Employee’s psychological experiences with bank’s pay for performance system in South Africa

Orientation: Pay-for-performance (P4P) system is a crucial organisational strategy to retain and reward employees. However, it is not always well implemented. Research purpose: The aim of the study was to explore the perceptions and psychological experiences of employees about the implemented P4P system at a bank in Polokwane City in Limpopo province. Motivation for the study: The P4P system's objective is to reward great performance. However, it might also be used to punish deserving employees while unjustly and unfairly rewarding the non-deserving employees, leading to negative perceptions and psychological experiences by other employees. Research approach/design and method: The study followed qualitative research design, therefore, the 10 conveniently sampled participants' verbatim transcribed semi-structured interviews were analysed and interpreted from the interpretivist paradigm perspective to understand the lived experiences of the employees with regard to how the P4P is implemented at the bank. Content analysis was used to explore the deep, contextual meanings of the participants' words and to extract themes and the subsequent subthemes. Main findings: The P4P system was perceived as a great but biased initiative and employees psychologically experienced betrayal and confusion, felt both motivated and demotivated and experienced the P4P as an uninspiring exercise. Practical/managerial implications: The bank should train line managers on how to conduct the appraisal session, more specifically on how to allocate a rating that ultimately determines the rewards. Multiple rating techniques usage and sensitivity training for the line managers might minimise the experienced bias and legitimise the P4P system at the bank. Ultimately, the bank should link performance targets with bonuses to enhance transparency, equity and perceived justice within the system. Contribution/value-add: The study makes important first, unique, practical and scientific contributions to employees' perceptions and experiences (psychological experiences) of pay-for-performance in the banking sector. The study also provides valuable insights by exposing the challenges that limit the effectiveness of P4P in the banking sector.