Perform better, get paid more, is the basic tenant of pay-for-performance (PFP). One type of PFP strategy is bonuses, which are easy to hand out and motivate employees to accomplish short-term goals. PFP can be used at all levels of the organization, from CEOs to managers to entry-level workers. Want that project done by the end of the month? An extra monetary incentive won’t hurt! Or will it?
Although the concept is simple, the positive and negative outcomes of this compensation system are much more complex. One team of researchers (Pohler & Schmidt, 2016) investigated how giving managers bonuses for better performance leads to employee turnover.