Promise and peril in implementing pay-for-performance

• Published in: Human resource management Vol. 43; no. 1; pp. 3 - 48
• Main Authors: Beer, Michael, Cannon, Mark D., Baron, James N., Dailey, Patrick R., Gerhart, Barry, Heneman III, Herbert G., Kochan, Thomas, Ledford Jr, Gerald E., Locke, Edwin A.
• Format: Journal Article
• Language: English
• Published: Hoboken Wiley Subscription Services, Inc., A Wiley Company 01.03.2004; Wiley Periodicals Inc
• Subjects: Compensation; Decision making; Employees; Human resource management; Intelligent design; Management decisions; Managers; Merit increases; Monetary incentives; Motivation; Pay for performance; Perceptions; Professions; Studies; United States > US; California
• ISSN: 0090-4848; 1099-050X
• DOI: 10.1002/hrm.20001

Why would managers abandon pay‐for‐performance plans they initiated with great hopes? Why would employees celebrate this decision? This article explores why managers made their decisions in 12 of 13 pay‐for‐performance “experiments” at Hewlett‐Packard in the mid‐1990s. We find that managers thought the costs of these programs to be higher than the benefits. Alternative managerial practices such as effective leadership, clear objectives, coaching, or training were thought a better investment. Despite the undisputed instrumentality of pay‐for‐performance to motivate, little attention has been given to whether the benefits outweigh the costs or the “fit” of these programs with high‐commitment cultures like Hewlett‐Packard was at the time. © 2004 Wiley Periodicals, Inc.