MERIT PAY, PERFORMANCE-APPRAISAL, AND INDIVIDUAL MOTIVATION - AN ANALYSIS AND ALTERNATIVE

Theories of motivation and common expectation argue that people who co ntribute more to an undertaking should receive more from it. This expe ctation has significantly influenced the design of compensation system s. Merit pay reflects this influence. Nonetheless, in spite of intuiti ve appeal and apparent theoretical support, merit pay rarely achieves its objectives. This article reviews five common implementation issues . It also argues that merit plans underemphasize important attribution biases that affect performance judgements. These biases suggest that such plans would still have limited effectiveness, even if implementat ion problems were overcome. The article presents an alternative focuse d on group accomplishment. (C) 1998 John Wiley & Sons, Inc.