Pay for Performance: Implementation of Individual and Group Plans

A survey of over 1,000 companies conducted in 1990 indicated that two‐thirds will be giving merit‐only increases in 1991, which was a 60 per cent increase over two years ago. However, a current question: Is pay for performance used effectively? This article examines both individual and group incentive plans and explores all key factors utilised in determining the outcome (implementation) of these plans. Furthermore, the structure of an effective pay‐for‐performance plan is outlined in light of the mission, strategy and objectives of the organisation to determine how rigid or entrepreneurial the design can be. It was concluded that pay for performance is fundamental for competitive organisations.