Performance Pay for Mgoa Physicians

SHR 355 – Strategic Human Resource Management

Case Assignment Questions

Performance Pay for MGOA Physicians (A)

1. Using equity theory and expectancy theory, discuss the potential advantages of MGOA proposed pay-for-performance compensation system relative to the current base-pay compensation system (2x2=4 points).

The advantages for a pay-for-performance compensation system would lead to repeated positive performance. This is because the doctor’s pay would correlate directly with the number of surgeries they can perform in a given quarter. This compensation system would reduce the protection provided to low performers; the individual would be compensated based on their activity and not spread amongst the group.

The doctors knowing this would be motivated to work more efficiently instead of relying on the base pay they have grown accustomed to. It would provide a sense of responsibility for their own actions, since they would be expected to bring in enough revenue for the company. Failure to do so would result in repayment for the deficit and the blame could not be passed on to other doctors since it is based on individual performance.

In another view it would also provide a decent reward system, for those who out perform their duties. Since there pay would reflect their efficiency, those who over perform can be expected to compensate for their work further fueling their motivation.

2. MGOA has hired you as a consultant to get a second opinion on the proposed pay-for-performance compensation system before implementing it. Please address the following two issues:

a. Discuss TWO potential problems associated with MGOA’s proposed pay-for-performance compensation system. Be sure to justify your answers (3x2=6 points).

Although there are advantages to this form of compensation, pay-for-performance also has some downsides. Employee may become goal oriented to fulfill a requirement and develop single-mindedness. Doctors...