There are any number of problems in organizations. Some problems are visible. Some problems are hidden. Hidden or disguised problems tend to make companies less efficient. According to Gibson, Ivancevich and Donnelly in Organizations: Behavior, Structure, Processes, one common problem involves rewards and appraisal. Management can use financial rewards to improve performance. Adequate compensation can also be a factor in attracting talented new employees to the company. Some organizations have unrealistic salary ranges for open positions and find it difficult to fill key positions. Some companies do not properly structure their compensation plans to motivate employees. For example, the company may offer an across the board cost of living increase but no merit increase for superior performance based on budget constraints. This compensation structure in reality a disincentive for workers to excel. Employees who distinguish themselves do not receive any additional compensation for their contributions. Therefore, this program is a hidden problem in some organizations (Gibson, Ivancevich and Donnelly, 13).
Stuart Craner explains that the Peter Principle means that every employee working in a hierarchy tends to be promoted up to their level of incompetence. The principle is based on the idea that a new employee is hired and when they prove to be competent in the task to which they are assigned, they are promoted (Crainer, 127). Employees will continue to be promoted until he or she reaches a position where he or she is no longer competent at which point promotions stop. Gibson, Ivancevich and Donnelly in Organizations: Behavior, Structure, Processes suggest that the most basic measure of effectiveness involves individual effectiveness. If a significant number of employees are ineffective, it is unlikely that the company can be either effective or successful (Gibson, Ivancevich, Donnelly, 24).
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