What are the components of pay for performance schemes and what are the risks of implementing a plan?
The pay-for-performance approach to wages can help align an employee's interests with those of the company. Pay-for-performance links the wages of an employee to their performance at their job and is tied to specific outcomes that the employee can meet.
Answer and Explanation:
There are five key components of pay-for-performance:
- Measurability - The performance must be measurable by some objective measures.
- Transparency - The ability to meet those goals need to be clear to the employee and the employer.
- Communication- There needs to be a path for the employee to achieve high performance and a way to communicate that and provide clear feedback.
The risks of implementing pay-for-performance are that it can encourage an employee to take shortcuts to achieve their performance goals that may be harmful to the overall company's objectives or discourage work if objectives are unclear or arbitrary. If pay-for-performance is tied just to overall output (making 100 widgets an hour or more) the employee has an incentive to cut corners on quality to achieve that objective. Conversely, tying performance to quality can lead to a lower output of work from the employee.
Learn more about this topic:
from Business 106: Human Resource ManagementChapter 7 / Lesson 3
Related to this Question
Become a member and unlock all Study Answers
Try it risk-free for 30 days!Try it risk-free
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Explore our homework questions and answer library
Our tutors are standing by
Ask a study question and one of our experts will send you an answer within hours.
To ask a site support question, click here
Your question has been submitted!
When your answer is ready, it will appear on your Dashboard.