A Considered Approach to Performance Related Pay Within Yorkshire Water Services

International Journal of Applied HRM (ISSN: 1742-2604) Volume 1 Issue 2

Steven Marrison, Yorkshire Water Services


In September 1997 Yorkshire Water’s Director of Human Resources outlined the company’s intention to introduce Performance Related Pay (PRP) as the primary method of determining pay. This would apply specifically to relationships involving individual assessment and the competency levels felt necessary for all operations across the company. The rationale for the decision was that it supported the strategic HR objectives of Yorkshire Water Services (YWS), the overall intention being to align each employee’s role in a more formal manner and directly in line with strategic intentions. This follows a basic tenet of HR philosophy, in so far that practice stems from and supports the strategic objectives. In accord with this trend Mabey et.al. (1998) stated:

“Essential to the notion of strategic management of human resources is the requirement that the process of managing people is not an end in itself, but explicitly related to the wider goals of the organisation. The management of human resources therefore finds itself being judged on its contribution to wider goals, and, faced with this scrutiny, must develop its own procedures to report on its record. More generally it must provide a framework for internally auditing the means by which it delivers a contribution to strategic goals, with a view to continuously improving them. Performance management is a means of addressing these requirements.”1

After protracted negotiations with the trade unions, in June 1998, the Managing Director’s team had formally gained acceptance in principle of PRP. The Managing Director had noted prior to acceptance in support of the principle of PRP:

“The new approach to reward is a vital step in keeping YWS moving forward towards achieving the vision of becoming the best water company in the UK. We are convinced the changes will result in a reward system which is fairer to everyone by taking into account individual contribution and competence and removing inconsistencies. We believe that it is not fair that individuals who work hard to achieve their objectives receive no greater reward than those who simply tick over. The changes will also enable pay to be increased outside of promotion to reflect broader career development.”2

There existed a number of pertinent issues in relation to the sentiments of the last quotation, one being the ability to pay outside of promotion in relation to career development. YWS, like many organisations, has had a prolonged initiative to de-layer and devolve within the management structure, with the consequential loss of promotional opportunities. Such intention relates directly to the desire to retain valued employees. Heery (1992) suggests that performance management systems can be a means of segregating workers, and that payments outside of promotion are a surreptitious way of streamlining management stratas by giving someone a little more pay and a lot more responsibility.3

Kessler and Purcell (1992) in considering PRP noted:

“In terms of retention, PRP was viewed as sending the right message in rewarding highly those the organisation wanted to keep and lowly those it was happy to lose.”4

This paper seeks to evaluate the introduction of Performance related pay (PRP) as the chosen method of remuneration within Yorkshire Water PLC. In so doing the following key areas are considered:

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