Contents

• Problem statement
• Introduction
• Definition
• Behaviours and Motivation
• Types of driving forces
• Supporting and enabling performance
• Management and Personnel
• Risk aversion
• Purpose of reward
• Conclusion
• References

Description

In companies, pay for performance encompasses several concepts, ranging from traditional merit pay to stock options. It has been confirmed in researches that pay for performance is effective in corporations. Humans have not always had the central role within companies that they posses today.
According to the Classical Organizational Theories, workers were looked upon as a factor of production that could be controlled and manipulated in the same way as machines. The consequence was that humans had to work with monotonous job assignments and with high performance pressure, which led to a great number of occupational accidents and strain injuries. Another aftermath was that the employee suffered psychical problems caused by isolation from his or her co-workers and inanimate assignments. Today, it is the people in the organization who make up the company, regardless of whether it is a commodity or service producing business. For the enterprise to be efficient and gain high profitability, it requires the employees to be confirmative and work efficiently with the company aims. One way of steering the workers in the desired direction is to design an incentive system. The workers receive clear directives on objectives and visions, which, if they are achieved, will lead to a reward. Therefore, it is of great significance that the company’s objectives are attainable and that these goals are desirable for the individual worker. If the incentive system meets these conditions it will lead to the workers being directed towards realizing what the company wants, as rewards control our behavior. A worker who strives to attain an objective has to be motivated by something. Today, there are many theories about incentives that deal with which factors that motivate a human being. These Motivational Theories make up the foundation of the company’s incentive system.