pros and cons of performance based pay

Topics: Maslow's hierarchy of needs, Motivation, Employment Pages: 3 (934 words) Published: December 4, 2013
Contrast the advantages with the disadvantages of performance – based – pay. Which approach to pay do you think, would be the most beneficial to work organizations in the current economic climate.

To begin this essay I would like to use the definition of what performance related pay is by Hoevemeyer : An intention to pay distinctly more to reward highly effective job performance than you are willing to pay for good solid performance, the objective of which should be to develop a productive, efficient, effective organization (Hoevemeyer, 1989).

There are many advantages and disadvantages to performance- based pay, throughout this essay I will contrast the advantages with the disadvantages, and at the end of this I will also come to a conclusion of which approach to pay do I think is the most beneficial to work organizations in the current economic climate.

The types of performance based pay are:
-Flat rate plus individual PBR system
-Flat rate plus group/team-based PBR
-Flat rate plus firm based PBR

The first and most important advantage to performance- based pay is that this type of pay is a fantastic motivator. Simply for a worker to get more money, which is the case in nearly every job, he needs to work harder. This pay system is great for retaining key talent the organization has and getting unmotivated individuals to improve productivity. For a sales person, performance- based pay motivates you too sell your product, since it is the only way that you are going to get paid. There is also a feeling of accomplishment when you get your income, its like a reflection of all the hard work you have put in the month or week.

A disadvantage of performance- based pay that would contradict my previous advantage would be that motivation isn’t just as simple as money = happiness! Too little money will demotivate but more money will not necessarily increase satisfaction or monivation. (Herzberg) Abraham Maslows hierarchy of needs model of...
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