Any Business Article (Article needs to be at least 1 pg long)

Performance Based Pay Plans

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Performance Based Pay Plans

As organizational structures have become more complex to keep pace with the ever increasing complexity of the business environment , it has become crucial to institute an effective and efficient compensation system that provides not just offers fair rewards to employees but also motivational incentives

The two basic types of compensation plans in practice today are the pay for performance and pay for skill based systems . The mechanics of both these compensation plans stem from prior motivational research

conducted

Before proceeding to a discussion about the mechanics of the different kinds of compensation plans , it is imperative to study the basics of motivational theory , since all compensation plans , whether skills based or performance based , find their roots in Motivational Theory

The basis of motivational theory is that all actions of an individual are stimulated by unsatisfied needs that prompt action that would lead to their fulfillment . In other words , according to motivational theory human behavior can be understood simply as goal directed behavior , where all actions are undertaken with the sole purpose of need satisfaction

Of the multitude of motivation theories that abound , expectancy and equity theories of motivation have been considered the most important in designing different types of compensation plans

Proponents of expectancy theory contend that an individual has conscious control over the majority of his /her actions and hence that course of action will always be selected from among the available options that lead to the best...