Suppose that Oak Meteors institutes a Super Bonus program that provide

QUESTION

Suppose that Oak Meteors institutes a Super Bonus program that provides a large cash award for the business developer with the greatest year-to-year increase in revenue.

A manager claims that this would encourage business developers to do poorly in one year in order to make it easier to do much better in the subsequent year. All of the following would help address this concern EXCEPT:
A) Restricting eligibility for the Super Bonus program to those who achieved their annual goals in the previous year.
B) Changing the Super Bonus so that it is awarded only to those who have increased their revenue by a substantial percentage.
C) Offering the Super Bonus for the current year’s performance and then never offering it again.
D) Including a review panel empowered to disallow the Super Bonus for those who have abused the process.
E) Disqualifying all business developers who have earned a negative performance review within the last three years.

ANSWER

Answer: B
Explanation: B) Giving a bonus for a big increase can give people an incentive to underperform in one year, making it easier to get that big increase in the second year. To stop this, Oak Meteors could use its judgment to disqualify people who seem to be doing this, as Choices D and E suggest. Oak Meteors could also use a clear rule such as the one in Choice A. Choice C also addresses the problem, because the business developers can’t go back in time and sabotage last year’s performance. If Choice C is true and the award is never offered again, there will be no year in which the employees have an incentive to underperform. The one that doesn’t help is Choice B. Switching to a percentage increase gives people even more of an incentive to underperform. If someone earned $1 this year and $100 next year, their revenue would have gone up by only $99, but it would have gone up by a staggering 9900 percent! That’s a big percentage increase and a terrible performance.