The Positive and Negative of pay for Performance Essay

The Positive and Negative of pay for Performance - Essay Example Nowadays, the utilization of this scheme is widely used not just in the United States but all over the world as documented by the Harvard Business School. While others have strongly supported the view that performance based compensation will promote efficiency and satisfaction in the business organization, some empirical experiments failed to display its significance. In line with this, this report will look at the pros and cons of pay for performance. This paper will apply pay for performance both for employees work on their own and those working within a team. Pay for performance is based on the premise that money is a motivational factor. This premise assumes that in order for individuals to work harder, monetary incentives should always be present. Pay for performance is a system which directly links money to higher and more efficient performance. According to Pinto, performance based is the best from of compensation in this knowledge-based business environment. He argues that the â€Å"old archaic systems and processes of lax reviews and annual automatic pay increases across the board†¦ results in increasing jeopardy for employees whose pay has escalated over the years to a level that simply cannot compete in the modern global environment† (Pinto 6). This is supported by empirical results the most famous of which is the GE experience. It should be noted that Jack Welch significantly improved the performance as GE as the entire workforce â€Å"shaped up as nobody wanted to be at the bottom† (5). In some situations, money can function as a primary motivator in the case of workforce in the developing countries. An increase in their salary almost always motivates to work harder to finance their families’ expenditures. Performance-based compensation is also favored because of its relative simplicity. This system is regarded to give immediate and meaningful feedbacks. Also,