Performance-oriented Pay in Human Service Organizations

Performance-oriented Pay in Human Service Organizations

Performance-oriented compensation (also referred to “pay(-ment)”) is a direct or indirect remuneration or variable salary component paid to employees depending on their performance and capacity (“pay per performance”). In addition to other incentive systems or schemes, performance-oriented pay is primarily designed to increase the motivation and performance of professionals and managers, and thus also the productivity and effectiveness of the whole organization (in comparison to classic forms such as piecework and premium wages, time wages with performance bonuses). Financial resources are used to incentivize and to reward the work done. The complex relationship between motivation and performance is targeted at the individual motives and motivational potential of employees’ work activity. The assessment of employees’ work performance is usually carried out by the management. It can be linked to either individual or group performance: Gain sharing, for example, is a performance-based compensation in group work, whereby teams receive compensation, i.e. depending on saving effects achieved or due to the reduction of complaints. Profit sharing is also closely related to performance-oriented payment as variable remuneration such as income, profit, and equity participation. This article gives further insights into the performance-oriented compensation of professionals in Human Service Organizations and demonstrates how incentive systems could be implemented in such organizations.

See Publications: Arnold, M. (2019). Leistungsorientierte Vergütung [Performance-oriented Pay]. In H. Christa (Ed.), Das große Handbuch Organisation und Verwaltung in der Kita (pp. 187-202). Köln: Carl Link.*

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Dr. Maik Arnold is Professor for Non-Profit-Management and Vice-President for Research, Innovation and Transfer at University of Applied Science Dresden.