Answers:

1. According to Jackson there is a relationship between merit pay program and competitive
strategy. Implementing a merit pay program to provide pay increases based on
performance would support the company’s competitive strategy by rewarding
employee’s productivity through differentiation between performances. This pay system
promotes healthy competition among employees, encouraging each to work hard to
achieve their best while delivering great results for the company.

2. Developing a merit pay program before the performance appraisal system is important.
Merit programs draw and hold superior performers, since these programs reward skills,
efforts, and provide opportunities for advancement. Which encourages employees to
stretch their own limits to achieve the best. Also, allowing the employer to differentiate
pay given to high performers, and between individual and company performance.
Without recognition of high performing employees, the company risks the loss of a highly
competent, well-motivated employee, and at the same time fails to encourage high
performance standards. So developing a merit pay program is an important key for the
company.

3. Precision’s face some problems with performance appraisal that might cause challenges
for Jackson to implement a merit pay program. First, failure to differentiate among
performers because employees do not have written job descriptions that clearly state
their performance expectations. Second, poor performance measurements since
supervisors use a generic form to conduct their appraisal, and the same form is used for
all employees. Thus, the review of past appraisals suggest that supervisors tend to rate
all employees about the same. Third, a supervisor's biased ratings of employee job
performance very rarely is an employee rated exceptionally high or low, must be rated
as average. Finally, lack of open communication between management and employees
because it seems that employees and supervisors communicate very little about
performance, aside supervisors tend to talk to employees about their performance only if
there's a problem. So, Jackson has to provide a reliable assessment to support the merit
program.

4. Aligning the performance appraisal process with the merit pay program has several
strategies. Analyzing job description by noting duties, requirements, and relative
importance of a job which help reduce a supervisor’s arbitrary decision about the merit
pay increase, by clarifying the standards against employee performance. Second,
communications are important since for a merit pay program to succeed employees
must clearly understand what they need to do to receive merit increases and what the
rewards for their performance will be. Because open communication helps an employee
to develop reasonable expectations and encourages him/her to trust the system and
who operates it. Third, establish effective appraisals because during performance
appraisal meetings with employees, supervisors should discuss goals for future
performance and employee career plans. Fourth, empower employees since supervisors
must ensure that employees have access to the resources necessary to perform their
job because empowering employees leads to more self-corrective action rather than
reactive courses of action to supervisory feedback. Finally, differentiating among
performers, merit increase should consist of meaningful increments since when
employees don’t see significant distinctions between top performers and poor
performers, so top performers may become frustrated and reduce their level of
performance.