Question

Discuss issues related to performance based pay for executives.

Answer 1

Pay-for-performance programs take several forms such as cash bonuses, company stock and profit sharing. While planning to provide performance based pay for executives, employers need to consider the possible issues before implementing them. These issues are:

--Deteriorating Quality: Pay-for-performance plans can cause employees to work more on quantity instead of quality, which could result to the deterioration of the latter

--Lack of Teamwork: In an attempt to reach personal goals sometimes are less willing to be team players

--Insufficient Motivation: When employees perceive the amount of the incentive as too low, then it will not provide the motivation to reach the desired increased productivity levels

--Biased approach: Too much of the process relies on the judgement quality made by a manager and the manager approach can be biased

--Ignores development needs: Since the performance appraisal process can be affected detrimentally because of the focus on financial reward instead of developmental requirements