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Part
6
Performance and Reward
378
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schemes depend on the existence of accurate
and reliable methods of measuring
performance, contribution, competence,
or skill, which might not exist;
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individuals are encouraged to emphasize
only those aspects of performance that are
rewarded;
●
merit pay decisions depend on the judgement
of managers, which in the absence of reliable
criteria can be partial, prejudiced,
inconsistent or ill-informed;
●
the concept of merit pay is based on the
assumption that performance is completely
under the control of individuals, when in
fact it is affected by the system in which
they work;
●
merit pay, especially performance-related
pay, can militate against quality and
teamwork.
These are powerful arguments and further weight to
them is supplied by the fact that merit pay schemes
are difficult to manage well. Organizations, includ-
ing the UK Civil Service, rushed into performance-
related pay in the 1980s without really understanding
how to make it work. Inevitably, problems of imple-
mentation arose. Studies such as those conducted
by Bowey and Thorpe (1982), Kessler and Purcell
(1992), Marsden and Richardson (1994) and
Thompson (1992a, 1992b) have all revealed these
difficulties. Failures may arise because insufficient
attention has been paid to fitting schemes to the
context and culture of the organization. But pro-
blems are often rooted in implementation and
operating difficulties, especially those of inadequate
performance management processes, the lack of
effective communication and involvement, and line
managers who are not capable of or interested in
properly carrying out the actions involved. Vicky
Wright (1991: 82) remarked that: ‘Even the most
ardent supporters of performance-related pay
recognize that it is difficult to manage well’; Trevor
(2011: 201) also questioned the extent to which
such systems are manageable.
Critical evaluation of merit pay
The argument that people should be rewarded in
accordance with the value of their contribution is
a strong one, but it stands alone. The evidence that
incentives improve performance is conflicting. In
some circumstances, as demonstrated by research
projects, it works, but in others it doesn’t. Most
merit pay schemes are unlikely to provide a direct
incentive, simply because they do not match de-
manding requirements such as line of sight and a
worthwhile reward. Their main purpose is to recog-
nize the level of contribution, and even this is ques-
tionable because of the difficulty of making fair and
consistent assessments of performance as a basis for
pay decisions. Such schemes can demotivate more
people than they motivate.
But what’s the alternative? Should everyone be
paid the same rate in a job however well they per-
form? Or should pay be progressed in line with
length of service – paying people for being there?
For all its problems, the balance of the argument is
in favour of some scheme for relating pay to merit.
But the difficulties of doing this should be recognized
and every attempt should be made to ensure that
pay decisions are fair, consistent and transparent.
It is also necessary to consider carefully the exacting
criteria for success.
Merit pay – criteria for success
The criteria for effective individual merit pay are:
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Individuals have a clear line of sight
between what they do and what they will
get for doing it.
●
Rewards are worth having.
●
Fair and consistent means are available
for measuring or assessing performance,
competency, contribution or skill.
●
People are able to influence their
performance by changing their behaviour
and developing their competencies and
skills.
●
The reward follows as closely as possible
the accomplishment that generated it.
●
The scheme fits the culture of the
organization.
●
The scheme is manageable and
cost-effective.
●
The scheme will be supported by well-
established methods of measuring
performance, competency, contribution
or skill.
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