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Many, but not all, employers give passing grades to their pay-for-performance plans - incentive arrangements that reward employees for good job performance. According to a survey by William M. Mercer Inc. in New York, 65 percent of 179 companies say their plan has significantly improved productivity, although 35 percent say it has not.

While 60 percent of the companies say that pay-for-performance helps lower costs, 40 percent attribute no cost savings to this approach, and 36 percent say they do not think their plan helps improve company or department morale.

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Mercer principal Bruce Spiegel says that pay-for-performance typically does not reach far enough down into an organization to cover a large enough group of employees.

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