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Merit pay, performance appraisal, and individual motivation: An analysis and alternative
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1998
Year
Behavioral Decision MakingProject ManagementHuman Resource ManagementOrganizational BehaviorPerformance ManagementEmployee AttitudeBiasManagementRemuneration PracticeWork AttitudeGroup AccomplishmentMotivationIncentive TheoryPerformance AppraisalMerit PayIncentive MechanismCommon Implementation IssuesBusinessIncentive-centered DesignIndividual MotivationDecision ScienceIncentive Model
Merit pay is grounded in motivation theory that rewards higher contribution, yet it seldom meets its goals despite shaping compensation systems. The article reviews five implementation problems, highlights attribution biases that undermine merit plans, and proposes a group‑accomplishment alternative. The authors examine five common implementation issues in merit‑pay schemes. Attribution biases limit merit‑pay effectiveness even when implementation problems are resolved. © 1998 John Wiley & Sons, Inc.
Theories of motivation and common expectation argue that people who contribute more to an undertaking should receive more from it. This expectation has significantly influenced the design of compensation systems. Merit pay reflects this influence. Nonetheless, in spite of intuitive appeal and apparent theoretical support, merit pay rarely achieves its objectives. This article reviews five common implementation issues. It also argues that merit plans underemphasize important attribution biases that affect performance judgments. These biases suggest that such plans would still have limited effectiveness, even if implementation problems were overcome. The article presents an alternative focused on group accomplishment. © 1998 John Wiley & Sons, Inc.