Although there is a voluminous psychological literature on performance evaluation (PE), surprisingly little of this research examines the consequences of linking pay to evaluated performance in work settings. Rather, PE research has been dominated by cognitive processing, measurement, and construct validity issues. At the same time, a large literature on pay-for-performance (PFP) linkages does exist, but most of it has been conducted in disciplines other than psychology. We think this pattern should change. To this end, we briefly trace the origins of the general separation of PE research from PFP research in psychology. From there, we review recent research on the relationship between PE and performance improvement, particularly with respect to multisource or 360-degree evaluation. We then turn to research on various PFP systems, such as merit pay and individual and group incentives. We conclude with suggestions as to how psychological research can make useful contributions to knowledge of PE, PFP, and performance improvement.

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This study examined the hypothesis that self‐monitoring moderates the relationship between Big Five personality traits and interpersonal performance. The findings from a sample of 102 employed Executive MBA students reveal that when self‐monitoring was high the relationships between 3 of the Big Five personality traits (Extraversion, Emotional Stability, and Openness to Experience) and supervisory ratings of interpersonal performance were attenuated. These effects were replicated using peer ratings of interpersonal performance for Extraversion and Emotional Stability but not for Openness to Experience. Further, as expected, self‐monitoring did not moderate the relationships between personality traits and supervisory or peer ratings of task performance. Implications for future research in the area of personality and other motivational theories are discussed.

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