Merit Pay and Performance - Book Report/Review Example

However, for merit pays to work there is a need to identify the factors associated with the success of merit pays in boosting employee performance. This point brings up the need for good design on merit pays and possibly even on the limitation of merit pays. Merit Pay and Performance Introduction One of the top concerns of management is motivating personnel to give their best for the organization. In recent years, merit pay has been vigorously proposed as an instrument that can enable the workforce and management to perform optimally.

Schulz and Tanguay (2006, p. 71) noted that “the use of merit pay is increasing in public institutions,” including in public universities. Yet, at the same time, merit pay date back to Great Britain in 1700s and, in the case of the United States, to the report A Nation at Risk in 1983 that pointed out that “a significant number of public school districts in the United States began considering merit-based pay as an alternative or supplement to the single salary schedule” (Besharov, 2007, p. 912). Although the applications of theories of merit pay are in the field of management and administration, Schulz and Tanguay (2006) have pointed out that the theoretical foundations of merit pay are also in psychology and economics.

Given a possibly considerable support for merit pay, what does recent literature say on merit pay and performance? What are some of the findings of empirical studies for last five years? Discussion Cowley and Veldhuis (2011) reviewed two recent studies that claim merit pay works for the education sector. According to Cowley and Veldhuis (2011), one such study is that by University of Chicago economics professor Derek Neal. Cowley and Veldhuis (2011, p. 11) pointed out that in the Neal study, “strong suggestive evidence” is found in the literature that indicate that teacher efforts increase with merit pay although there are “exceptions” like the merit pay in England and Portugal where merit pay was extended based on “subjective assessments” and, thus, did not work.

Cowley and Veldhuis (2011, p. 11) also pointed out that another recent study that has a similar finding is that one by economics professor Victor Levy wherein evidences were presented that “monetary incentives” for English and Math teachers in Israel led to significant improvements in test passing rates and responsiveness to student needs. Nevertheless, Cowley and Veldhuis (2011, p. 11) recognized that merit pay systems work and attributed the inutility of some merit pay programs to “poor design”.

Unfortunately, however, Cowley and Velhuis (2011) did not identify the details of the design features that led to the failure of some merit pay programs but Cowley (2011, p. 11) noted, however, that the study of Victor Levi highlighted the importance for merit pay to “align performance with outcomes” and the need for the merit pay system to be “monitored closely to discourage manipulation by teachers.” Campbell et al. (2010, April) examined the question empirically whether merit pay for accounting professors promoted better teaching, research, and service and found that a merit plan among accounting professors has been associated with research outputs.

In addition, they also found that the American College Testing or ACT scores of incoming freshmen students were associated with r