Advantages And Disadvantages Of Using Pay-for-Performance Plans

“Pay for Performance” has made inroads in business, but has remained a hard sell in public school systems. There are some successful examples where teacher pay has been linked to student test scores. For example, in Minnesota, some districts have stopped giving automatic raises for seniority and base 60% of all pay increases on performance. In Denver, unions and school districts designed an incentive program where teachers receive bonuses for student achievement and for earning national teaching certificates.

However, some plans have not worked. For example, Cincinnati teachers voted against a merit pay proposal and Philadelphia teachers gave their bonus checks to charity rather than cashing them. It appears that having teachers involved in planning the incentive system is one key factor to success. The same can be said for all incentive plans – if employees don’t buy into them, they will not work.

Your paper may be based on a business entity of your choosing from the public or private sector and must answer the following Research Questions:
1. How could an organization measure the effectiveness of its pay-for-performance plan(s)?
2. From an employee’s perspective, what are the advantages and disadvantages of using a pay-for-performance plan?
3. From an employer’s perspective, what are the advantages and disadvantages of using a pay-for-performance plan?

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