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This chapter provides further evidence on the role of uncertainty and job complexity in pay-for-performance and autonomy decisions. It proposes an encompassing econometric approach in order to explain the differences in previous outcomes that may be due to differing methodological approaches. The main stylized fact is that autonomy and pay-for-performance are positively associated. Additionally, autonomy is positively related to job complexity and uncertainty suggesting that the relationship between these latter variables and pay-for-performance could be through autonomy. After controlling for autonomy, the positive relationship between pay-for-performance and job complexity disappears, while that between pay-for-performance and uncertainty becomes more negative.

To examine the effect of pay‐for‐performance on distributive justice and the moderating effect of commitment performance appraisal in the case of Korean employees.

Data were collected from 28 companies and 656 employees. Moderated regression analyses were employed.

Findings show that pay‐for‐performance enhances employees' perception of distributive justice only when there is a commitment performance appraisal practice. Additional analysis shows that the commitment performance appraisal practices of a company influence employee perceptions of such practices in a U‐shape fashion.

Since, data were collected from 28 companies, the results may need to be modified before being generalized to/for Korean companies.

It is notable that only when accompanied by commitment performance appraisal does pay‐for‐performance enhance employee perception of distributive justice. Managers in Korean companies should consider implementing commitment appraisal practices when they want to utilize pay‐for‐performance.

This paper notes the fundamental changes in the pay systems in Korean companies, and offers practical implications for managers starting out on a pay‐for‐performance system.

The purpose of this paper is to analyse the situation of performance management, to be more precise, the usage and attitudes towards pay‐for‐performance on the example of Estonian schools and brings out practical implications for implementing pay‐for‐performance in Estonian general educational schools.

Altogether 298 headmasters and 2,165 teachers participated in this research. The goal of the research was to map the situation of the usage of pay‐for‐performance in Estonian schools and to find out teachers' and headmasters' opinions about the most effective pay‐for‐performance system.

Despite the great expectations of performance management and pay‐for‐performance, it is not being used in many Estonian general educational schools. However, the findings of this research show that both headmasters and teachers have quite positive attitudes towards pay‐for‐performance that gives a favourable platform for implementing pay‐for‐performance in the Estonian educational sector.

The study was mainly quantitative with only a few open questions, which raises limitations for finding complete answers and explanations to questions raised. Therefore, case studies need to be done to find answers to some interesting research questions.

With the view to raising the performance of the Estonian educational system and to guarantee its sustainability, a new course concerning schools' and pupils' individual development must be taken. It can be achieved through performance management and pay‐for‐performance, which also helps to raise teachers' motivation. A central feature of the pay‐for‐performance is that pay must be in accord with performance and must provide an incentive to promote the success of the organisation.

Policymakers implementing pay-for-performance schemes within general practice should seek to design schemes which work with rather than against the professional values and goals of general practitioners. In this way, schemes are more likely to enhance the practitioners' engagement. The purpose of this paper is to show how this was done in two case studies of pay-for-performance design and present the lessons from this study for policymakers.

A Most Similar Systems collective case study of the design of two pay-for-performance schemes for general practitioners, the United Kingdom's Quality and Outcomes Framework (QOF) and the New Zealand’s Performance Management Programme (PMP) was undertaken, involving 26 semi-structured interviews with policymakers, documentary and literature analysis.

Innovation in processes was found in both case studies which facilitated engagement by general practitioners in the formulation and implementation of these schemes. These were careful selection of highly skilled design teams, use of principle-based negotiation techniques and academic mediation of indicator selection. In addition, in England the majority of members in the combined QOF design team were general practitioners. The evidence from these two case studies reinforces approaches to scheme design which seek to harness rather than challenge medical professional values and which maximise the participation of general practitioners in the design process. Achieving funder/practitioner collaboration should be a key goal in the policymaking process.

Pay-for-performance scheme designers can improve their ability to engage general practitioners in scheme design and scheme uptake by adopting approaches which actively engage general practitioners as designers and users of such schemes.

This study compares two contemporaneous processes of pay-for-performance scheme design and implementation in similar systems of general practice funding and delivery at the national level, offering a rare quasi-experimental opportunity for learning lessons from comparative analysis.

Enhancing the innovative behaviour of knowledge workers is a main task in knowledge management. The pay-for-performance policy is one of the management practices for innovative behaviour enhancement and has been gaining popularity in the knowledge-intensive context. However, it is still uncertain whether such practice really enhances the innovative behaviour of knowledge workers. To address this issue, this paper aims to propose and verify a conceptual framework incorporating kernel notions of social exchange, psychological empowerment and work engagement rooted in the social cognition paradigm.

The current study conducts a survey on 608 knowledge workers and their supervisors, validating the model structure and causal path pattern of the proposed framework. The causality is delineated from social exchange attributes of financial incentive, psychological empowerment and work engagement to innovative behaviour of knowledge workers.

Perceived organisational support and perceived pay equity are primary antecedents of symbolic incentive meaning reflected in the financial incentive of the pay-for-performance policy. Symbolic incentive meaning comprising dimensions of relative position, control and personal importance relates positively to innovative behaviour of knowledge workers. Psychological empowerment and work engagement are partial mediators of the positive relationship.

The current study explicates why and how social exchange attributes of the financial incentive provided by the pay-for-performance policy may enhance innovative behaviour of knowledge workers. Implications are supplied to knowledge management scholars and practitioners to optimise the pay-for-performance policy for innovative behaviour enhancement.

Identifies three approaches to controlling the agent‐principal conflict for CEOs (market discipline, compensation structure and monitoring mechanisms) and reviews previous relevant research. Develops a mathematical model of the relationship between pay‐for‐performance sensitivity and external monitoring; and tests it on 1971‐1993 US data. Presents the results, which suggest that the sensitivity is significantly affected by monitors, growth opportunities and CEO share ownership. Considers consistency with other research and the implications of the findings.

To evaluate a proposed prescriptive model for the design of effective combinations of performance goals and pay‐for‐performance plans for the performance management of teams.

The idea underlying the model – in which task, goal, and reward interdependence and their fit play a dominant role – is that a pay‐for‐performance plan should support the team goals and the goals of individual team members as well as support the way in which team members need to cooperate. To obtain a first notion on the model's validity, it was applied to evaluate a pay‐for‐performance plan for management teams at a large IT company. This evaluation consisted of an in‐depth study of three management teams, using a case study methodology.

Combinations of fit among type of team, performance goals, and pay‐for‐performance plan (established by a fit between the interdependence constructs and/or by an overlap in the content of the goal and pay indicators) are more effective than combinations of misfit.

The case study was limited to intra‐team interdependence relationships and did allow for a analysis of the separate effects of a fit between the interdependence constructs versus content fit.

This study shows that pay‐for‐performance plans should not be designed in isolation, but rather in alignment with performance goals and existing task interdependencies.

This is the first study to investigate the three inter‐dependence constructs in conjunction in a field setting.

The purpose of this paper is to understand how buyers and suppliers in supply chains learn to align their performance objectives and incentives through contracting.

Two longitudinal case studies of the process of supply chain alignment were conducted based on 26 semi-structured interviews and 25 key documents including drafts of contracts and service level agreements.

The dynamic interplay of contracting and learning contributes to supply chain alignment. Exchange-, partner- and contract framing-specific learning that accumulates during the contracting process is used to (re)design pay-for-performance provisions. Such learning also results in improved buyer-supplier relationships that enable alignment, complementing the effect of contractual incentives.

The study demonstrates that the interplay of contracting and learning is an important means of achieving supply chain alignment. Supply chain alignment is seen as a process, rather than as a state. It does not happen automatically or instantaneously, nor is it unidirectional. Rather, it is a discontinuous process triggered by episodic events that requires interactive work and learning.

Development of performance contracting capabilities entails learning how to refine performance incentives and their framing to trigger positive responses from supply chain counterparts.

The paper addresses supply chain alignment as a process. Accordingly, it stresses some important features of supply chain alignment.

A survey of over 1,000 companies conducted in 1990 indicated that two‐thirds will be giving merit‐only increases in 1991, which was a 60 per cent increase over two years ago. However, a current question: Is pay for performance used effectively? This article examines both individual and group incentive plans and explores all key factors utilised in determining the outcome (implementation) of these plans. Furthermore, the structure of an effective pay‐for‐performance plan is outlined in light of the mission, strategy and objectives of the organisation to determine how rigid or entrepreneurial the design can be. It was concluded that pay for performance is fundamental for competitive organisations.

This paper aims to describe the introduction of pay‐for‐performance in New Zealand primary health care; compare this policy development with analogous English initiatives; discuss the risk of unintended, adverse consequences of the New Zealand programme; and consider key lessons for the policy development of pay‐for‐performance in health care.

This article is based on description and analysis of policy developments for performance management in New Zealand and England.

It is not clear that the New Zealand Programme appropriately reflects the values and goals of primary health care providers. It encourages slow, incremental change by paying bonuses to Primary Health Organisations, rather than practices, for meeting targets on a small number of performance indicators. The bonuses account for a tiny proportion of the total income of PHOs and in general are for service improvement rather than to supplement practitioner incomes. It is important to align performance incentives with stakeholders' values and goals.

The paper discusses New Zealand developments in pay‐for‐performance in the context of English policy initiatives and considers lessons for all health systems.