Employee Reactions to a Pay Incentive Plan
The reaction of a work group to a pay incentive plan is studied. An analysis of the employees’ attitudes reveals that they trust management, understand the plan, and see a close relationship between their pay and their performance. Based upon expectancy theory, it is hypothesised that because these conditions exist, the workers will respond directly to the economic payoff structure of the plan. In order to test this hypothesis, a mathematical model is developed to predict the productivity of the work group. The data show a high degree of fit between the model’s predictions and the actual productivity of the group. The implications of this for future research and for the design of incentive systems are discussed.
KeywordsUtility Model Incentive System Incentive Plan Expectancy Theory Psychological Climate
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