This chapter identifies three assumptions underlying pay-for-performance plans. Do you believe these assumptions are valid? Explain.

Assumptions:

1) Individual employees and work teams differ in how much they contribute to the firm not only in what they do but also in how well they do it.

2) The firm's overall performance depends to a large degree to the performance of individuals and groups within the firm.

3) To attract, retain, and motivate high performers and to be fair to all employees, a company needs to reward employees on the basis of their relative performance.