Most merit pay plans have limited ability to motivate employees and to enhance productivity. This article suggests that performance targeting, a concept that is related to performance appraisal but different from it, may be a more promising approach to productivity enhancement. The article illuminates some of the main shortfalls of expectancy theory on which many merit pay plans are based and points out some of the possible problems with performance appraisal. The article sug gests that the productivity enhancement effort must include a deliberate effort to prevent the crea tion of demotivators and a search for a better understanding of what makes the individual employee tick. It cautions managers to consider the propositions that are provided by the equity and needs theories of motivation in developing programs to boost productivity.
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