Looking at Pay for PerformanceJune 15th, 2010 |
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Here are a few great posts I came across in the last couple weeks that were worth sharing with you.
Derek Irvine over at the Human Capital League blog had an interesting post Retain, Develop, Plan, Innovate - Talent Management & Recognition. The post looked at how in the recovering economy, employee turnover and retention is becoming a concern as workers have more employment choices. He shares a Deloitte report that found that greater compensation is not enough to keep workers satisfied. While that’s really nothing new, what was interesting was the discussion of the role of innovation in job satisfaction - not something that we talk a lot about from a talent management perspective.
It’s the questions for talent leaders highlighted in the report that set this study apart from so many similar ones. The final key question really drives the point home:
“Do you know what it takes to stay ahead of your competitors in retaining critical talent, developing new leaders, implementing workforce planning, and driving innovation?”
Did you notice the first three items in that list are classic talent management concerns, but the final one - driving innovation - hits the bottom line of every business, every organization. If you can’t innovate to stay ahead of your competitors and lead the market, you will die. All the other points serve to drive that final one - the need to innovate.
Definitely some interesting food for thought and Irvine goes on to share some ideas about strategic recognition and how innovation can be included.
Along the same reward strategies vein, I read an interesting post on Professor Michael Roberto’s blog. Roberto is the author of Know What You Don’t Know: How Great Leaders Prevent Problems Before They Happen. The book in and of itself has me intrigued, and I think I’ll be ordering it for some summer reading.
Late last week he posted on Rethinking the Link Between Pay for Performance. This caught my eye, because, while I am a proponent of pay for performance, there are definitely lots of issues that come with it when it’s not implemented properly.
Roberto shares the findings of a study in Dan Ariely’s book on the effects of bonus compensation on human performance. As Roberto explains:
Ariely conducted an interesting experiment in India along with several colleagues. They created a variety of games and tasks for subjects to complete, and they created three conditions (low, medium, high bonus). They chose India so that the bonuses would be small in absolute dollar terms, but very high in terms of their worth to an average Indian citizen. The highest bonus level actually constituted approximately five months’ pay for the subjects in the experiment.
The study found that performance was lowest in the highest bonus structure, and the same was found in the U.S. Roberto explains that the combination of stress and fear of losing the money negatively impacted performance.
This study is further support for the assertions David Creelman makes in his white paper “Why Pay for Performance Can Work at Last.”
The old idea was that pay was a bit like the cue stick you use to whack a billiard ball. Point pay at an employee, give them a whack, and they’ll go where you want them to go - or so people thought. There is some truth to this; people can be motivated in simple mechanical ways by pay. However, on the whole the mechanical model does not accurately predict how people will react to pay-for-performance. We need to approach pay as a psychological and social phenomenon if we are to boost performance. It is this more sophisticated approach that gives us reason to believe pay-for-performance can work at last.
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