Category Type Advantages Disadvantages
1. Money Wage Incentive - can increase worker productivity - lowered quality – can increases productivity
Plans - attractive to workers for motivation at the expense of quality
- differential opportunity – workers may be
given a higher opportunity for incentives than
others
- reduced cooperation
- incompatible job design
- restriction of productivity – may fear that if
they produced at a high level, pay rate will fall
Merit Pay - can link pay to performance on white-collar jobs - low discrimination – managers may not be
- performance reviews that lead to some merit pay able to tell good performers apart from poor
to be awarded can stimulate performance performers
- good for individuals who see a strong link between - small increases – merit increases could be
rewards and performance too small to be effective motivators
- pay secrecy – may damage the motivational
impact of a well-designed merit plan
Profit Sharing - sense of ownership - many factors beyond the control of
- aligns employee goals with organizational goals employees can affect profits
- only pays when the organization makes a profit - difficult for employees to see the impact of
their actions on organization profits
Employee Stock - creates a sense of legal and psychological - hard for employees to see connection
Ownership ownership for employees between their efforts and value of the stock
- aligns employee’s goals/interests with those of the- lose their motivational potential in a weak
organization economy
Gain Sharing - aligns organization and employee goals - bonuses might be paid even when the
- encourages teamwork and cooperative behaviour organization doesn’t make a profit
- employees might neglect objectives that
aren’t included in the formula
2.Management Goal Setting - can facilitate goal establishment, goal - elaborate, difficult, time-consuming process
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