Performance-based pay, which is one of the most common forms of performance-related rewards, varies according to the performance that is measured. Therefore, the performance-based pay is variable or considered “at risk” pay. There are two schools of thought each opposing the other about the effectiveness and fairness of performance-based pay. Those arguments that support the performance-based pay base their arguments on motivation theories such as the agency theory, expectancy theory, and reinforcement theory. However, according to Alfie Kohn, performance-based pay fails because of the following reasons:
Though people depend on salaries, there is no basis for assuming that pay will motivate people to work better.
There is a similarity between rewards and punishment. Managers try to control the behaviors of their subordinates, but it turns punitive after some time. Not receiving rewards is akin to being punished. This is detrimental to the workplace environment.
Rewards will reduce the chance of cooperation amongst the employees. Everyone is working for their individual gains. Rewards are the surest way to destroy organizational excellence. It can also affect the relationship between the supervisor and the subordinates adversely.
The workplace might have many problems, which have to be solved for the organization to perform better. Boosting productivity by offering rewards will not solve these issues. This also ensures that the managers are not using good managerial skills to resolve issues and motivate employees, but taking the shortcut.
When people know what they will get for doing a task, they are less inclined to take risks. They will focus on numbers and even try to manipulate them unethically.
No extrinsic motivation such as rewards can match the intrinsic motivation to excel. People would be happy if they are paid well but they do not excel because of pay.
References
Kohn, A., 1993. Why incentive plans cannot work. Harvard Business Review, Issue September-October.s
McNeese, B., 2007. Dr. W. Edwards Deming and profound knowledge - Part 4. [Online] Available at: https://www.spcforexcel.com/knowledge/deming/profound-knowledge-part-4[Accessed 15 April 2016].
Nankervis, A., Baird, M., Coffey, J. & Shields, J., 2014. Human resource management : strategy and practice. 8th ed. South Melbourne: Victoria Cengage Learning Australia.
