Editor's Note: What wisdom can Aristotle offer those of us who endeavor to make merit pay work?
In a conversation about pay-for-performance a number of years ago, one of the participants drew a comparison between the challenge of making merit pay work and the classic dilemma the Tragedy of the Commons. It was a great point, one I've borrowed countless times over the years.
A little background. The theory underlying the Tragedy of the Commons dates back as far as Aristotle, but it was popularized in modern times by the essay of the same name written by Garrett Hardin for Science. Essentially, it describes the dilemma that occurs when the short-term interests of individuals are at odds with the long-term interests of the group or, as Aristotle puts it "... what is common to the greatest number of people gets the least amount of care..."
I like Wikipedia's summary of Hardin's article:
This story describes a group of herders having open access to a common parcel of land on which they could let their cows graze. It is in each herder’s interest to put as many cows as possible onto the land, even if the commons is damaged as a result. The herder receives all the benefits from the additional cows but the damage to the commons is shared by the entire group. Yet if all herders make this individually rational decision, the commons is destroyed and all will suffer.
As Hardin and others point out, the "tragedy" plays itself out in a wide range of modern day "commons" - beginning (but not ending) with our use of resources such as water, parks and wetlands, fish stocks and oil. The point made by my colleague during the aforementioned discussion is that we often see a similar dynamic at work among managers when it comes time to assess their subordinates' performance and hand out merit increases.
The actions of many managers would suggest that they see their role and their primary objective in the merit pay process to be getting the highest possible increases for each of their reports, however that might be accomplished. If gaming the pay system is the most expedient way to get there, then so be it.
The outcome of this behavior is that the ability of the group (the organization) to pay for performance, to differentiate and reward the employees who truly go above and beyond in their roles, is compromised in favor of the individual manager trying to maximize the pay levels of his/per particular group of employees. Peformance-based pay ultimately fails.
Addressing this "tragedy" requires more than simply training managers in the nuts and bolts of how the performance management and pay systems work. It requires directly dealing with the definition of what it means to be in a management role. I would submit that the role of a manager is one of stewardship; of being good stewards of the organization's resources - both human and economic. Stewardship involves actively balancing the needs of both employees and the organization. What it isn't is putting the short-term interests of their reporting employees above the longer-term interests of the larger group.
Until and unless we hold managers accountable for their roles as stewards, we may be unable to conquer this particular Tragedy of the Commons and our pay-for-performance efforts will suffer accordingly.
Maybe Aristotle's got some ideas for us...
Ann Bares is the Founder and Editor of Compensation Café, Author of Compensation Force and Partner at Altura Consulting Group LLC, where she provides compensation consulting and survey administration services to a wide range of client organizations. She earned her M.B.A. at Northwestern University’s Kellogg School and enjoys hiking, reading and hanging out with family in any spare time.
Creative Commons image "Grazing Cow" by Matthijs Meeuwsen
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