CAIE A-Level Business 2.2.4 Motivation Methods in Practice

Evaluate whether ZB should introduce performance-related pay.

1(d)

Responses may include:
AO1 Knowledge and understanding
Knowledge of performance related pay and/or salary, including;
- Performance-related pay; is where the amount of payment is linked □ - to the employee's meeting
targets/quality/ability
- Do not reward 'performance'
- Salary; a salary is a fixed payment □ (usually paid monthly) irrespective of number of hours worked and/or
productivity
One payment system can gain both AO1 marks, if developed knowledge is shown.
AO2 Application
- Sells products online / online retailer
- Luxury hand-made bags
- Made to customer's order
- 15 employees
- Operates a JIT inventory management system
- ZB set up three years ago
- ZB operates as a partnership
- Growing demand following magazine advertising promotion in January
- Orders increased by 50%
- Labour turnover increasing
- Five-day lead time
- Workers currently paid a salary
AO3 Analysis
Analysis for performance related pay, including;
- Performance-related pay offers employees an incentive to work harder ${ }^{\Delta v}$ - increased productivity ${ }^{[9 \mathrm{v}]}$.
- Performance-related pay offers the employees the opportunity to potentially earn more money than when they were
paid a salary. This could reduce labour turnover - decreases costs.
- Money as a method of motivation and increased productivity - lower costs.
- Challenge of setting fair performance objectives / fair review of performance for all employees, increases productivity -
increases sales.
- Performance-related pay may encourage some employees to work faster/harder and quicker dispatch of orders may
become a source of competitive advantage - increased market share.

1(d)

Analysis against performance related pay, including;

- Money not motivating all employees so may increases costs - and lead to lower profit

- Time/administration involved with managing/operating a performance-related pay system increases costs - reduces profit.

- Employees may focus on producing a higher quantity under a performance-related pay system, which could have a negative impact on quality - which could affect future sales/brand image.

- The change to performance-related pay may lead to less pay stability for employees and could increase labour turnover further - increasing costs.

Allow analysis for and against a maintaining salary, including;

- Salary payments offer stability for employees as they know how much they will receive each month which may reduce labour turnover - reducing costs.

- Salary payments offer no incentive for employees to increase production - no growth.

AO4 Evaluation

- A judgement whether ZB should introduce performance related pay, and/or a judgement that ZB should maintain its system of paying a salary.

- What the introduction of performance related pay may depend upon, such as; whether employees are motivated by pay, the local labour market and the employee's reaction to the idea

- Whether the benefits of the increased employee effort/motivation outweigh the costs of introducing the system?

- What payment systems do other local businesses offer - will ZB continue to lose experienced employees if unhappy about the change?

- What impact will the change have on product quality - will this affect future sales/brand image?

- Will employees receive a basic payment alongside the performance-related element to provide stability?

Accept all valid responses.

2(a)(i)