Scientific literature has extensively dealt with variable pay-for-performance. Despite the fact that serious problems linked to this approach have thus become obvious, many authors continue to support compensation according to predetermined performance criteria because they are committed to the traditional concept of the ’homo oeconomicus’. (...)
There are four major arguments against variable pay-for-performance:
•In a modern economy, it is practically impossible to determine tasks that are to be fulfilled in the future precisely enough so that variable pay-for-performance can be applied. In a society continually faced with new challenges, superiors oftentimes find it impossible to fix ex ante what an employee will have to do in the future.
•It would be naïve to assume that the persons subjected to variable pay-for-performance would accept the respective criteria in a passive way and fulfil their work accordingly. Rather, they spend much energy and time trying to manipulate these criteria in their favour. This is facilitated by the fact that employees often know the specific features of their work better than their superiors. The wage explosions observable in many sectors of the economy can at least partly be attributed to such manipulations, eg when managers are able to contract easily achievable performance goals.
•Variable pay-for-performance results in employees restricting their work to those areas covered by the performance criteria. In the literature, this is known as the ’multiple tasking’ problem. This may induce employees to spend considerable time and energy during their work trying to find a better-paid job with another firm. They therefore neglect their tasks insofar as they are not contractually fixed by the performance criteria.
•Variable pay-for-performance tends to crowd out intrinsic work motivation and therewith the joy of fulfilling a particular task. However, such motivation is of great importance in a modern economy because it supports innovation and helps to fulfil tasks going beyond the ordinary.
Monday, September 26, 2011
Publicada por Miguel Madeira em 16:13