ABSTRACT
It has been pointed out that the rationale for contingent pay is based on considerations of equity, motivation and sending a strong message across the organization that it attaches great importance to performance. Hence, the chapter deals with only performance-related pay (PRP) and related issues. After discussing the definition and types of ‘contingency pay’, the chapter moves on to discuss ‘performance related pay’, its objectives, growth, criticism, pre-requisites for its success, developing a PRP programme, and operating and evaluating PRP. Then, the issue of ‘performance appraisal’ has been dealt with in detail. The meaning and definition of performance appraisal and potential appraisal, performance appraisal's objectives, process, appraisal interview, its methods—casual appraisal, traditional and highly systematic appraisal and modern methods—have been discussed, followed by some practices of performance appraisal in Indian industries, feedback about performance reviews, how to introduce and execute performance programme, uses of performance appraisal, constraints of appraisal systems, how to give negative feedback to employees, etc. Thereafter, follows a discussion on ‘potential appraisal’, its meaning and need, and its methods, viz. Philips Hi-Lo Matrix, Philips NV Holland Model, Psychometric Tests, Review Appraisal and best practices of potential appraisal used by some organizations. The chapter comes to an end after writing the chapter review,discussion questions, individual and group activities and case study.
