August 14, 2007
Pay for performance
Rewarding workers based on their performance is good in theory, but until lately it's proven hard to implement. Today's technology is making it easier to track performance and link it to pay, says N.C. State University economist Mike Walden.
"A new study (that) just came out shows that more firms are linking pay to performance. And this is because ... the ability and the cost of gathering and monitoring performance data have gone down," says Dr. Walden, a professor of agricultural and resource economics.
"So it is easier for firms to do this. I think it is also a result of pressures being put on individual businesses from more competition in the economy, both from domestic and foreign sources," he adds.
"However what this means -- and this new study confirms this -- is that we are seeing greater variation in pay, even within the same specific jobs. That is to say that a business now that has performance data for two people who are manufacturing widgets, the one person who is making more widgets per hour, they are going to get paid more than the other person," Walden says.
"So this could create some source of conflict within the firm. It's also another source of the widening income inequality gap," he concludes. "But clearly there are pressures that are pushing firms to do this, and this linkage -- this increased linkage -- of pay to performance is probably not going to go away."
Posted by deeshore at August 14, 2007 08:00 AM