Performance-based Compensation: Regulating Worker Results Through Rewards and Incentives

Understanding Performance-based Compensation

Final answer:

Performance-based compensation is a system where workers are rewarded based on effort and contribution, aiming to align their goals with that of the organization and improve performance.

Explanation:

The regulation of workers' results through rewards and incentives is known as performance-based compensation. This concept is characterized by the notion that employees should receive compensation tied directly to their efforts and achievement of work goals. Two main principles lie at the core of this concept:

• Effort: Workers are rewarded in proportion to the effort they put into their labor.
• Contribution: Compensation is reflective of the value each employee's work adds to the organization's success.

In practice, performance-based compensation can take many forms, such as bonuses, salary increases, stock options, or other financial incentives. The theory behind this approach lies in motivating workers to perform better, align their goals with those of the organization, and ultimately increase productivity and efficiency.