As children grow up one of the first lessons that parents try to instil is the notion that things don't just happen - hard work makes things happen. In other words, hard work pays. It's an obvious truism - but does it also hold that paying people according to some measure of their performance makes for better organisational outcomes?
Here are six issues that are worth considering:
- Does more money - rather than individual ability, self-esteem, self-development or social position - really make people work harder?
- How else could organisations and their HR functions prompt people to work harder? After all, pay is one of the few motivating factors that an organisation can readily quantify and distribute.
- How can an individual's contribution to an organisation be judged? Yes, it is fairly clear-cut in some cases (fee earning lawyers, for instance) but in most cases the informal coaching, support and comradery that are likely to make for successful workplaces are harder to measure.
- At what level should performance be assessed? Individuals may perform the work, but it almost always takes a team effort to shape and direct that work into a useful product or service.
- What form should performance-related pay take? Variation in basic salary is one thing, bonuses, share options and even subordinated debt have become hot issues in recent times.
- Can performance-related pay ever avoid unintended consequences?
What do you think? You can tell us about your organisation's performance-related pay scheme here.
Update: this blog post was previously entitled "Cause and effect: pay and performance?" - the wording was changed to (hopefully) make things clearer.
Photo credit: pfala
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