Paying your employees more for hitting specific targets may backfire, according to HBS professor Michael Beer .
..."I think there is an implicit negotiation going on between what management wants and expects, and what employees want and expect," observed Beer in his talk to HBS faculty. This implicit negotiation is "embedded" in the context of pay-for-performance, but often goes undiscussed and unacknowledged, he suggested. Misunderstandings about goals are the result. Pay-for-performance may also have a natural life cycle that managers are unaware of, he said.
Financial rewards in a fast-changing business environment could undermine a company's ability to build trust and commitment unless management and employees have an honest discussion of their mutual expectations, they added. This is "very difficult to do."
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