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Managing Human Capital

Write an article on Managing Human Capital. It needs to be at least 3000 words. The researcher states that merit-pay systems can, in fact, serve to demotivate and even generate anxiety, thereby only contributing marginally as motivators of desired performance. Merit pay is usually rolled into the base salary and hence performance in one year will have the effect on the salary in the future. However, this is based on performance appraisal and the methods of performance appraisal followed by the organization are a controversial issue. Even if linkages to productivity do not exist, the plan communicates a useful message to employees. It is generally believed that individuals should be rewarded based on their contributions and hence merit-based pay serves to fulfill the “norm of distributive justice”. Thus it diffuses concerns among the employees about fairness and equity. Theories of motivation also support the basis of merit for pay. Managers are encouraged to link important outcomes to desired behaviors. Whether they base their decision on the reinforcement theory or the expectancy theory, managers need to demonstrate to employees a link between performance and rewards. All these would indicate that basis of merit for pay is necessary as well as beneficial. Researchers express doubts whether performance can be accurately measured and there have been suggestions to make the measurement objective instead of subjective judgments. Moreover, individual performance is linked to others in the organization and this poses difficulties in calculating the individual contribution to the organization. Instead of output measures, behavioral measures can be considered but none is satisfied with such measures. Employees’ acceptance of the feedback systems creates problems as they do not accept the evaluations as accurate. Perceived favoritism is a problem in merit compensation systems due to the subjective nature of the performance evaluation process.

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