Article Review: “Financial Incentives, Professional Values and Performance: a Study of Pay-for-Performance in a Professional Organization” – Gary J Young, Howard Beckman and Errol Baker

2019 Words Oct 8th, 2013 9 Pages
Young, Beckman and Baker conducted a study on the influence of financial incentives in a pay for performance based research experiment of professional physicians. Their study aimed to provide further evidence on the effect of the agency theory in incentivizing the agent by providing financial rewards particularly in professional organizational settings. There is much debate in the field about the real benefits of financial incentives on human behavior management in the workplace. The subject remains controversial and many studies have provided equivocal results. Their study exposes that physicians in the test group responded differently to the financial incentives offered based particularly on their belief in the importance
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People need to have “clear and strong action to results connections” (Pritchard & DiazGranados, 2008) in order to see the relevance to themselves and for organisations to benefit from financial incentive programs they need the same thing in return. This would account for the high level of debate in this topic.
The authors briefly discuss the fact that there are underlying motivations to the professional subjects’ job performance with a major focus being on the autonomous nature of their work. They reference several works on the subject who conclude that professional organisations that consist of highly trained individuals working in a self-directed manner are often generally defined by rules and policies set by external organisations (Butcher & Stelling, 1969) (Sharma, 1997) (Wallace, 1995). They pay particular attention to Sharma’s (1997) work as it is one of few articles that consider professional organizations with an agency theory focus.
Agency theory is based on the idea that the principal and agent have differing goals and the principal needs to align the agent’s goal with theirs in order to achieve optimum results. This is primarily explored through the idea of incentivizing the agent with financial rewards based on performance (Eisenhardt, 1989) (Sharma, 1997) (Sloof & van Praag, 2008). This moves some of the risk on outcomes to the agent as their reward or incentive hinges on the

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