Washington D.C, Jan 28 (ANI): Despite incentive compensation becoming an increasingly popular practice, it is not one-size-fits-all because for some managers, performance-based pay is not motivating enough, according to a recent study.
Researcher Joyce Cong Ying Wang said the the University of Texas study examined differences in individual characteristics, specifically career ambition and task attention, and business context to see how they affected managers’ responses to incentive pay.
Managers, and people in general, have inertia where they tend to do what they feel comfortable doing. The thought is that if companies provide managers with incentive pay, which is closely related to firm performance, then managers will be willing to take more risks, she said.
Wang noted that they found that managers with higher career ambition will be more responsive to incentive pay by taking more risks and that task attention more consistently affects managers’ response to incentive pay. When managers are offered incentive pay, if they are very attentive to tasks, they will take more risks. They tend to invest more strategically, and they also are more likely to change strategies.
The study also found that when a company’s performance grows, incentive pay does not work as well as when a firm’s performance declines.
The study appears in Journal of Organizational Behavior. (ANI)