Pay-for-performance (PFP) is a common motivational strategy in organizations; employees are offered pay raises or bonuses for exceptional work. However, there is conflicting evidence as to whether PFP is a reliable motivator. This article explores the reasons behind this discrepancy and highlights the significance of leadership behaviors such as warmth and competence in determining the effectiveness of PFP as a motivator for employees.
PAY-FOR-PERFORMANCE
In two studies, the authors (Kong et al., 2023) surveyed employees at three different time points one month apart. Results revealed that when leaders used PFP and had high competence, employees perceived PFP programs as a positive challenge; in turn, employees were more engaged and experienced enhanced task performance. However, when leader warmth was low, employees were more likely to feel threatened by PFP programs; in turn, employees withdrew from their work and task performance decreased.
ORGANIZATIONAL TAKEAWAYS
To start, organizations need to understand that implementing pay-for-performance (PFP) systems may not always have the intended positive effect on employee motivation and performance. In fact, the authors demonstrated that such systems can sometimes lead to negative outcomes, which are often due to employees’ perceptions of their leaders.
Therefore, in addition to introducing PFP systems, organizations should prioritize hiring competent leaders and provide them with training that fosters warmth and approachability. The authors state that this training might involve teaching “servant leadership” behaviors or encouraging leaders to display positive emotions and humor while on the job. By taking these steps, organizations can help their leaders become warmer and more supportive, which in turn can significantly enhance the effectiveness of PFP programs.
Kong, D. T., Park, S. K., & Peng, J. (2023). Appraising and Reacting to Perceived Pay For Performance: Leader Competence and Warmth as Critical Contingencies. Academy of Management Journal, 66(2), 402–431.
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