Performance And Satisfaction Deteriorate: Effects Of The Removal Of A Pay Incentive

Abstract

This 14-month field study involving over 900 operative employees in two plants of the same company utilized a “before-and-after” design to investigate the effects of removal of a pay incentive.  The only difference between the two plants was that tone was in the process of abandoning a pay incentive system (experimental condition) that was identical to the system that remained in the other (control group).  Findings from both multivariate and univariate analytical procedures revealed significant declines in performance and comparable although sometimes counterbalancing effects on measures of employee satisfaction, turnover, and grievances after removal of the incentive plan.  The findings suggest that management needs to reconsider continuation of the trend away from performance-contingent pay systems that is now so widespread at the operative level.