Research: Pay-for-Performance Doesn’t Have to Stress Workers Out

Surveys of nearly 900 workers show that perceptions of supervisors have a significant impact on whether these programs succeed.

by

and

Jian Peng

by

and

Jian Peng

October 17, 2024

HBR Staff/MoMo Productions/Getty Images

Summary.

Pay-for-performance (PFP) is considered one of the strongest tools to motivate employees, yet despite its popularity, it can sometimes create stress for workers that results in decreased performance, creativity, and engagement. New research suggests that how employees view their supervisor has a role in determining whether workers view PFP as a motivating challenge, leading them to achieve new heights, or a stressful threat that impacts their work. The authors offer tips for companies and managers on how to best harness the benefits of PFP while addressing some of the ways it can lead to stress.

“The incentive plans my company provides make me very stressed because the goals seem unachievable. Instead of feeling motivated, I feel too much pressure and stress, and my boss is not helping, but pushing.”

Sanghee Park is currently an associate professor of human resource management at Hanyang University Business School in South Korea. Her research focuses on the impact of compensation systems, particularly how different types of pay-for-performance affect employee motivation and performance, and has been published in leading management journals. She provides insights to help practitioners design more effective compensation systems through training and consulting. She has received research funding from the Seegene Medical Foundation.
Dejun “Tony” Kong (Ph.D., Washington University in St. Louis) is an Associate Professor of Organizational Leadership and Information Analytics at the University of Colorado Boulder’s Leeds School of Business. His research addresses how to enable people to be more prosocial (advancing other people’s or collective interests). He is a Fellow of the Association for Psychological Science, a Poets & Quants 40-under-40 business professor, an Associate Editor of the Journal of Management and the Journal of Organizational Behavior, and Program Chair-Elect of the Academy of Management’s Conflict Management Division.
JP

Jian Peng is an associate professor at the School of Economics & Management at Southeast University (corresponding address: Southeast University Road No.2, Jiangning District, Nanjing, Jiangsu 211189, China). His research centers on leadership and followership within the context of human resource management.

Research: Pay-for-Performance Doesn’t Have to Stress Workers Out

Partner Center

Explore HBR

HBR Store

About HBR

Manage My Account

Follow HBR