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BioSpace: Does pay for performance work? It depends

21 Dec 2023
Models that reward employees with higher compensation for good work performance are used throughout most industries, including biotech and pharma.

Originally found at BioSpace

"There are multiple forms of pay for performance,” said Tony Kong, an associate professor of Organizational Leadership at the CU Boulder Leeds School of Business. “It can be that company or supervisors allocate the pay or rewards based on individual performance, either appraised by a supervisor or measured in some way that is more objective. It can also be paid for team performance. And sometimes some companies actually pay for organizational performance in the form of profit sharing."

The model is fairly common in biotech and pharmaceutical companies, said Liz Nguyen, an advisor to emerging biotech companies who previously worked as the senior vice president of Talent and Culture at Surrozen.

Much evidence in organizational journals has indicated that the “incentive effect” works to motivate employees to work harder, according to a 2023 Academy of Management Journal study coauthored by Kong. But some recent studies argue that these models can actually backfire and cause employees to become overly stressed, anxious and even depressed, leading them to withdraw from their work or quit. One 2020 study conducted in Denmark even found that when pay-for-performance models were introduced, there was a 4–6% increase in the usage of antidepressant and anti-anxiety medication among employees.

The problem is, there are really no other alternatives to this model for motivating performance in the workplace, Kong said. “If someone has the idea, that’s a million-dollar idea,” he said.

Continue reading the original article at BioSpace

Read the original research in Academy of Management Journal.

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