Subjectivity in Incentive Pay

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Description/Abstract

I investigate the determinants and effects of subjectivity in incentive pay. New forms of incentive pay are increasingly being introduced by company management – for example, bonuses are now linked to wider business goals, such as quality and customer service, company reputation and employee hiring and retention policies, replacing the traditional focus on output or profit measures. A new conceptual work on subjectivity is used to evaluate these incentive pay practices. The analysis shows that a variety of contextual factors influence the organizations to make greater use of subjectivity in incentive pay. I also discuss the performance effects of subjectivity.