Pay for Performance

Why Pay for Performance Works

HRD-321- Compensation and Benefits

Southwestern College

Mr. Randy Lawson

October 27, 2009

Reginald Sampson

Many people may argue that pay for performance helps employers by

maximizing their profits. But the reality is that pay for performance benefits both the

employer and the employees. First off, what is pay for performance? Pay for performance

is defined as a motivation concept where employees receive increased compensation for

their work if their team, department or company reaches certain targets. (Lagace 2003)

As of 2005, over 75% of all businesses in the United States have ties to some part

of a employees job performance to their pay. Stefan Martinovic states “Pay for

performance compensation structures not only account for individual, but also account

for the working environment and performance of the team as well. This can be a valuable

benefit, as knowing that compensation increases will be based on the performance of the

team will coerce employees to operate as a cohesive unit in order to reach a common

goal.” (Martinovic 2009)

What motivates pay for performance is the employees behavior. Behavior

plays a important role for the success of pay for performance. If an employee lacks

motivation to do the job. The end result will show in their pay and also lower work

productivity. This is the reason why pay for performance is so important. For example,

in the National Football League players strive in their performance to do well on the field

so that in the end they can get that lucrative contract they worked so hard for. But, where

the system is flawed is when organizations sign rookies coming...