Pay for Performance as Growing Phenomenon


Human resource management is a very important skill that is very imperative for the growth of any business. Any organization that has a poor human resource policy can never grow and prosper. Human beings have immense potential and human resource management aims at tapping that untapped potential in human beings. This paper will throw light upon an important human resource that is paid for performance.

Pay for Performance

Incentive Pay or Pay for Performance is given for specific performance results rather than the time worked by an employee. It is beneficial for both, the employees, as well as the organization because an incentive increases the motivation of employees to work harder and to achieve the goals of the organization and when more and more employees work towards the goals of the organization, both, the employees, as well as the organization, inevitably grow and prosper. Incentives can give a much-deserved boost to an employee, results of which, are usually seen in quick time this also strengthens the relationship of an employee and boss, the same also contributes to achieving the goals of the organization. “The simplicity inherent in the casual incentive approach attracts many farmers who would not consider a structured incentive. Casual rewards include a pat on the back, a sincere thank-you, a $50 bill, a dinner for two at a local restaurant, or a pair of tickets to the rodeo (workers may have excellent suggestions along these lines). You may want to entitle workers to choose from a menu of several rewards.”1

There are many types of incentives all meant to boost the performance of an employee. For instance, typical incentives include profit sharing, bonuses for reducing production cost, etc. Safety incentives include training the workers, forming a safety committee in an organization, etc. Each incentive is meant for a special purpose and if made use of, it can work wonders for the organization.

“What better way to drive people to work harder and more efficiently, you may ask, than to offer them a special carrot: more money for hitting specific company targets? The idea seems perfect. Managers want their employees to pull out the stops on Project X, for example. Employees, confident of their ability to reach if not surpass the goals, start banking on the extra money.”2

Managers employ this method to attract the employees to work harder and to achieve the organizational goals, however, this system produced horrifying results when implemented by HP. The first 6 months were really enjoyable for all the employees as well as the managers but when the managers moved the target a little on the higher side the negative impact of this system was exposed. The frustration of all the employees was there in front of everyone to see. They could not meet the target as a result of which there were no incentives. This goes to show that this system can be a failure if the managers become too ambitious or set unrealistic goals.

“Pay for performance is a growing phenomenon, according to a Hewitt Associates study that found employee pay raises inching up an average of 3.8 percent in 2008, maintaining the tepid growth of the last few years. Bonuses based on performance, meanwhile, were set to hit a record high this year of 12 percent, as a percentage of payroll, up from 8.8 percent in 2003. Ninety percent of companies offer at least one broad-based variable pay plan, Hewitt found, up from 80 percent in 2006 and 51 percent in 1991.”3


  1. Incentive Pay” University of California Web.
  2. Pay for Performance, Entrepreneur Web.
  3. Pay for Performance Does not always pay off” Working Knowledge Web.
  4. Susan M. Heathfield “ 360 Degree Feedback” The Good, the Bad and the Ugly Web.


  1. “Incentive Pay” University of California
  2. “Pay for Performance Does not always pay off” Working Knowledge
  3. “Pay for Performance” Entrepreneur
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