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ACCA Strategic Professional · Advanced Performance Management · Performance and reward

Orchid Logistics operates a team bonus pool for a depot of 40 drivers, paid equally if the depot meets on-time delivery targets. Over time, several drivers contribute little effort, while the best drivers are demotivated. Which theory best explains this outcome, and what is the most appropriate modification?

This is the free-rider problem, where in a large team the reward is shared equally so some individuals contribute little. The best fix is to combine the team pool with an individual performance element or peer review, restoring the link between personal effort and reward while keeping team focus.

  1. AExpectancy theory; remove the bonus entirely
  2. BFree-rider problem; add an individual performance component or peer review to the team poolCorrect
  3. CHertzberg hygiene factors; raise basic pay only
  4. DAgency theory; make the bonus pool larger

Explanation

In a large group, each person's effect on the pool is small while the reward is shared equally, so some free-ride. Adding an individual element or peer assessment restores the link between effort and reward. Removing the bonus loses team alignment, and a larger pool does not solve the free-rider issue.

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