The tendency to pay according to performance previously set can be described as a generalization of the idea of bonuses. A bonus is positively correlated with the performance and describes the part that is paid in addition to fixed salary. However, this operation not only in the banking sector spreads, but just as in the public sector and at universities, ministers and many more. While the current wages are celebrated as a glorious enterprise idea, enjoy wide acceptance and are thus introduced almost everywhere, presenting our teacher Prof. Dr. Dr. hc mult. Bruno S. Frey and the problems that are associated with this "lousy idea" :
Problem 1: performance is difficult / impossible to measure.
As an example, measuring the performance of bankers called the basis of stock prices. Other influences than the performance of Bankers determine the share price with strong. The value of a company should be reflected in the share price, this is not including prepared from tampering. addition, the Performance as measured by the expectation. A 70-million bonus from a CS-chief is justified by the share price - but measured relative to other banks. So if the stock price crashes of UBS, the bonus of the CS-CEO's shoots into the air. A bonus you get a result is often not just because one is good, but less bad than expected. assembly line allowed relaying power are quite measurable. The introduction of performance wages there increased performance by giving the employee more difficult. It stands there, however, a selection effect: high-performance employees will be sorted out less powerful. If there is a fire or a flood comes, however, is no one to save the machinery responsible for this because no performance pay is paid: The damage from this is just much greater than the benefits of performance pay.
provides Moreover, the problem of ex ante -specification of wages. Since the incentive pay is tied to a mandatory performance target, it must be established before what constitutes the extrinsic extra motivation. If the performance-based extra income determined in retrospect, the risk of Rent Seeking just would not: A worker could no longer - dependent care only about the performance of the additional wage - with the exclusion of thinking and flexibility.
Problem 2: incentive payments undermine intrinsic motivation.
is set as an incentive from outside, it is purely strategic. The best known example to us all the Bologna system of universities, the only spot to hunt is being studied rather than on the interest, which contradicts the concept of science. Those who study only because of the diploma and a job-oriented education seeking, should study at a college or an apprenticeship. The distortion of incentives leads to loss of actual interest. -> More on this in blog post to Bologna.
Another problem is the erroneous focus on the criterion of compensation: All other domains be neglected. If, for example - as already mentioned - in a company unexpected events in a non-remunerated on the field, but no one is responsible and it is potentially highly problematic failures.
Problem 3: selection effect (self-selection )
incentive pay to attract people with mainly monetary interests. Among other things, could suffer from the variety of workers, resulting in a significant quality reduction.
Problem 4: performance wages lead to conflicts and disappointments.
out a bonus to fixed salary to interpersonal comparisons, which are directly related to money or income. The problem, in the incomparable, since there is no objective answer. The bonus is not given, the company may lose more than it gains by the fact that there is a bonus.
As alternatives to rate incentives were following proposes solutions:
first Fixed salary ( Fixed Wages): You pay a fixed wage honest market, additional demands are not heeded.
- rewarded addition, in hindsight: How do you measure the performance of broad, and it may make retroactive wage adjustments. ex post can be measured with the same criteria more, but prevents the people running only in one direction.
- 360-degree assessment: a holistic view is essential.
second Awards: money or recognition?
- to complete this question see the article on the role of awards.
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