A Comparison Study on the Performance Effects of Variable Pay Systems

Variable pay systems are used in various forms and intensities all over the world at all organizational levels, from the top management to blue-collar employees. In the current economic situation, competition is increasing, the growth rate is decreasing, and markets are getting saturated. In the age of globalization, markets are getting deregulated, and people are well educated. Individualism and self-determination is part of people¿s mentality. This leads to the question, are established management concepts still successful in today¿s business world? Organizations today are under continued pressure to improve their business so they can keep up with competition and show excellence performance. Employers continuously want to enhance the effectiveness and efficiency of their business. Among other things the motivation of employees can lead to these effects. Companies hope to improve the motivation of employees through variable pay systems, which results in positive effects on the company¿s performance, profitability and success. Motivation cannot be measured and monitored objectively. But the results followed by motivation, such as performance effects, can. Variable pay systems become an important point of interest in today¿s companies. They are management tools which should give executives, top-management, and the whole workforce orientation.