Promise and peril in implementing pay-for-performance

Why would managers abandon pay-for performance plans they initiated with great hopes? Why would employees celebrate this decision? This article explores why managers made their deci-sions in 12 of 13 pay-for-performance "experiments" at Hewlett-Packard in the mid-1990s. We find that managers thought the costs of these programs to be higher than the benefits. Alternative managerial practices such as effective leadership, clear objectives, coaching, or training were thought a better investment. Despite the undisputed instrumentality of pay-for-performance to motivate, little attention has been given to whether the benefits outweigh the costs or the 'fit" of these programs with high-commitment cultures like Hewlett-Packard was at the time. (C) 2004 Wiley Periodicals, Inc.