Pay For Performance:  Innovation Killer? | Talent and Performance Development |
Talent Management magazine, The Business of Talent Management

Pay for performance is effective for employees in operational roles, such as a painter painting houses or a salesman hitting quotas. But when it comes to employees responsible for finding creative solutions to problems, the model is ineffective, said Gustavo Manso, co-author of a 2012 study published in the July issue of Management Science.

...a straight pay-for-performance model does not have a tolerance for early failure, a component essential to innovation, said Manso, an associate professor of finance at the University of California at Berkeley.

Innovation is a “trial and error process,” Manso said. “You have to try things that you don’t know if they’re going to work.”