21. According to the statement, in order to ensure high productivity, companies
should base their employees salaries and job security solely on job performance, and
not on length of service to the company. I agree that salary increases and job security
are powerful incentives to high achievement and should generally go to those who do
the best work. However, to ensure employee productivity, companies must also reward
tenured employees with cost-of-living raises―though not with job security.
On the one hand, rewarding average job performance with large pay increases or
promises of job security is a waste of resources―for two reasons. First, complacent
employees will see no reason to become more productive. Secondly, those normally
inclined to high achievement may decide the effort isnt worthwhile when mediocre
efforts are amply compensated. Companies should, therefore, adjust their pay schedules
so that the largest salaries go to the most productive employees.
On the other hand, employees who perform their jobs satisfactorily should be
given regular, though small, service-based pay increases―also for two reasons. First,
the cost of living is steadily rising, so on the principle of fair compensation alone, it is
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