Bonner and Sprinkle (2002), for example, report that the structure of incentive schemes, individual ability, and other organizational and environmental circumstances impact the effectiveness of performance-based incentive compensation schemes. Regardless of their ultimate effectiveness, organizations implementing incentive schemes often anticipate improved recruitment and retention of employees by generously rewarding individuals who perform at high levels. The question of how to properly motivate high performing employees while not alienating other important workers is, however, becoming a more important part of many motivational programs (Stuart, 2005). In fact, establishing appropriate employee reward schemes and limiting undesirable reactions for those who fail to achieve imposed goals may be as much of a managerial difficulty as rewarding top performers. Ultimately, challenges presented to firm owners and managers who seek to motivate valuable workers while not imposing harsh penalties for failure are substantial. From the critical perspective, various employee reward schemes and their derivatives represent possibly the best way to increase work motivation within organizations. A general assumption of much of prior economics-based research is that encouraging enhanced performance from employees is beneficial because it leads to increased profitability to the organization’s owners by aligning the interests of owners and employees (Sprinkle, 2003). Economic agency theory, primarily the principal-agent model, and psychologically based goal-setting theory explain the hypothesized causal relationships between incentives, motivation, effort, and performance (Bonner amp. Sprinkle, 2002. Locke, 2001). From an economic perspective, the benefits of using performance information as a motivational tool stem from the assumption that self-interested employees are interested in maximizing personal wealth either through personal compensation or the consumption of firm prerequisites and engaging in leisure or not working.
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