PublicOrgTheory

Motivating employees toward improved organizational performance is one of the great challenges of management.  Companies in particular spend a lot of time, energy, and money designing, implementing, and maintaining pay-for-performance programs.  According to new research by John Budd, Industrial Relations Land Grant Chair at the University of Minnesota Carlson School of Management, a lot of the effort is for naught:

An analysis of the NBER Shared Capitalism data set of thousands of employee responses linked to company-provided information from ten to fourteen private-sector organisations reveals significant fractions of employees whose perceptions of whether or not they are covered by various shared capitalism programmes do not match their employers’ policies. Such shared capitalism programmes seek to tie employee pay to performance. If this is intended simply as a risk-sharing mechanism between employers and their employees, then ignorance of shared capitalism plans is detrimental to employees, but is probably not a significant concern with respect to corporate performance. In contrast, if a goal of shared capitalism programmes is to provide incentives for employee performance, then employee ignorance has the potential to undermine this goal. Put simply, how can incentives work if employees are not aware of their existence?

Indeed.

ALSO: There’s a reason why Frederick Herzberg’s Harvard Business Review article on motivation is a classic.