Question

Pay-for-Performance Link. Discuss how to strengthen the pay-for-performance link.

A. Powerful incentives can cause undesired behaviors. Suggest ways to solve this problem, using something you know a great deal about – academic performance.

B. How would you design a pay-performance system that uses powerful incentives to motivate behavior, yet keep the behavior from veering into the unethical? (Hint: You want to keep the powerful incentive effect of pay. So don’t recommend eliminating incentive pay or reducing the size of the incentive component.) What’s left?

C. How do you ensure ethical behavior?

Answer 1

1) Powerful incentives are very prone to attract undesired behaviors from individuals since it directly benefits individuals and therefore many individuals take an unethical route to meet their incentive targets. As per my view, such behaviors can be avoided mainly through training and awareness. It is very important to ignite a sense of ethicality among people in order to stop them from any undesired behavior as it is the most effective way to solve this issue. So, sufficient emphasis should be given to training related to ethical behaviors. Other ways could be creating strict rules and stiff penalties for such behaviors that may restrain individuals from any such behaviors.

2) A pay-performance system using powerful incentives to motivate employees would be such a system that gives all employees equal opportunities to achieve the incentives targets. This can be done by training all the employees on product knowledge and equal opportunity to sell the products such as equal involvement in sales campaigns etc. Such a system will not only motivate the employees to put more efforts, it will also make employees conscious from indulging into any unwanted behavior since every employee know the product well and may raise alarm to higher management.

3) As stated in the first part, training employees regarding ethical behavior along with drafting and implementing a policy with clear instructions and standard operating procedures would be the best way to ensure the ethical behaviors.