Final answer:
To improve extrinsic reward plans, managers should increase reward distribution frequency and align rewards with individual preferences. A one-size-fits-all approach and decreased transparency are less effective.
Step-by-step explanation:
Managers can improve extrinsic reward and pay-for-performance plans by following certain strategies. Two such approaches include:
- Increasing the frequency of reward distribution: When rewards are given more frequently, they can provide continuous motivation and reinforce the link between performance and outcomes.
- Aligning rewards with individual preferences: Understanding that employees have different needs and preferences allows managers to personalize rewards, thereby increasing their effectiveness.
It is also important to note that a one-size-fits-all approach is often less effective because it does not account for individual differences. Furthermore, decreasing transparency in reward systems is generally not recommended, as transparency helps ensure fairness and reduces uncertainty, which can improve motivation and performance.
When it comes to effort and compensation, people should be rewarded proportionately to the effort they expend and the costs they incur within their work. This aligns with the principle of equity, where employees feel that the rewards received are fair relative to their inputs.