Individual performance-related pay: does it drive better organisational performance?
By Peter Reilly (February 2005 Issue)
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The notion behind individual performance-related pay is that employees will be motivated if they believe they will be rewarded for improving their contribution to the success of the enterprise. This view derives from many years of psychological thinking. For behaviourists such as BF Skinner, learning only takes place through external positive and negative reinforcement. The right behaviour could be encouraged through the use of rewards and praise and, to a lesser extent, discouraged through punishments. FW Taylor applied these theories in the workplace and advocated the use of piece rate payments as a means of controlling behaviour and orientating it to management requirements. In contrast to this employer-centred view, expectancy and goal theorists put the emphasis on cognition – that is, the thought processes employees go through that affect their performance in the workplace. They looked at the expectation of future reinforcement rather than past. Goal theorists pursued this argument by saying that future goals can be used to influence behaviour and motivation. Goal theory was refined in a number of ways through expectancy theory. This made the important point that motivation will only come if outcomes have psychological value for people. Effort would be made where people expect to be rewarded for it. There has to be a clear line of sight between effort and reward. Equity theorists argued that the reward needs to match exertion. If the reward is too small or unimportant for the effort involved, an individual will not try that hard. ...
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