Performance-based compensation systems
A) have to be used cautiously and sometimes toned down in certain foreign countries, because incentive compensation runs counter to local customs and cultural norms.
B) can have an adverse effect on employee performance because some managers and employees are not psychologically and emotionally strong enough to cope with performance-based pay systems.
C) tend to be less effective if the performance-based pay exceeds 10-15 percent of total compensation because failure to receive incentive rewards can hurt employee morale and curb their living standards.
D) should be used sparingly because too much emphasis on pay-for-performance tends to have a negative impact on employee productivity.
E) have the disadvantage of making it harder for employees to focus diligently on the duties and functions they are supposed to perform.
Answer: A