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08/16/2013

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Well, first of all, pay for performance, when designed, executed and communicated well, works. This study is only one of many examples. It doesn't work in every instance, it doesn't work for every person, but it DOES work more than it doesn't.

Second, the ability for a well-managed P4P program to help identify the lead weights that slow us down is often overlooked. Perhaps these programs should be referred to as "Distribution of Pay, relative to contribution to success (DOPRTCTS?) programs. But that might be too clunky.

Ask yourself what an organization should pay for if not performance, skill, and competency. People seek out a 'formula' for pay that matches their disposition to perform as the organization suggests and acquire and apply the skill and competency required to grow as organizational needs evolve. Those who wish to avoid having their performance judged for one reason or another seek out workplaces where things such as loyalty, tenure, and following rules and regulations to the letter are the value system. I remember my first week in the US Army (Oh, do I ever) when the training officer told us, "If you want to thrive in the US Army you need to learn to dress right, cover down, and shut up".

This is a great post, Ann. Of course I always really love stuff that I agree with.

Trying to understand what the "Relative Economic Service Value" chart really means is certainly over my pay grade. Is it important to recognize performance? Absolutely! Is money always the best vehicle? Probably not. Is there value in paying for performance? It depends, although most folks would say yes.

I get wrapped around the definitions associated with all this stuff. And I question the utility of studies that produce data not easily applicable to real time situations.

Look, I didn't read all 49 pages of the study, and I'm sure there are some real pearls in there. The fact that it was published 10 years ago gives me pause, since the business environment is quite different today. What I can tell you with certainty is that some 'pay for performance' plans didn't work then and don't work now.

Pay tends to be the fall guy for all sorts of issues, from turnover to disengagement to dysfunctional work cultures. However, it's one piece of a complex puzzle, which manifests itself differently in different settings. The only way I know how to evaluate its effectiveness is in the context of what it's trying to do, and the environment it's trying to do it in.

Dan:

Agree that P4P, when designed, executed and communicated well, works. Opponents often cite programs and efforts which are, even at cursory glance, poorly conceived and even more poorly executed. Is it tough to do well? You betcha. But so are most worthwhile things.

Jay:

Exactly! If you aren't going to pay for performance, than you'd better get clear on what you are doing, cuz you are surely paying for something. And I love your statement "People seek out a 'formula' for pay that matches their disposition to perform". Very well said. That is one of the many insights I gained from this study, is that it examines the manner in which the population shifts if you make it clear that you are going to aggressively reward those who perform and who develop and hone the skills most needed by the organization.

John:

Agree that pay does tend to be the fall guy for many issues that are not about remuneration, but - for me - that doesn't change the fact that performance pay (when well conceived, designed, executed and communicated - to Dan's point) works. Yes - it does have to be established in a manner that fits the organizational system in which performance happens - but that is part of doing it well. To my mind.

I shared just essentially this one tidbit of the study because I think it provides some genuine insights that are very applicable to real time situations. In fact, I have begun applying them thusly already!

Appreciate the comments and insights, all!

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