Pay$-$for$-$performance can be detrimental for a firm for the following reasons:

Decreased employee morale: When employees are solely motivated by financial incentives, it can lead to a decrease in overall morale and job satisfaction. This can result in higher turnover rates and lower productivity in the long run.

Risk of unethical behavior: In a pay$-$for$-$performance system, employees may be tempted to engage in unethical behavior in order to meet their performance targets and receive higher compensation. This can damage the reputation of the firm and lead to legal issues.

Focus on short$-$term results: Pay$-$for$-$performance systems often encourage employees to focus on short$-$term results in order to receive immediate rewards. This can lead to neglect of long$-$term goals and sustainability of the firm's success.