Transcript Pay for Performance

Chapter 11
Rewarding
Performance
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Pay-for-performance
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Pay-for-Performance (P-f-P)
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Incentive System
Rewards individuals and groups based
on their contributions
Challenges
 “Do only what you get paid for” syndrome
 Unethical behavior—pressure to produce
 Can foster competition, not cooperation
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Pay-for-Performance: Challenges
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Factors beyond employee control
Difficulties in measuring performance
Credibility gap
Potential reduction of intrinsic drives
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Meeting the Challenges
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Link pay and performance
Use pay-for-performance as part of
broader HRM system
Promote the belief that performance
makes a difference
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Meeting the Challenges
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Use multiple layers of rewards
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Different types of pay incentives
Increase employee involvement
 Participate in pay plan design
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Types of Pay-for-Performance Plans
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Individual Plans
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Individual-based plans
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Merit pay, bonuses, and awards
Advantages:
 Performance rewarded likely to be
repeated
 Incentives can help shape person’s goals
[use with goal-setting interventions]
 Rewarding individual performance is
equitable
 Fit with individualistic culture in the U.S.
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Individual Plans
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Disadvantages:
 Can promote single-mindedness
 Many do not see link between pay and
performance [or perhaps not there ]
 Quality goals may not be given priority
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Individual Plans
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Most likely to succeed when:
 Individual contributions can be isolated
 The job demands autonomy
 Cooperation is less critical to
successful performance
 Competition is to be encouraged
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Team-based Plans
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Cash/noncash
Given to all equally?
Team may decide how to
distribute the award
Case 11.2—Lakeside Util.
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Team-Based Plans
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Advantages:
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Foster group cohesiveness
Easier to assess team performance
Disadvantages:
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Possible lack of fit with individual culture
Free-riders
Social pressures to limit performance
Difficulties identifying meaningful groups
Intergroup competition
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Team-Based Plans
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Most likely to succeed when:
 Work intertwined, hard to identify
individual contributions
 Organization’s structure facilitates
groups and teams [e.g., HPWSs]
 Case 11.2 redux
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