Summary of “Promise and peril in implementing pay-for-performance” by Michael Beer and Mark D. Cannon on 2004, Human Resource Management, volume 43, pages 3-48
Decades of empirical research in a variety of areas indicate that financial incentives are a potent motivator, however, despite the breadth and sophistication of topics being examined in research related to pay-for-performance, the crucially important issue of managers’ approach to implementation has not received much attention.
Significant potential problems with implementing pay-for-performance programs:
- Destructive effect on intrinsic motivation, self-esteem, teamwork, and creativity
- Motivate employees to focus excessively on doing what they need to do to gain rewards, at the expense of doing other things that would help the organization.