Hard Facts, Dangerous Half-Truths, and Total Nonsense

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Do Financial Incentives Drive Company Performance?

THERE’S A LOT OF MONEY in financial incentives. Type the word compensation into Amazon.com and you get more than 47,000 book entries, with some 43,000 entries associated with the word incentive. Hordes of people are clearly interested in reading—and writing—about compensation and incentives. There are large compensation consulting companies such as Towers Perrin, Hewitt Associates, Mercer, and Watson Wyatt, plus scores of small ones, that make good money selling advice about how to design incentive systems that attract, retain, and motivate employees. Human resource executives devote huge chunks of time to designing pay systems and dealing with unusual cases and complaints from employees, ...