Employees and Incentive Pay: A Balancing Act

What impact does extremely rewarding incentive pay have on employee focus?

a. It enhances their overall job performance
b. It may lead to a narrow focus on rewarded performance measures only

Final answer:

It is true that employees may primarily focus on performance measures rewarded by incentive pay, potentially neglecting other important job aspects. This is related to the nature of extrinsic versus intrinsic motivation, where external rewards can diminish the motivation for unrewarded tasks.

When incentive systems offer highly rewarding pay based on specific performance measures, employees may become fixated on excelling in those areas to attain the rewards. However, this singular focus can result in neglecting other crucial aspects of their job responsibilities.

Research suggests that extrinsic motivation, such as financial incentives, can sometimes undermine intrinsic motivation for tasks that are not tied to the rewards. For example, employees may excessively concentrate on meeting sales targets to earn bonuses, potentially overlooking the importance of customer service or collaboration with colleagues.

Additionally, theories like Davis and Moore's propose that rewarding individuals for more critical work with higher income can incentivize them to work harder and longer. This highlights the power of targeted incentives in influencing behavior and performance.

However, in scenarios where management prioritizes investing in machinery over increasing wages, as seen in the case of union workers provided, fewer employees may benefit from improved productivity due to advanced technology. This demonstrates the nuanced effects of incentive pay on employee focus and organizational dynamics.