The Struggle to Measure Pay for Performance

The Struggle to Measure Pay for Performance

It is often assumed that all people are motivated by the same things. Actually we are motivated by a whole range of factors. We are all motivated by financial rewards, statuses, praise and acknowledgment, competition, job security, public recognition, at times even fear, perfectionism and both positive and negative results. Employees may be more motivated if they understand the primary aim of your business and in providing answers to questions they may have to establish how clear they are about the company's principles, priorities and mission.

Pros and Cons of employing a forced performance ranking matrix.

Forced ranking is most popular with large corporations that have hundreds or thousands of employees and need to organize their Human Resource processes. The objective is to impact increased productivity, profitability, and shareholder value. But it’s been studied that sometimes a company culture can shift creating a more competitive atmosphere and decreasing morale.        

The Strong Points

By identifying their top employees, companies can reduce favoritism, nepotism, and promotions that may be based on factors other than performance. Managers can identify top performers and in the process reward them, keep them and train them to be future leaders of the business. On the other hand forced performance ranking also provides a reasonable way to identify and lose workers who may be holding the business back.

The Weak Spots

Companies can certainly make mistakes using forced performance ranking, firing someone who might go on to be a super star elsewhere or discouraging excellent performers by ranking them as mediocre simply to fill a quota. Replacing lower ranking employees each year can also be costly and can lower productivity in the early months of hiring someone new to replace that employee. This data was found in a study by Drake University professor Steve Scullen who also claims this system creates a competitive environment that can result in unethical behavior; it may limit risk-taking, creativity, and teamwork. It also highly discourages employees from asking for help or extra training out of fear that they'll be identified as low performers.

Does a forced “performance matrix” increases meaningful motivators for employees?

Employees shouldn’t be terrified of walking into their annual performance review. A performance review should encourage an open discussion, reviews are also a time to recognize outstanding employee performance, and performance reviews have become an even more important aspect in making sure high-performing employees are recognized. Many companies miss this opportunity to praise outstanding employees and lose them to the competition. Performance Reviews should also be a time to deal with issues. Reviews are a good time to recognize employees for outstanding work, but it’s also an important time to reinforce plans for getting an employee back on track when there have been issues, modifications to behavior issues should be dealt with immediately after the inappropriate behavior or when the lack of performance occurs and not kept for weeks or months until performance review time.