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The Incentive and Rewarding Mechanism

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Performance Management Systems

Part of the book series: Contributions to Management Science ((MANAGEMENT SC.))

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Abstract

This Chapter aims at analysing the role of the incentive and rewarding mechanism in the loose coupling PMS. Thus, it firstly identifies the purposes of the incentive and rewarding mechanism in the PMS, namely motivation, information, and recruitment and retention. After a brief introduction to the incentive theories, the discussion starts from the investigation of the incentive and rewarding process, which is composed of three main phases; the selection of the performance measures to be used in the assessment phase, the assessment and its frequency, and the model selection. Finally, the last sections provide theoretical and practical insights into the assessment of the incentive and rewarding mechanism and the dysfunctional effects resulting from the use of biased incentive and rewarding mechanisms.

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Notes

  1. 1.

    Merchant outlined a set of both positive and negative (punishments) rewards. Among the positive rewards, he listed autonomy, power, opportunity to participate in important decision-making processes, bonuses, recognition, promotions, and so forth. While job interference from superiors, loss of job, zero salary increase, no promotion, etc., are all negative rewards, i.e. punishments (Merchant 1998).

  2. 2.

    In a similar vein, Merchant and Van der Stede pointed out that motivation is only one of the three main purposes of rewarding employees. The other two aims relate to informational, as well as personnel-related issues, such as retention and recruitment of high-level employees (Merchant and Van der Stede 2007: Chap. 9).

  3. 3.

    The number of performance measures used for evaluation purposes can be lower than the number of targets assigned to an employee. This is the case, for example, of targets in which it is difficult to assess the effort the employee put in order to achieve the target.

  4. 4.

    Another strand of research stressed that the relationship between the four determinants and the level of reward could also be opposite. For instance, an highly rewarded activity signals to the employee that either the activity is difficult to accomplish, or it is a low desirable one, or the superior perceives the employee as under-skilled for that activity (Gneezy et al. 2011).

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Authors and Affiliations

  1. Department of Economics and Management, University of Pavia, Pavia, Italy

    Chiara Demartini

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  1. Chiara Demartini
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Demartini, C. (2014). The Incentive and Rewarding Mechanism. In: Performance Management Systems. Contributions to Management Science. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-36684-0_10

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