If an employee compensation plan is linked to pre-established company, team, and functional area goals,...

The ASQ Certified Manager of Quality/Organizational Excellence Handbook provides insights into various aspects of quality management, including compensation plans. In this context, a performance-based compensation plan is one that directly links an employee’s compensation to their performance. It is designed to incentivize employees to achieve specific goals, whether at the company, team, or functional level. By aligning compensation with performance, organizations can motivate employees to excel and contribute to overall organizational success. Such plans often involve clear metrics, targets, and evaluations to determine the level of performance achieved. The performance-based approach emphasizes results and encourages employees to actively participate in achieving organizational objectives1.