This book was written to bring together a summary of the current knowledge on merit pay and to further advance understanding of this type of incentive pay plan. When the writing of the first edition was begun in 1989, there were no books devoted exclusively to the subject of merit pay. Thus, this book was written to fill a void in the compensation literature. Since then, surveys have shown that merit pay remains a frequently used method of incentive compensation, and research into the merit pay process continues to grow. However, other forms of incentive pay, such as gainsharing, continue to receive the most attention, as evidenced by the number of books and articles on this topic in the popular press. In response to the frequent use of merit pay in organizations and the growing body of research, a book-length treatment of merit pay was needed. What we hope to do with this second edition, beyond updating, is to link merit pay with the many changes going on in total compensation or "reward management" (R. Heneman, 2001a, 2002). We also will argue that, even among all the challenges and changes that organizations currently face, there is still "merit" in appropriately conceived and implemented merit pay plans (Bates, 2003c).

Based on a staffing model that identifies all the key components of staffing, external influences and staffing system management, this work covers: the model itself; external influences (economics, laws and regulations); staffing strategy and planning; job analysis; measurement; external and internal recruitment; external and internal selection; decision making; the final match; and management of the staffing system.

The contents of this book center around the management of strategic reward systems. In particular, the book focuses in on the following elements of managing a reward system: design, implementation, and evaluation. It is my belief that too much time is spent on the administration of strategic reward systems at the expense of these other activities that add more value than does administration to the organization. Moreover, it is very important to remember that the management of reward systems takes place in a larger context that must be accommodated when designing, implementing, and evaluating strategic reward systems. This larger context includes the business environment, business strategy, and compensation strategy. Elements of the environment include the internal environment (organizational structure, business processes, HR systems) and external environment (laws and regulations, labor markets, and unions). The collection of articles presented throughout the book is very concerned with the fit of strategic reward management with the business environment, business strategy, and compensation strategy. Research has clearly documented the importance of this "fit" to organizational effectiveness (Gomez-Mejia & Balkin, 1992). A practical illustration makes the point as well. Taco Bell was found guilty in a class action suit by current and former employees. In order to keep the number of labor hours low in a productivity formula used to grant bonuses to managers, employee time sheets failed to account for overtime hours by employees. Failure to pay attention to the legal context in designing, implementing, and evaluating a strategic reward program cost Taco Bell millions of dollars (Gatewood, 2001). Although all of the readings in the book focus in on the management of strategic rewards in the larger business context, the readings are organized by topical area. The selection of topics is simply based on my writing interests and do not reflect the entire domain of important topics in strategic reward management.

Of all U.S. organizations, 80 percent now use merit pay. In his book, Robert Henemann summarizes current research which can be used to develop new merit-pay plans, or to increase the effectiveness of existing plans. He also shows how performance-appraisal research should be expanded to include certain situational factors, such as the administrative purpose of the appraisal, organizational politics, the type of organization, and the goals of the compensation systems. Major sections of the book include an assessment of the desirability and feasibility of the merit pay, development and administration of a merit-pay plan, and the evaluation of relevant outcomes. Henemann's book is a summary of the current knowledge of merit pay that emphasizes three perspectives: a balanced perspective, an interdisciplinary perspective, and recommendations for merit pay policy and practice.

This text, written from an organizational, managerial viewpoint, is based on a comprehensive staffing model that identifies the key components of staffing, external influences and staffing system management. Major areas covered are the model itself, external influences (economic, laws and regulations), staffing strategy and planning, job analysis, measurement, external and internal recruitment, external and internal selection, decision making, the final match and management of the staffing system.