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2. Meaning
Most businesses today say they pay for performance. It only makes
sense in most situations to provide the most pay to those employees
who do the most for the business. However, sometimes there exists
a disconnect in the definition of performance at all levels of the
organization
3. Advantage
Align employee’s actions with the interests of the company. What
aspect of the business do you need to improve? Customer service?
Productivity? Business processes? A pay-for performance plan is an
excellent way to focus your employee’s actions on the areas that
need attention. They are a tool that can be used to shine a spotlight
on key company priorities and business drivers
Attract and Retain Talent - A critical business objective for every
company, well-designed pay-for-performance plans help companies
compete for the talent they need and communicate company
priorities and critical business objectives to employees
4. Advantage
Give employees - a stake in the company’s success. Obviously
employees realize that performing their job well helps the company
do well, but the company’s success can be too far removed from the
daily activity of the employee to be a motivating factor. A pay-for-
performance plan can bring the interests of the employee closer to
the interest of the company
Cost control- Although not as important as the factors mentioned
above, one cannot ignore that pay-for-performance plan mitigate
financial risk for the company. Since these plans are tied to
performance, they are effective cost control mechanisms. In
addition, pay-for-performance payouts are not added to base pay,
and thus don’t generate the compound growth of fixed-costs that
base pay increases do