Motivational contracts to define the links between results and various organizational incentives. Recruit good people expect good performance pay them well if perform well. Employees typically put forth more (less) effort on activities that are (not) rewarded: directing effort. Helpi(cid:374)g e(cid:373)plo(cid:455)ees to u(cid:374)dersta(cid:374)d the (cid:272)o(cid:373)pa(cid:374)(cid:455)"s e(cid:454)pe(cid:272)tatio(cid:374) to the(cid:373) Inform the relative importance of often-competing results areas. Non-control purposes: provide a competitive compensation package, make compensation variable with firm performance. Minimize the risk of offering the compensation that is exceeding their ability: tax considerations. Individuals tend to more strongly motivated by the potential of earning rewards than by the fear of punishment. Positive incentives things employees value (rewards: monetary. Perquisites (club membership, vacation trips: non-monetary. Negative incentives things employees like to avoid (punishments: monetary, non-monetary. Benefits: pension and health benefits, perquisites of various types. Based on the performance of the current year or less. 20% of sales and 10% of net profits.