April 12, 2010 Vlog Episode 5: Pay for Performance
Stay tuned for more Vlogs about de-linking Pay and Performance.
Tags: Business, compensation, Management, motivation, Pay for performance
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Paula Marshall's Blog 
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brucelynn
said
Okay, I’ll bite. So are performance assessments essentially binary? ie. (a) you are doing a good enough job, (b) you are not doing a good enough job?
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paulaamarshall
said
Bruce-
I don’t know if the important question is that they are binary, lots of things in our society play out in a binary way such as language, gender roles and many other things. It is the way our minds work. The problem with the modern performance review is that there is little being done to find out why people are performing at a low level. HR professionals simply look at a set of numbers such as: attendance, tardies, number of hours worked etc. If the numbers reflect low performance, there is a reprimand, and little is done to find out why the employee is behaving such. It is a very mechanical approach to managing something that is not mechanical; people.
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brucelynn
said
Fair enough. You’ve clearly stated the problem (performance related pay, poorly executed performance reviews).
I guess I just am not clear on what you are proposing is the solution.
I inferred that since you do not want to link pay to performance then either (a) you would get rid of performance reviews altogether, or (b) they would only serve to assess whether to keep job or not keep job (ie. nothing to do with pay).
I’m trying to keep my ‘concerns’ with your proposal simple, but I am also curious how you determine ‘market rates’. Is it my role? By person? Is your source a survey?
I’ll come clean. I am completely opposed to your assertions. In fact, I think pay-for-performance does more to liberate staff than the alternative (eg. flexible working). In my experience, systems without some effort/process to measure performance and balance rewards accordingly are the ones the most rife with politics, favoritism, bias and inequity.
You are not the first person to espouse this approach. I am truly trying to understand your side, but I just don’t get it frankly.
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paulaamarshall
said
Bruce-
I am glad you are interested in the topic, and want to try to understand my position. Let me see if I can explain it a little better. The way that we pay people is based on market rates. Our HR department sources several different databases, that are updated yearly, and create an average of the their findings. This average is an employee’s base pay.
What I am talking about when I say “pay for performance,” is the practice of using raises and bonuses, as well as large stock option packages to motivate employees to perform at higher levels. I don’t believe that money is a motivator in any way, and that claim is also supported in Daniel Pink’s new book “Drive: The Surprising Truth About What Motivates Us.” At our organization, we do not offer performance-based raises. There is a cost-of-living increase in salaries, yearly, but this has nothing to do with the employee’s performance.
Performance reviews are still a critical part of our operations, the difference, however is that they do not involve conversations about money. The performance review is simply that, a conversation about a person’s performance, their strengths, weaknesses and where they feel they need to improve.
A lot of this boils down to trust. We trust our employees to do a good job. When we hire them, it is a given that they will do their best. We support them in as many capacities as we can, while training and educating them in strengthening their weaknesses. Their job descriptions are clear, well rounded and understood. This structure makes it easier for us to be honest with our employees about problems they may be having and ways in which they are excelling. We find that honest feedback, good or bad, keeps our employees much more motivated than simply throwing money at them.
I hope I have cleared up some of your questions,
Paula
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brucelynn
said
You haven’t answer my question on pay benchmarking. What variables do you look at to match your employees to the job income rates in your database? Job title? Years in role? Education? Qualifications?
You haven’t answered my question about what you do about ‘performance’ review. What you are doing I would call ‘performance coaching’. Yes, good for promoting growth and development. But I still don’t understand when/how you make a decision that someone is just sitting back and doing the minimum and therefore say ‘improve or lose your job.’ Maybe you work in a fortunate and idyllic environment where everyone is naturally inspired of their own accord to do their best.
‘Money is not a motivator in anyway.’ Wow. That’s a statement. Why on earth would anyone ever sign up to overtime shifts if money was not a motivator. If I offered you $1 million dollars do a day of tedious work for me would you take it? If you say ‘yes’, then money is indeed a motivator, it’s just the price you are quibbling over.
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paulaamarshall
said
Bruce–
Of course Education, Qualifications, and Years in Role are factors when determining someone’s salary. We cross check all our salaries with the Department of Labor statistics (O*Net) as well as some private research networks. All of the traditional areas are looked at, and in addition to those, we do surveys of the other employees, which are anonymous and done by a third party, to determine how a person is viewed by their peers, and those they manage.
When a person is having trouble in a role, and we have gotten the impression that they are not performing, we engage in what we call a “Courageous Conversation,” this is where we confront the person about the problems we are having, and let them know that their job may be in jeopardy if they do not improve. Nine times out of ten, it is either a lack of training, or a lack of understanding around their job description. Once these problems are taken care of, the person is more able to reach their full potential.
Once a person’s basic needs, such as food, clothing, housing etc. are met, the next step is to become self actualized. This is according to Maslow’s hierarchy of needs. Money, in the form of raises and “carrots on a stick” will not help a person to become self actualized. In some cases, giving raises in this way actually stifles performance, and breeds unhealthy competition within a team. When people know they are taken care of, and nurtured by those around them, they perform much better than when they are in fear of their jobs.
If you have any more questions regarding our practices, I can put you in touch with one of our HR Directors. However, if you are on a quest to debunk my management theories, then we will have to agree to disagree. I run my business of 1,000 employees, both in the US and in China, and these theories are part of what has made us so successful. It is not traditional, it is not run of the mill, but it works. Thank you for taking the time to contact me, and trying to understand the way we do business.