The effectiveness of pay for performance plan Essay

The effectiveness of pay for performance course of study - Essay ExampleNot every employee is the same therefore their preferences and motivating factors argon as vary as their individual personalities. Utilizing, combining, and integrating the right compensation strategy in the corporate structure plays a critical role in maintaining employee motivation, retaining talent, and attracting high-performing candidates to the company. Although pay for performance compensation plans have always played an intrinsical role in the compensation package of many companies there argon a number of shortcomings colligate to the merit pay system. Traditional compensation models ignore the key emotional influencers that reveal an individuals key motivating factors. According to a recent paper called The Psychological Costs of Pay-for-Performance, by Ian Larkin, Lamar perforate of Harvard and Francesca Gino of Washington University, this working paper identify the psychological costs of how affe ctionate comparison, employee certitude, and loss aversion are prime determinants of the success and vi tycoon of individual performance-based compensation systems (Tighe, 2011). Social comparison is the tendency of individuals to compare their pay vs. trial ratio with their peers and their expectations of their compensation to be fair based on these preconceived nonions. As a pass of this comparisons pay plan effectiveness or perceived fairness is often compromised. Individuals commonly judge the finish of other hatfuls work contribution based on what they can see and non on actual results. Consequently coworkers are often unfairly judged since the value or true consequence of their work is performed off premises or behind closed doors such as with salespeople or executives. Although in the case of major CEOs or star athletes for instance pay becomes a social measuring stick to which they compare against their peers, so pay becomes more closely tied to social factors and no t necessarily economics. Employee overconfidence is where individuals have the tendency to overestimate their own abilities and skill set therefore they are prone to accepting tasks above their capabilities. According to Larkin Psychologists and decision enquiry scholars have long noted that people tend to be overconfident well-nigh their own abilities and too optimistic about their future. Recent research has shown that overconfidence is not as much an individual personality trait as it is a twine that affects most people(Tighe, 2011). The authors elaborate that in general people tend to be overconfident in their ability to complete tasks that they tend to perform frequently. On the other hand individuals tend to underestimate their ability to complete tasks which they are not familiar with or seem too complex. Since pay-for-performance systems are based on the ability of individuals to pick and choose positions that they feel best matches their skill set, the misalignment between the individuals perceptual experience of themselves and their true skill set can cause them to undertake projects or tasks that are beyond their capabilities (Tighe, 2011). preferably of pay-for-performance becoming a catalyst for increased organizational achievement and individual performance an employees overconfidence can cause them to underperform under pressure, increase general dissatisfaction, and can also bring about a