, HRM2603 ASSIGNMENT 3 SEMESTER 2 2026 | DUE DATE 15 SEPTEMBER 2026
QUESTION 1 [11 MARKS]
1.1 Why some industries make greater use of pay-for-performance plans [5 marks]
Some industries make greater use of pay-for-performance plans because the nature of the
work makes individual or group performance easier to measure. Pay-for-performance links
part of an employee’s remuneration to the achievement of specific performance targets.
Incentives are therefore more likely to be effective where there is a clear relationship
between an employee’s effort and measurable results (Armstrong, 2021).
For example, sales, financial services and some production environments can make extensive
use of incentives because outputs such as sales volumes, revenue, production levels or targets
can be measured relatively easily. In these circumstances, employees can see a direct
connection between their performance and the reward they receive. Incentives can therefore
encourage employees to improve productivity and focus on organisational objectives.
However, pay-for-performance may be less effective where individual performance is
difficult to measure or depends heavily on teamwork. In jobs such as teaching, research or
complex professional work, outcomes may depend on several employees and may only
become visible over a longer period. Individual incentives could then encourage employees
to focus on their own targets instead of cooperating with colleagues. Incentives may also be
less effective where employees have little control over the factors affecting their performance
(Gerhart & Fang, 2014).
The effectiveness of an incentive system therefore depends on factors such as measurability,
employee control, fairness and the link between performance and reward. A well-designed
system should also support the organisation’s objectives rather than encouraging behaviour
that undermines quality or teamwork. This is why industries differ in how extensively they
use variable pay and performance incentives.
QUESTION 1 [11 MARKS]
1.1 Why some industries make greater use of pay-for-performance plans [5 marks]
Some industries make greater use of pay-for-performance plans because the nature of the
work makes individual or group performance easier to measure. Pay-for-performance links
part of an employee’s remuneration to the achievement of specific performance targets.
Incentives are therefore more likely to be effective where there is a clear relationship
between an employee’s effort and measurable results (Armstrong, 2021).
For example, sales, financial services and some production environments can make extensive
use of incentives because outputs such as sales volumes, revenue, production levels or targets
can be measured relatively easily. In these circumstances, employees can see a direct
connection between their performance and the reward they receive. Incentives can therefore
encourage employees to improve productivity and focus on organisational objectives.
However, pay-for-performance may be less effective where individual performance is
difficult to measure or depends heavily on teamwork. In jobs such as teaching, research or
complex professional work, outcomes may depend on several employees and may only
become visible over a longer period. Individual incentives could then encourage employees
to focus on their own targets instead of cooperating with colleagues. Incentives may also be
less effective where employees have little control over the factors affecting their performance
(Gerhart & Fang, 2014).
The effectiveness of an incentive system therefore depends on factors such as measurability,
employee control, fairness and the link between performance and reward. A well-designed
system should also support the organisation’s objectives rather than encouraging behaviour
that undermines quality or teamwork. This is why industries differ in how extensively they
use variable pay and performance incentives.
