remuneration for workload is other
cases. It must be on par or more with workload that employees have to burden in
company because it will satisfy them and prevent them from leaving company in future.
Examples
For examples, in Vads Berhad, it rewards their employees in term of
remunerations on par with their contribution, workload and perform exceed the
expectations. For Vads Berhad, they use quotes what you give you get back and
valued employees as important assets of the company. They dont want to lose this
valuable asset therefore the wages, benefits and allowances are given equal with their
performance. For employment layoff usually it is for less valuables asset and are given
layoff based on their latest performance doesnt matter it is below or above
expectations. Normally the compensation given will not be less than what employees
will earn if he continues to work in Vads Berhad to avoid any problems in the future.
References:

-http://iconixx.com/individual-vs-team-based-rewards-which-one-should-you-choose/
-https://das.iowa.gov/human-resources/employee-and-retiree
benefits/employees/benefits-upon-layoff
-http://www.healthaffairs.org/healthpolicybriefs/brief.php?brief_id=78
-http://www.qualitymag.com/articles/85712-the-entitlement-trap