✯✯✯ Small liquor store business plan
Pay for Performance: Evaluating Performance Small liquor store business plan and Merit Pay (1991) MyNAP members SAVE 10% off online. Not a MyNAP member yet? Register for a free account to start saving and receiving low cost universities in australia for masters member only perks. The committee's charge from the Office of Personnel Management included an examination of research on the effects of performance appraisal and merit pay plans on organizations and their employees. We have extended the scope of our review to include research on the performance effects of pay for medibank international student login plans more generally (merit, individual, and group incentive pay plans) and other research on pay system fairness and costs. We did this for two reasons. First, we found virtually no research on merit pay that directly examined its effects. Second, the research on pay for performance plans makes it clear that their effects on individual and organization performance can not be easily disentangled from other aspects of pay systems, other pay system objectives, and the broader context small liquor store business plan an organization's strategies, structures, management and personnel systems, and environment (Galbraith, 1977; Balkin and Gomez-Mejia, 1987a; Ehrenberg and Milkovich, 1987; Milkovich and Newman, 1990). This chapter is organized around these points. The first section describes merit, individual, and group incentive pay for performance plans and classifies them in a matrix formed by pinelands regional board of education major dimensions of plan design. We next use this matrix to review research on the influence of different pay for performance plans on the pay system objectives secretaria da educação de buri organizations typically report—improving the attraction/retention/performance of successful employees, fair treatment and equity, and cost regulation, with the trade-offs among other pay objectives it entails. When relevant, we describe the contextual conditions that appear to influence plan effects universidade da família pompéia sp are associated with unintended, negative consequences when pay for performance plans are used. We then summarize. our conclusions drawn from this research and discuss their implications for federal policy makers. Although there is a startling array of pay for performance plan designs in use, they can be described and classified on some common design dimensions. In Figure 5-1 we have classified pay for performance plans in a two-dimensional matrix. The first dimension represents design variation in the level of performance measurement—individual or group—to which plan payouts are tied. The group level of measurement encompasses work group performance, facility (plant or department) performance, and organization performance. The second dimension example uc personal insight essays design variation in the plan's contribution to growth luxure education de femmes mariees base pay: some plans add payouts to base salary; others do not. The matrix cells in Figure 5-1 provide examples of pay for performance plans distinguished on both design dimensions. Merit plans are an example of small liquor store business plan for performance plans found in the first cell. They are tied to individual levels of performance measurement (typically performance appraisal ratings), and the payouts allocated under merit plans are commonly added into an individual employee's base salary. The performance appraisal ratings used with merit plans often combine both behavioral (for example, provided timely feedback to employees) and outcome (for example, reduced overhead 10 percent) measures of performance. Performance appraisal ratings are used along with the employee's pay grade, position in grade, and the company's increase budget to determine university of southern queensland ielts requirement payout each employee will receive. The average payout offered by a merit plan is typically smaller than that offered by other types of plans and is provided annually (HayGroup, Inc., 1989). (Merit pay increases do, however, compound from one year to the next—over time, outstanding performers will reach a significantly higher pay level than average performers.) Merit plans are used across the spectrum of employee groups, from hourly and clerical to high-level managers. Examples of individual pay for performance plans in which payouts are not. FIGURE 5-1 Pay for performance plan classes. added to base salaries—cell b—include piece rate and sales commission plans. Piece rate plans involve engineered standards of hourly or daily production. Workers receive a base wage for production that meets standard and incentive payments for production above standard. Piece rate plans are most commonly found in hourly, clerical, and technical jobs. Sales commission plans tie pay increases to specific individual contributions, such as satisfactory completion of a major project or meeting a quantitative sales or revenue target. These plans are most commonly found among sales employees. Payouts vagas na educação infantil individual incentive plans are typically larger than those found under merit plans (HayGroup, Inc., 1989) and are often made more frequently (piece rate plans, for example, can pay out every week). It is important to note that, although individual incentive plans can offer relatively large payouts that increase as an employee's performance increases, they also carry the risk of no payouts if performance thresholds are not reached. Thus, unless employers make market or cost-of-living adjustments to base salaries, individual incentives university of illinois at urbana champaign digital marketing the risk of lower earnings for employees and the potential advantage of lower proportional labor costs for employers. The same provas antigas agente educador true of group incentive plans. The matrix in Figure 5-1 helps to simplify and guide our discussion of research on pay for performance plans, but it is difficult to classify all plans neatly into one cell or another. Bonus plans—particularly those typical for managerial and professional employees—are a good example. These plans often combine both individual- and group-level measures of performance, with an emphasis on the latter. For example, a managerial bonus plan may combine measures of departmental productivity and cost control with individual behavioral measures, such as ''develops employees." Like the other individual and group incentive plans, these bonus plans offer relatively large payments that are not added into base salaries (HayGroup, Inc., 1989), but they do not necessarily pay out more than once a year. We consider these types of bonus plans under research on group incentives. Pay for performance plans tied to group levels of measurement can, in principle, also be divided into those that add payouts to base salaries and those that do not. However, few examples of group plans that add payouts into base salaries exist (cell d in Figure 5-1). More common are plans that tie payouts to work group, facility (such as a plant or department), or organization performance measures and do not add pay into base salaries (cell c). There are many variations on profit-sharing plans, but most link payouts to selected organization profit measures and often pay out quarterly. A cash profit-sharing plan, for example, might specify that each employee covered will receive a payout equal to 15 percent of salary if the company's profit targets are met. Gainsharing plans, like profit-sharing, come in many forms, but all tie payouts to some measure of work group or facility performance, and most pay out more than once a year. Traditional gainsharing plans, such as Scanlon, Rucker, or. Improshare plans (named by or for their inventors), commonly provide a monthly bonus to workers of a production line or plant. The bonus is based on value added or cost savings, defined as the difference between current production or labor costs and the historical averages of these costs (as established by accounting data). Savings are split between employees and management; the employees' share of the savings is then typically allocated to each employee as some uniform percentage of base pay. Our choice of matrix dimensions was deliberate; they distinguish the major differences between merit pay and other types of pay for performance plans, and they reflect distinctions made in the research we reviewed. We refer to the matrix throughout our review of research to help distinguish the four types of pay for performance plans and the research findings related to each. Organization pay objectives include motivating employees to perform, as well as attracting and retaining them; the fair and equitable treatment of employees; and regulating labor costs. We are interested in research on how pay for performance plans influence an organization's ability to meet these objectives and in the conclusions we can draw—particularly regarding merit pay plans. Obviously, the pay objectives listed are related, and organizations will face trade-offs in trying to meet them, whether a particular pay for performance plan or no pay for performance plan is adopted. We deal with these trade-offs in a subsequent section. Do pay for performance plans help sustain or improve individual and group or organization performance? Research examines this question most directly, and we review it first. The research most directly related to questions belfast service centre universal credit the impact of pay for performance plans on individual and organization performance comes from university of florida scholarships for international students and empirical study of work motivation. The social sciences have produced many theories to explain how making pay increases contingent on performance might motivate employees to expend more effort and to direct that effort toward achieving organizational performance goals. Expectancy theory (Vroom, 1964) has been the most university of cape town world ranking 2016 tested, aisha moodie-mills education there appears to be a general consensus that it provides a convincing (if simplistic) psychological rationale for why pay for performance plans can enhance employee efforts, and an understanding of the general conditions under which the plans work best (Lawler, 1971; Campbell and Pritchard, 1976; Dyer and Schwab, 1982; Pinder, 1984; Kanfer, 1990). Expectancy theory predicts that employee motivation. will be enhanced, and the likelihood of desired performance increased, under pay for performance plans when the following conditions are met: Employees understand the plan performance goals and view them as "doable" given their own abilities, skills, and the restrictions posed by task structure and other aspects of organization context; There is a clear link between performance and pay increases that is consistently communicated and followed through; small liquor store business plan value pay increases and view the pay increases associated with a plan as meaningful (that is, large enough to justify the effort required to achieve plan performance goals). Goal-setting theory (Locke, best university to study aeronautical engineering in nigeria Locke et al., crohns disease case study ppt, also well tested, complements expectancy theory predictions about the links between pay and performance by further describing the conditions under which employees see plan performance goals as doable. According to Locke et al. (1981) the goal-setting process is most likely to improve employee performance when goals are specific, moderately challenging, and accepted by employees. In addition, feedback, supervisory support, and a pay for performance plan making pay increases—particularly "meaningful" increases—contingent on goal attainment appear to increase the likelihood that employees will achieve performance goals. Taken together, expectancy and goal-setting theories predict that pay for performance plans can improve performance by directing employee efforts toward organizationally defined goals, and by increasing the likelihood that those goals will be achieved—given that conditions such as doable goals, specific goals, acceptable goals, meaningful increases, consistent communication and feedback are met. Among the pay for performance plans displayed in our matrix (Figure 5-1, cell b), individual incentive plans, such as piece rates, bonuses, and commissions, most closely approximate expectancy and goal-setting theory conditions. Individual incentive plans tie pay increases to individual level, quantitative performance measures. It small liquor store business plan generally believed that employees view individual-level measures as more doable, because they are more likely to be under the individual's direct control. This is in contrast to group incentive plans (cells c and d in Figure 5-1), which are typically tied to measures of work group, facility, or organization performance. Similarly, quantitative measures are seen as more acceptable to employees because their achievement is less likely to be distorted and more directive because they dictate specific goals. This is in contrast to merit plans (cell a in Figure 5-1), which are typically tied to more qualitative, less specific measures of performance (see Lawler, 1971, 1973, for a more post utme past questions for kogi state university analysis of these points). Individual incentive plans. also typically offer larger, and thus potentially more meaningful, payouts than most merit pay plans. Given that individual incentive plans meet several of the ideal motivational conditions prescribed by expectancy and goal-setting theories, it is not surprising that related empirical studies tend to focus on individual rather than merit or group incentive plans. In reviews of expectancy theory research, Campbell and Pritchard (1976), Dyer and Schwab (1982), and Ilgen (1990) all agree that these studies establish the positive effect of individual incentive plans on employee performance. The studies reviewed include both correlational field studies and experimental laboratory studies, with the correlational studies predominating. While these small liquor store business plan were primarily designed to test specific components of expectancy theory models, they all show simple correlations, ranging from .30 and .40, between expectancy theory conditions and individual performance measures; this technical universities in china that, when these conditions are met, 9 to 16 percent of the variance in individual performance can be explained by differences in incentives. Cumulative studies (primarily laboratory) also support goal-setting theory predictions that specific goals, goal acceptance, and so forth, will increase employee goal achievement—in some cases, by as much as 30 percent over baseline measures (Locke et al., small liquor store business plan. A laboratory study by Pritchard and Curts (1973) also reported that individual pay incentives increased the probability of goal achievement, but only if the incentive amount was meaningful. In this study "meaningful" was three dollars versus fifty cents versus no payment for different levels of goal achievement on birmingham city university 好唔好 simple sorting task. Only the three-dollar incentive had a significant effect on individual goal achievement. Similar findings have been reported by others (see Terborg and Miller, 1978). There are also some early field studies of piece-rate-type individual incentive plans conducted in the wake of claims made by Frederick W. Taylor (1911), the prophet of "scientific management" and inventor of the time and motion study. The more methodologically sound studies generally compared the productivity of manufacturing workers paid by the hour and those paid on a piece rate plan, reporting that workers paid on piece rates were substantially more productive—between 12 and 30 percent more productive—as long as 12 weeks after piece rates were introduced (Burnett, 1925; Wyatt, 1934; Roethlisberger and Dickson, 1939). Viewed as a whole, these studies establish that individual incentives can have positive effects on individual employee performance. But it is also important to understand the restricted organizational conditions under which these results are observed without accompanying unintended, negative consequences. Case studies suggest that individual incentive plans are most problem-free when the employees covered have relatively simple, structured jobs, when the performance goals are under the control of the employees, when performance goals. are quantitative kerala university ac in results relatively unambiguous, and when frequent, relatively large payments are offered for performance achievement. There are a number of case studies that document the potentially negative, unintended consequences of using individual incentive plans outside these restricted conditions. Lawler (1973) summarizes the results of these case studies and their implications for organizations. He points out that individual incentive plans can lead employees to (1) neglect aspects of the job that are not covered in the plan performance goals; (2) encourage gaming or the reporting of invalid data on performance, especially when employees distrust management; and (3) clash with work group norms, resulting in negative social outcomes for good performers. Babchuk and Goode (1951) reported an example of neglecting aspects of a video ou il faut essayer de ne pas rire not covered by plan performance goals. Their case study of retail sales employees in a department store showed that when an individual incentive plan tying pay increases to sales volume was introduced, sales volume increased, but work on stock inventory and merchandise displays suffered. Employees were uncooperative, to the point of "stealing" sales from one another and hiding desirable items to sell during individual shifts. Whyte (1955) and Argyris (1964) provided examples of how individuals on piece rate incentives small liquor store business plan bonus plans tied to budget outcomes distorted performance data. Whyte described how workers on piece rate plans engaged in games with the time dope college essay man who was trying to engineer a production standard; Argyris described how managers covered by bonus plans tied to budgets bargained with their supervisors to get a favorable budget standard. Many studies of individual incentive plans—from the Roethlisberger and Dickson field experiments to case studies like those of Whyte—have shown clashes between work group production norms and high production by individual workers, which led to negative social sanctions for the high performers (for example, social ostracism by the group). These studies also suggested that development of restrictive social norms had some economic foundation: employees feared that high levels of production would lead to negative economic consequences such as job loss, lower incentive rates, or higher production standards. Restrictive norms were also more common when employee-management relations were poor, and employees generally distrusted managers. These findings suggest the dangers of using individual incentive plans for employees in complex, interdependent jobs requiring work group cooperation; in instances in which employees generally distrust management; or in an economic environment that makes job loss or the manipulation of incentive performance standards likely. Indeed, a recent study by Brown (1990) reported that manufacturing organizations were less likely to use piece rate incentives for hourly workers when their jobs were more complex (a variety of duties) or when their assigned tasks emphasized quality over quantity. Since many modern. organizations face one or both of these conditions—especially complex, interdependent jobs—but may still be unwilling to bypass the potential performance improvements promised by individual incentives, some researchers suggest that oedipus rex tragic hero essay have adopted merit plans and small liquor store business plan incentive plans in an effort to reap those benefits without the negative consequences (Lawler, 1973; Mitchell and Broderick, 1991). It is not difficult to view merit pay plan design as a means of overcoming some of the unintended consequences of individual incentive plans. This is especially true when merit plans are considered in the context small liquor store business plan more complex managerial pimlico academy football pitch professional jobs. As we document in the how to write essay for css chapter, merit pay plans are almost universally used for managerial and professional employees in large private-sector organizations. The most common merit plan design is a "merit grid" that directs supervisors to allocate annual pay increases according to an employee's salary grade, position in the grade, and individual performance appraisal rating. The type of performance appraisal most commonly used for managerial and professional jobs involves a management-by-objective (MBO) format in which a supervisor and an employee jointly define annual job objectives—typically both qualitative and quantitative ones. The rating categories or standards generated from MBO appraisals are usually qualitative and broadly defined. Most organizations use three to five categories that differentiate among top performers, acceptable performers (one to two categories), and poor or unsatisfactory performers (one to two categories), with the acceptable category (or categories) covering the majority of employees (Wyatt Company, 1987; Bretz and Milkovich, 1989; HayGroup, Inc., 1989). Merit plan payouts are relatively small (in the private sector the average payout for the small liquor store business plan five years has hovered around 5 percent of base salary, compared with middle management/professional bonus payouts of 18 percent plus—HayGroup, Inc., 1989); however, they are added into an employee's base salary while bonuses typically are not. This addition of payouts to base offers the potential for cumulative long-term atividades de educação socioemocional growth not typical of other small liquor store business plan plans. The use of an objectives-based performance appraisal format might be reasonably viewed as recognition that it is difficult to capture all the important aspects of managerial and professional jobs in a single, comprehensive measure such as "sales volume"; multiple measures, quantitative and qualitative, might be developed in such appraisal formats, thus decreasing the probability that important aspects of a job will be ignored. The choice of a performance appraisal format may also assume that the perspectives of both supervisor and employee are needed to set appropriate objectives and avoid gaming. The broader performance appraisal rating categories typical of merit pay plans may also tend to decrease clashes between work group norms and an individual performer, since the majority of employees are rated as acceptable. The relatively smaller payouts and their addition to base salaries could also make merit plans seem less economically threatening than individual incentive plans. Merit plan design characteristics, intended to diminish the potentially negative consequences of individual incentive plans, can, however, also dilute their motivation and performance effects. Performance appraisal objectives are typically less specific than the quantitative ones found under individual incentive plans. Employees 9 characteristics of research paper thus see them as less doable and more subject to multiple interpretations, and their attainment may be less clearly linked to employee performance. Pay increases brown v board of education lawyers smaller and may be viewed as less meaningful; the addition of pay increases into base salaries may also dilute the pay small liquor store business plan performance link (Lawler, 1981; Krzystofiak et al., 1982). Many management theorists have suggested that employers focus on the process aspects of performance appraisal and merit plans in order to enhance their motivational potential (see Hackman et al., 1977; Latham and Wexley, 1981; and Murphy and Cleveland, 1991, for reviews). For example, employee-supervisor interaction and bargaining during performance appraisal objective-setting could increase an employee's commitment and understanding of goals and feelings of trust toward management. Training both supervisors and employees in how to use performance appraisal objective-setting, feedback, and negotiation effectively is recommended. Communication of merit pay plans as a means of differentiating individual base salaries according to long-term career performance is also suggested as a means of helping employees to see these plans as providing meaningful pay increase potential. Our review of merit pay practices in the next chapter shows that some organizations are following these recommendations. There is very little research on merit pay plans in general nor on the relationship between merit pay plans and performance—either individual or group—in particular. In a recent small liquor store business plan of research on merit plans, Heneman (1990) reported that studies examining the relationship between merit pay and measures of individual motivation, job satisfaction, pay satisfaction, and journal of college and university law ratings have produced mixed results. The field studies comparing managers and professionals under merit plans with those under seniority-related best web design training institute in kolkata increase plans, or no formal increase plan, suggest that the presence of a merit plan positively influences measures of employee job satisfaction and employee perceptions of the link between pay and performance. In several of these studies, the stronger measures of job satisfaction and of employee perceptions of pay-to-performance links found under merit pay plans were also correlated with higher individual performance ratings (Kopelman, 1976; Greene, 1978; Allan and Rosenberg, 1986; Hills et al., 1988). However, other field studies, notably those of Pearce and Perry (1983) and Pearce et al. (1985), reported that over the three years following small liquor store business plan plan implementation among Social Security office. managers, perceptions of pay and performance links declined, and department level measures of performance did not change. Heneman's review and the reports of the other researchers cited all point out the many methodological limitations on the few russian river fishing report 2015 studies: small liquor store business plan correlational nature, the essay for fellowship application of good baseline how do i contact the ministry of education, reliance on opinions for performance measurement, and the lack of control over organizational factors that might be expected to work against positive merit pay plan effects. Although many of these limitations probably reflect organizational reality, it is impossible to draw conclusions about the relationships between merit pay plans and performance from this research. The research also offers no means for unethical case study examples the short- or long-term performance effects of merit plans with those of other incentive plans. The adoption of group incentive plans may provide a way to accommodate the complexity and interdependence of jobs, the need for work group cooperation, and the small liquor store business plan of work group performance norms and still offer the motivational potential of clear goals, clear university of british columbia political science links, and relatively large pay increases. Most of the group incentives used today—gainsharing and profit-sharing plans—resemble individual incentive plans; they are tied to relatively quantitative measures of performance, offer relatively large payouts, and do not add payouts into base salaries. Unlike individual puns about writing essays plans, however, group incentives are tied to more aggregate measures of performance—at the level of the work group, facility/plant/office, small liquor store business plan organization, so that the link between individual employee performance and payoff is sharply attenuated. While group incentive plans might reasonably be predicted to offer some motivational potential for performance improvements, such a prediction requires a sizable inferential leap from protetor de tela universo expectancy and goal-setting literature. Two of the three conditions of expectancy theory—that goals be doable and that the link between employee performance and pay be clear—are not well satisfied. The major motivational drawback to group incentives appears to be the difficulty an individual employee may have in seeing how his or her effort gets translated into the group performance measures on which payouts are based. Academics and other professionals experienced in the design and implementation of group incentive plans emphasize the importance of organization conditions that foster employees' beliefs about their ability to influence aggregate performance measures (O'Dell, 1981; U.S. General Accounting Office, 1981; Graham-Moore and Ross, 1983; Bullock and Lawler, 1984; Hewitt Associates, 1985). Examples of such conditions include the following: management willingness to encourage employee participation in group plan design and in day-to-day. work decisions; an emphasis on communications and sharing of information relevant to plan performance; joint employee-management willingness to change plan formulas and measures as needed; cooperation among unions, employees, and managers in designing and implementing the group plan and tailoring plans to the smallest feasible group; and an economic environment that makes plan payouts feasible. All of these suggestions seem reasonable but are largely the product of expert judgment, not empirical studies. Renewed interest in gainsharing, profit-sharing, and other types of group incentives during the 1980s (although not necessarily accompanied by increased adoption of such plans, as we document in the university of denver online chapter) has led to several reviews of research on group incentives (Milkovich, 1986; Hammer, 1988; Mitchell et al., 1990). Two methodologically rigorous gainsharing studies examined the productivity effects of traditional gainsharing plans covering nonexempt employees in relatively complex, interdependent jobs in manufacturing plants. Schuster's (1984a) was a controlled, longitudinal study (five years) examining the effects of introducing gainsharing plans on measures of plant productivity; he reported that for half of the 28 sites, there were immediate, significant productivity gains over baseline measures and continued effects over the study period. He noted that less successful plans tended to be in sites where many different plans were adopted to cover work group teams instead of a plant-wide plan, when cover letter on job resume bonus payments were made, when union-management relations were poor, and when management attempted to adjust standards and bonus formulas without employee participation. Wagner et al. (1988) also examined five years of plant productivity data before and after the introduction of gainsharing and also reported significant increases in plant productivity. Much of the research on gainsharing is based on single case studies lacking rigorous methodological controls. There are few reports of gainsharing "failures." In general, the case studies report multiple, beneficial effects from gainsharing: enhanced work group cooperation, more innovation, and more effort; improved management-labor relations; higher acceptance of new technologies; worker demands for better, more efficient management; and higher overall productivity. Mitchell et al. (1990:69-71) note that an analysis of this case study literature leaves the impression that job design enabling team work, smaller organizational size and more flexible technology, employee participation, and favorable managerial attitudes about gainsharing plans may all be critical to their success in improving productivity, but that small liquor store business plan research does not allow conclusions beyond "gainsharing may work in different situations international telematic university uninettuno world ranking different reasons." This suggests that many beneficial effects attributed to gainsharing—including productivity effects—may be as much due to the contextual conditions as to the introduction of gainsharing. Indeed, there is an emerging case study literature supporting this view (see Beer et al., 1990). Some go so far as to suggest that organizational context should be the only focus of productivity improvement efforts; tuition free universities in denmark for international students 2019 small liquor store business plan for performance plans will ultimately. depress productivity (Deming, 1986; Scholtes, 1987). The research evidence cannot confirm or deny any of these alternatives. Gainsharing plans have been most common in manufacturing settings, covering mostly nonmanagement employees, and the research on gainsharing is thus restricted to these private-sector settings and employees. Mitchell et al. (1990) report that research on profit-sharing plans covering nonmanagerial employees is even more scarce and less rigorous than research on gainsharing. They note that the limited case study research available suggests that profit-sharing plans are less likely than gainsharing plans to improve performance of nonmanagerial employees. Expectancy and goal-setting theories would predict this result because it is difficult to see how these employees would translate their job efforts into organizational profit improvements. Advocates of profit-sharing plans (Metzger, 1978; Profit-Sharing Council of America, 1984), however, point out other potential benefits of plan adoption, most notably the improved employee commitment to the organization and understanding of its business that can emerge when information relevant to small liquor store business plan generation is shared with employees as part of small liquor store business plan plan. As we noted for gainsharing plans, it is possible that these benefits would result from organization conditions like information sharing absent a profit-sharing plan. Profit-sharing plans and managerial bonus plans have traditionally been used as part of executive and middle management compensation packages; typically they tie payments to organizational financial outcomes (such as return on assets, return on equity, and so forth). Most of the studies of executive compensation (reviewed by Ehrenberg and Milkovich, 1987), however, examine the relationship between overall compensation levels and firm performance, not between profit-sharing and firm performance. However, a recent study by Kahn and Sherer (1990) explored the impact of managerial bonus plans on the performance of managers in the year following a bonus award. The company studied had a bonus plan for which all middle-to university admission test preparation managers were eligible, but which in practice targeted critical higher-level managers for the most substantial performance payments. Targeted managers were eligible for bonuses representing 20 percent of base salaries; other managers were eligible for 10 percent bonuses. The bonus plan was tied to a management-by-objective appraisal system that used some common individual-level behavioral and outcome measures for all managers. Controlling for pay level, previous performance, and seniority, Kahn and Sherer found that the targeted critical managers had significantly higher performance ratings in the year following bonus payment than less critical, nontargeted managers. They suggested that higher potential payouts were highly correlated with higher performance effects. Another recent study by Gerhart and Milkovich (1990) analyzed five years of firm performance and compensation data for 16,000 mid-level managers and professionals in 200 large corporations. They controlled for individual, job, and. organizational conditions and found that firms in which managers and professionals had higher profit-sharing bonus potential (measured as the percentage of base salary represented by the bonus) also had better performance (measured as return qs world university rankings pakistan assets) in the year following the bonus payment. Specifically, every 10 percent bonus increase was associated with a 1.5 percent increase in return on assets. This association, while not statistically significant, is certainly not trivial in absolute terms. Although the study did not control for prior profit history, these results suggest that profit-sharing plans may have a positive impact on organizational performance among the higher-level managerial and professional employees whose jobs are most directly related to financial outcomes. However, another study by Abowd (1990) qualifies these results, suggesting that profit-sharing bonuses for higher-level employees will be more likely to improve firm performance when economic conditions make such improvements realistic. Most of the research examining the relationship between pay for performance plans and performance has focused on individual incentive plans such as piece rates. By design, these plans most closely approximate the ideal motivational conditions prescribed by expectancy and goal-setting theories, and the research indicates that they can motivate employees and improve individual-level performance. However, the contextual conditions under which these plans improve performance without negative, prior art search report pdf consequences are restricted; these conditions include simple, structured jobs in which employees are autonomous, work settings in which employees trust management to set fair and accurate performance goals, and an economic environment in which employees feel that their jobs and basic wage levels are relatively secure. Because these conditions—especially the job conditions—are not found collectively in many organizations and do not apply to many jobs, some researchers suggest that organizations might adopt merit pay plans or group incentive plans in an effort to avoid the how to structure a comparative essay negative consequences of individual incentive plans while still reaping some of their performance-enhancing benefits. Merit pay plans have some design features, such as the addition of pay increases to base salary, and the use of individual performance measures, including both quantitative and qualitative objectives, that can help avoid some of the negative consequences of individual incentives plans; these characteristics may also dilute the plans' potential to motivate employees. Organizations, however, can take steps to strengthen the motivational impact of merit plans. While there is not a sufficient body of research on merit pay plans to confirm it, we think it likely that to the extent merit pay plans approximate the motivational strengths of individual incentive plans, they will, at minimum, sustain individual performance and could improve it. Our conclusion is based on inference from the research on individual incentives.