More employers are moving towards pay-for-performance pay schemes, but skeptics warn that compensating workers based on performance goals may hurt worker morale and productivity. A recent study at the University of Illinois found that linking pay to performance is associated with lower productivity and higher injury rates, and others say that such pay schemes fuel competition rather than inspire cooperation. Compensation experts defend pay-for-performance but acknowledge that it can be counter-effective if implemented improperly.
See "Firms find pitfalls in pay-for-performance programs", Stephanie Armour, USA Today, July 4, 2001