Xcel Energy Pays for Employees Who Excel

Xcel Energy Pays for Employees Who Excel

Sylvia Kupczyk

Kaplan University

MT203: Human Resources Management

Professor Anton

May 8, 2012

Xcel Energy Pays for Employees Who Excel

Introduction

This paper discusses pay incentive strategies at Xcel Energy. The pay incentives in this case are being compared and analyzed with the reading in the Chapter 12 of the textbook: “ Recognizing Employee Contribution with Pay”.

Review/Analysis of the Case

Answer to question #1: Merit pay can take the form of bonuses or salary increases. Typically, merit pay programs focus on rewarding individual output rather than group output. A strong merit pay system provides options for varying pay increments based on the strength of an employee’s performance. Employers using merit pay systems determine the criteria by which they will evaluate employees, and assign and value to each criterion. The connection between individual effort and individual reward becomes extremely clear with a fair merit pay system and it motivates employees. By giving higher pay only to employees’ deemed deserving, merit pay invests in strong employees. This system encourages stronger employees to work harder and stay with the company. Also, if the company doesn’t reward the poor performers, the company encourages them to either improve their skills or look elsewhere for employment. When considering an organization’s overall reward program, each reward element should be designed to accomplish a specific objective or purpose. Taken together, there should be a sense of balance in the design and interaction of the reward plans. Xcel’s strategy of implementing the merit pay system would focus on paying bonuses for a combination of individual, group and corporate performance. I believe this strategy is the right choice for Xcel because it can be tracked easier; it is more cost effective for the company, and more beneficial for the employees (Noe, Hollenbeck, Gerhart, &...