The goal of a performance pay system is to get an employee to meet and exceed production quotas or goals. But an employee is always faced with events that are clearly beyond his/her control. What measures can be taken by the management to understand and minimize the impact of these ‘random' elements in the production system?
What will be an ideal response?
Actual employee effort may be impossible to measure due to asymmetric information. However, it is important for the management to try to measure, as much as possible, true effort, as long as it is not too costly to devise such measurements. One method that can be used is relative performance evaluation. The employee's performance is measured relative to peers' performance. This method is more likely to be useful if all peers in the comparison group are subject to the same random elements. Another method that can be used is peer evaluation or 360-degree evaluation. This method seeks to gather as much information as possible from others about the employee's true effort, and often uses subjective rating scales. Again, the cost of implementation should be taken into account.
You might also like to view...
When discussing pass through effects, it is fair to say
A) that the degree of pass through varies across nations, time and industries. B) that the degree of pass through varies across nations. C) that the degree of pass through varies across time and industries. D) that the degree of pass through varies across industries.
Refer to Figure 9.3. If the government establishes a price ceiling of $1.00, how many pounds of berries will be sold?
A) 200 B) 300 C) 400 D) 600 E) 800
The price of a bushel of corn next year is a ________ variable because the price ________ known with certainty.
A) known; is not B) random; is C) random; is not D) known; is
Supply-siders and Keynesians agree that with the correct approach to stabilization policy, it is possible to reduce both the unemployment rate and the inflation rate
Indicate whether the statement is true or false