Sunday, 1 July 2012

Performance pay theory

A couple of snippets from a book from 2000 called Rewarding Excellence that includes a focus on performance pay. I don't agree with quite a bit of it, and am posting simply to set out a mainstream textbook view.

"[I]ndividuals can be motivated both by organisationally given rewards and intrinsic rewards they give themselves. [There is not] a cancellation or interference effect between the two kinds of rewards. Rather...the greatest amount of motivation is present when individuals are doing tasks that are intrinsically rewarding to them when they perform them well and that provide important financial and recognition awards for performance."
"[I]f goal difficulty gets too high, individuals may see a low probability of achieving the goal. This in turn will destroy the connection between their effort and the receipt of a reward. This doesn't necessarily mean that individuals will never try to achieve hard goals. It does suggest, however, that if they are going to be achieve hard goals, two conditions need to exist. First, the connection between achieving the goal and the reward needs to be clear. Second, the amount of reward, either intrinsic or extrinsic, that is associated with goal accomplishment needs to be large. When there is a low probability of achieving a goal, or the rewards are small, it is almost certain that individuals will not put forth effort to try to achieve the goal."
"To summarise, motivation is a function of reward importance and the degree to which rewards are tied to a particular kind of performance or behaviour. The implication of this is that organisations can motivate individuals to perform in particular ways if they develop a line of sight between important rewards and performing in that way."

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