The Salary-reward Incentive Effects Of Relative Performance Evaluation

Relative Performance Evaluation(RPE)is a kind of measurement of performance evaluation,which chooses a suitable standard when evaluating managers’ performance thus decreasing the interference of system factors and increasing the connection between managers’ performance and working behaviors.In principal-agent relations,an effective motivation is not only the compensation to managers but also the reflection of optimal cost-benefit results to principals.As the primary form of incentives,salaries can bring more utility when correlated with suitable measurements.Therefore it is meaningful to study the effects of RPE and salary incentives.This thesis based on principal-agent theories,taking general agents into account,combined with behavioral sciences to study the application of RPE and its salary reward incentive effects.The research are divided into two parts:First,questionnaire survey was used to study the applying situations of RPE in enterprises from employees’ cognitive perspective and the potential incentive effects of RPE.The results implies that the levels of RPE application in large enterprises and non-state-owned enterprises are higher,though the whole level of employees’ cognition on RPE application is low.Also the potential incentive effects of RPE are influenced by the environmental risks.When the environment is faced with more uncertainties and industrial competitions,employees’ identity for RPE is higher consequently leading to the better potential incentive effects of RPE.Second,basing on the results of the influencing factors on the potential incentive effects of RPE,experimental research was used to study the incentive effects of RPE combined with environmental risks.The results implies the salary system based on RPE has better incentive effects than the conventional system.Also the incentive effects of RPE explode more in environment with more industrial competitions.The conclusion provides the data supports and references for RPE application in China.Considering the employees’ cognition for RPE and the incentive effects of RPE-salary combination,the enterprises should enforce the use of RPE in the extent of both width and depth according to the working environment to better evaluate and inspire employees,which will finally improve the enterprise’s beneifts.