New forces in the marketplace—including new organizational values, work cultures, and business goals—have reshaped the structures, strategies, and human resource process of most organizations. One change brought about by these marketplace forces is the development of a new set of work standards. These work standards de liver clear and specific goals to employees, so that they understand exactly what is expected of them in order to earn fair and equitable pay for their job performance. These standards also provide employers with a reliable system of performance appraisal. These new compensation processes are referred to as standard-based work performance.

Standard-based work performance has also been termed pay-for-performance, at-risk compensation, and merit pay. It became fashionable in the 1990s, when a large percentage of U.S. organizations began using some form of standard-based work performance. In its purest forms, standard-based work performance also includes...