Handbook of Principles of Organizational Behavior - Soltanieh ...

PAY FOR PERFORMANCE
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attempt to attract skilled workers and create organizational cultures in which employees
feel part of the same company regardless of their location. Cisco Systems, a maker of
Internet equipment, has 65,000 employees worldwide, with about one third operating outside
of the USA (Cisco, 2008 ). The company sets base pay at the 65th percentile in every
labor market and offers variable pay that brings total remuneration to the 75th percentile
(Hansen, 2005 ). Cisco Systems ’ global strategy includes the use of stock options and a
stock purchase plan, but its commitment to doing so has meant that the company has
had to work hard to ensure that pay is understood, accepted, and deployed to the benefi t
rather than to the detriment of workers worldwide. Problems it has encountered include
(Gross and Winterup, 1999 ): regulations in China and Russia that limit the ability of citizens
to hold securities in foreign companies and differing tax regulations across countries
within Europe, including taxing stock options when they are received rather than when
they are exercised or severely taxing any profit if stock options are sold within the fi rst fi ve
years. Differences in per capita income have also caused some adjustments in some countries
to avoid having individuals receive such huge capital gains that they would be able
to take early retirement in only a few years. These examples illustrate the importance of
staying abreast of labor markets and changing laws wherever a company has operations,
but Cisco Systems is convinced that doing so is worth the effort because it enables the fi rm
to recruit and retain superior employees worldwide. The company considers its employees
the company ’s best asset and, as a result, places heavy emphasis on a broad set of benefi ts
and a culture that focuses on “ nurturing and developing this talent to its full potential ”
(Cisco, 2004 ). Cisco frequently appears on various rankings of best places to work (Cisco,
2008 ; Gerdes, 2008 ).
CONCLUSION
Paying for performance works – when done right. It communicates what factors
are most important to the company ’s success and focuses employees ’ attention and
effort on those factors. It is fair, because it pays more to those who contribute more.
In turn, it attracts individuals who can perform at high levels and, by recognizing
and rewarding them for doing so, makes them want to remain.
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Bank of America ( 2008 ). Rewarding success. Retrieved October 4, 2008, from http://
boa.stg.hodesiq.com/ada/rewarding.asp
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