In his On Call presentation today, Don Berwick said he was skeptical about the effectiveness of pay for performance when it's used to motivate individuals. Among his objections:
- Pay for performance reduces the incentive for employees to cooperate with each other.
- Arriving at accurate performance metrics is tough and expensive.
- When compensation is tied to achieving targets, people tend to reach for less ambitious targets.
- It's insulting, because it presumes people won't do the right thing unless they're paid to do it.
Don recently wrote a paper about this: "The Toxicity of Pay for Performance."
What do you think about pay for performance? Would you want to be paid in this way?
(For those of you who missed Don's talk, here's the audio recording.)
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2 comments:
First off, "pay for performance" is exactly how the rest of the economy works--when it does work. Employee pay is supposed to be a function of their worth to the company, and so more productive workers should command higher salaries.
As for the specific claims:
"- Pay for performance reduces the incentive for employees to cooperate with each other."
Not really. If you're working in a team, you generally need to work very cooperatively in order to succeed. A correct performance evaluation should take teamwork or its results into account.
"- Arriving at accurate performance metrics is tough and expensive."
That's why you have management.
"- When compensation is tied to achieving targets, people tend to reach for less ambitious targets."
There's absolutely no evidence of that. Quite the opposite, when people are paid whether they reach the target or not, they have much less incentive to reach the target. This is really elementary stuff.
"- It's insulting, because it presumes people won't do the right thing unless they're paid to do it."
It may be insulting, but it's also reality. Sorry to hurt your feelings.
Interesting story as for me. It would be great to read something more concerning this matter. The only thing I would like to see on that blog is a few photos of any gadgets.
David Karver
Cell phone jammers
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