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ACCA Applied Knowledge · Business and Technology · Review and appraisal of individual performance

A firm operates performance-related pay under which individual bonuses depend on personal appraisal scores. Staff in the audit team have begun withholding information from colleagues and refusing to help on joint assignments. Which is the best explanation and response?

Individual-based reward is encouraging competition and discouraging cooperation on work that depends on teamwork. The best response is to introduce a team-based element into the reward system so incentives match joint outcomes, rather than cancelling appraisal or reducing basic pay.

  1. AIndividual reward is discouraging teamwork, so the firm should add a team-based element to the reward systemCorrect
  2. BEmployees lack training, so the firm should cancel the appraisal scheme
  3. CThe appraisal criteria are too objective, so subjective judgments should be added
  4. DStaff are demotivated by hygiene factors, so basic pay should be reduced

Explanation

Individual performance-related pay can promote internal competition and reduce cooperation when work is interdependent. Adding team-based measures or rewards aligns incentives with joint outcomes. Cancelling appraisal or reducing basic pay does not address the cause, and adding subjectivity would worsen fairness concerns.

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