How incentive pay can go wrong

Employees seem to like pay-for-performance incentive systems, researchers Chidiebere Ogbonnaya, Kevin Daniels, and Karina Nielsen write for Harvard Business Review. They found in a recent study of 1,293 workplaces that performance pay was associated with higher levels of satisfaction, commitment, and trust amongst employees. Those positive effects, however, depended on whether the incentives were widely available to employees and whether the system was seen as equitable. Furthermore, the authors write, managers must vigilantly watch whether incentives are sustainable for employees’ well-being, as they can cause contentious behaviour, overwork, stress, and perceptions of unfairness in the workforce.

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