The Disadvantages of Pay for Performance

by Chris Joseph; Updated September 26, 2017

Employers sometimes use the ability to earn additional pay as a method of motivating employees to increase their productivity. Pay-for-performance programs take many forms, including cash bonuses, company stock and profit sharing. While pay-for-performance plans provide incentive to money-motivated employees, employers need to consider the possible disadvantages before implementing them.

Deteriorating Quality

Pay-for-performance plans can cause employees to focus more on quantity as opposed to quality, which could lead to the deterioration of the latter. A salesperson concerned with making as many sales as possible to achieve a bonus might overlook details such as filling out paperwork properly and ensuring the product is in stock before placing the order. As a result, customers receive the wrong item or have to wait much longer for delivery than promised by the salesperson.

Lack of Teamwork

Workers attempting to reach personal goals sometimes are less willing to be team players. They might be hesitant to provide assistance to struggling coworkers, because they view this as wasting valuable time that would be better used to improve their own productivity. In some cases, conflict between employees arises from a lack of cooperation or the perception that one employee is hindering the performance of another to prevent her from achieving her objectives.

Measuring Performance

Unless performance standards are completely objective, such as when awarding a salesperson a bonus for reaching a predetermined sales level, it can be difficult to determine whether the performance merits paying the incentive bonus. This places more pressure on supervisors during performance appraisals to accurately evaluate the performance of each employee. According to the Government Executive website, supervisors have a tendency to provide an inflated appraisal to ensure employees reach their incentives.

Insufficient Motivation

If employees perceive the amount of the incentive as too low, it does not provide the motivation to reach the desired increased productivity levels. Employees might even resent the employer for not offering a more meaningful program that could have a more significant impact on their standard of living. As a result, they could be motivated to perform to the minimum standard necessary to maintain employment while viewing the putting forth of extra effort as a waste of time.