(Achievement); Rewards IDENTIFIERS *Value Added

The purpose of merit pay is to reward employees for their accomplishments and motivate them to continue improving. Critics of merit pay say the increased extrinsic motivation that it prompts is more than offset by the decrease in intrinsic motivation. Supporters of performance-based pay claim several benefits of the practice. This study addressed adding value to and improving the process of appraising and rewarding employees. Two major prolqems concern what is measured to determine merit and how it is measured. Some critics claim merit cannot be measured relilbly. Problems with what is measured to determine merit include influence from outside forces, the accuracy of performance goals, and an emphasis on performance rather than ability and effort. Performance-appraisal and merit-pay practices must be redesigned. There are three major redesign elements that organizations must address. First, the inherent limitations of accuracy in all appraisal systems must be recognized and redesigned so they do not impose finite distinctions. Second, a broader range of employee contributions should be incorporated into the appraisal. Third, appraisal and merit pay should be viewed as a means of supporting the organization's overall strategy and a means for encouraging continuous improvement. (JPT) Reproductions supplied by EDRS are the best that can be made from the original document