We Don’t Pay For Performance

In a recent article of mine,  “Do You Really Pay For Performance?”  I suggested several methods for organizations wishing to improve their Pay-For-Performance (P4P) program.  On the other side of the coin, however, there are those out there who prefer to turn away from the matter entirely.  Some organizations do not wish to pay for performance at all and are frankly open about it.

While there seems to be an increasing dialogue about this strategy lately, and several recent articles have highlighted such outside-the-box thinking, current surveys suggest that only around 10% of organizations self-identify with going in a different direction for rewarding their employees.  And of course, when you march to the beat of a different drum you’re going to get a lot of attention, either positive or negative.  Thus the hot bed issue of late.

Marching To A Different Beat

Why does an organization argue against rewarding employees for their job performance?  At first blush, it seems counterintuitive not to acknowledge how an employee performs as a helpful if not critical criteria for judging (and rewarding) that performance.

But for some, there are very real reasons for taking a different tack.

Below is a list of reasons that I’ve heard from clients of mine who have either gone down this road or given it serious thought.  Maybe you’ve heard some of these yourself.  Maybe you’ve heard other reasons.

  • Trust:  Employees don’t trust their managers to properly rate employee performance.  This is a frequently heard complaint, even from those possessing a successful P4P program.  The core of this comes down to the individual level (one’s own boss) and the amount of training provided to those in authority.  However, when an organization feels that they need to step away from P4P for this reason, some serious self-analysis of management practices is in order.
  • Everyone is great: The saying goes, all of our employees are already performing at high levels, so how can we differentiate?  However, this rationale ignores the premise that standards of expected performance should rise even within successful groups.  Even within high performing groups, some employees are better than others.
  • One size fits all: An organization may implement a general increase where everyone gets the same pay increase.  When you can’t or won’t set a policy aimed at differentiating among employees a simple alternative is to give everyone the same increase, regardless.
  • Employees said so:  What I heard was that the employees had told management that they didn’t want P4P.  If the majority of employees are doing an average/successful/satisfactory job, wouldn’t that group be advocates for a general increase?  More so the less than successful, but less so the high achievers.  Another question is whether you should change such an important policy on the basis of an internal survey.  Unless management doesn’t care, either way.
  • EASY button: Easy to administer.  It’s hard to argue that simple processes are the easiest to communicate, implement and defend against criticism.  And P4P programs by their nature differentiate between employees, where losers complain and winners tend to be silent.
  • Universal equity: Everybody knows how they’ll be treated. Pick a common phrase; “We’re all XYZ employees,” “Everyone puts their shoes on the same way,” or “We believe that teams, not individuals, deliver success for our organization.”  The sentiment here is that the practice of differentiating between how employees are treated, especially in a [supposed] subjective manner, is inherently bad for the organization.
  • Rewards for other reasons:  Absent a P4P program organizations also use length of service tenure (LOS) and cost of living (vs. cost of labor) as so-called transparent reasons to grant pay increases.  The price of a loaf of bread went up, thus your pay should as well.  You’ve been here a long time (and we haven’t fired you), so you must be worth more money.  It’s time.

Is This For You?

Maybe.  Perhaps your organization has problems (above) similar to those who decided to walk away from P4P programs.  Maybe your management or HR is not concerned about encouraging good employee performance.

Personally, I don’t agree with taking what I consider a drastic and unreasonable approach to rewards, and I don’t think it solves the problem, but it’s an issue that every organization grapples with, at one time or another.  And there is usually more than one answer to most questions.

In my view having and maintaining an effective P4P program is hard work.  It’s also work that you can’t ignore or walk away from as “Done!”  You have to keep at it.

Or perhaps you can take the easy way out.

But first ask yourself; how would you like your own situation to be handled?

Chuck Csizmar CCP is founder and Principal of CMC Compensation Group, providing global compensation consulting services to a wide variety of industries and non-profit organizations.  He is also associated with several HR Consulting firms as a contributing consultant.  Chuck is a broad based subject matter expert with a specialty in international and expatriate compensation.  He lives in Central Florida (near The Mouse) and enjoys growing fruit and managing (?) a clowder of cats.

Creative Commons image, “White stone among black,” by Cyron

This post originally appeared on Compensation Cafe
Author: Chuck Csizmar