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Incentives are effective at enhancing productivity, but research also suggests that performance incentives can have “unintended negative consequences” including increases in hazard/injuries, increases in errors, and reduction in cooperation, prosocial behaviors, and creativity. Relatively overlooked is whether, when, and how incentives can be designed to prevent such negative consequences. The authors review literature in several disciplines (construction, healthcare delivery, economics, psychology, and [some] management) on this issue. This chapter, in toto, sheds a generally positive light and suggests that, beyond productivity, incentives can be used to improve other outcomes such as safety, quality, prosocial behaviors, and creativity, particularly when the incentives are thoughtfully designed. The review concludes with several potential fruitful areas for future research such as investigations of incentive-effect duration.

In this paper, we review the literature on pay variation (e.g., pay dispersion, pay compression, pay range) in organizations. Pay variation research has increased markedly in the past two decades and much progress has been made in terms of understanding its consequences for individual, team, and organizational outcomes. Our review of this research exposes several levels-related assumptions that have limited theoretical and empirical progress. We isolate the issues that deserve attention, develop an illustrative multilevel model, and offer a number of testable propositions to guide future research on pay structures.