Final answer:
Linking incentive pay to an organization's performance can increase productivity and job satisfaction by aligning employee efforts with company success. However, there can be negative effects such as stress, short-term focus, and potential unethical behavior if the system is not well-implemented.
Step-by-step explanation:
Linking incentive pay to an organization's overall performance can be an effective motivator, as it aligns the interests of the employees with the financial health of the company. This performance-based compensation encourages employees to work towards common goals and can enhance productivity. Employee satisfaction is typically higher when they feel their efforts are directly tied to rewards, potentially leading to responses such as "I recommend my organization as a good place to work" when surveyed.
However, there are potential negative consequences of this method. Overemphasis on organizational performance can lead to undue stress, unhealthy competition, and short-term thinking. It may discourage creativity and risk-taking, as employees focus on meeting specific targets rather than pursuing innovative ideas that may not have immediate results. Additionally, if the goals are not well-aligned with the long-term objectives or are perceived as unfair, it could lead to decreased job satisfaction and organizational commitment.
Negative consequences of poorly designed incentive structures include degraded employee morale, increased turnover, and potential ethical breaches as employees might be tempted to manipulate results to achieve incentives.