Another 2 cents for what it is worth.
We have no problem designing performance systems linked to
compensation. American corporations have been doing it for years. The
problem is not in the DESIGN phase, but in the implementation phase.
That's why we have been at it so long. We haven't come up with a
successful system yet.
So I support what Fred says. "Scrap the darn things!"
In principle, I support the concept (and for many years worked on
designing and implementing such systems). If we are not paying for
performance, what are we paying for? In reality, we are probably paying
more for a person's presence than their performance. The difference in
reward for working hard and working hardly is minute in most
performance/compensation systems.
As Robert mentioned, most of the times, the main purpose served by these
systems is a legal one, documenting and avoiding discrimination
charges. Basically this is known as CYA activity--(covering your
backside). Further evidence that we really don't use the system to
reward good performance.
I believe performance appraisals would work well if they focused on
developmental evaluation and were not linked directly to compensation.
However, neither our managers nor our systems would allow such.
BTW, I make a real distinction between performance management and
performance evaluation. The latter is just a late phase of the former
process. Yet, most of our systems focus on the evaluation aspect and
neglect the bigger picture. Evaluation comes after the fact, and it
doesn't do much good to "close the barn door after the horse has
escaped."
If specific criteria is established up front, and used to evaluate
actual performance against, then there is a note of objectivity to the
process. Performance can thus be managed through coaching,
encouragement, discipline, etc. If you base compensation ("merit") on
actual performance as measured against established criteria, you can
distinguish and reward accordingly, and legally document and justify the
distribution. Most of the time, we fail on that front end, and focus
entirely on the post evaluation of results. It's like saying "shoot
first, and call whatever you hit the target."
"Merit" systems also fail because they are fundamentally lies.
Typically, the merit system says we are rewarding you for what you have
done the previous year. Sounds good. But if you left the company the
day after you got that promise, you wouldn't have collected a dime. The
"merit" is built into your compensation for the next year, and you, in
reality, collect not for what you did last year, but for what we expect
you to do the coming year. Even if you don't produce, you still
collect. So again, it really isn't a reward for performance.
I suggest that merit be presented as an incentive, not a reward. Let's
say a person has agreed to work for $50,000 a year. At the end of the
year, his pay stub will indicate that he received $50,000. The company
has kept its promise, it's part of the contract. If the employee has
done all that was promised/expected, then the contract has been met on
both sides. If the employee hasn't, then I suspect that his manager
failed to properly supervise him. Rather than "rewarding" him for good
performance (more rewards for better and best) his level of achievement
should be seen as a baseline. The company should then say, "If you
promise to perform at the same level we will offer you the same
$50,000. If you promise to do more, we will offer you $50,000 plus
(whatever $ factor can be agreed upon). This is essentially the same
process we enter upon when we first hire the person.
So, let me say I believe in pay for performance. But we need to totally
revamp our current systems to allow for it.
Bob Carr
Fred Nickols wrote:
>
> Earlier, I posted...
>
> > > Well, for what it's worth, here's my opinion. (A) There should be no
> > > performance appraisal process or system at all. Scrap the darn things!
> > > (B) If you have to have an appraisal system, don't connect it to
> > > compensation. Those linkages divert way too much time and energy into
> > > manipulating the system or playing the game, whichever you prefer.
>
> To which Robert Bacal responded...
>
> >Fred, I share a concern about the flaws in performance appraisals,
> >but there are a few realities here that one has to contend with --
> >mostly to do with how to make certain decisions and protect
> >against accusations of discrimination.
<snip>