As the political season heats up, so does the call for “pay for performance.” The assumption here is that it works . . . and yes, to some degree it does. Unfortunately, it works in a manner that actually diminishes and destroys service.
Performance is dictated by the system in which you work. This is true for front-line workers and executives.
I have often quoted W. Edwards Deming and written about the 95/5 Rule. 95% of the performance of any organization is dependent upon how well your system is set-up, and only 5% is down to the individual/ The system is comprised of processes, work design, management thinking, measures, roles and any other element that exists.
It is true that pay drives individual performance. However, this takes away from the focus on the customer. Organizations that are functionally separated try to give managers individual pieces of the organization to optimize which results in sub-optimization. Sub-optimization is the enemy of synthesizing the whole – creating waste and inefficiency.
Individual pay for performance creates competition between workers where cooperation needs to exist to improve any system. Further, individuals learn to manipulate the system to survive or gain reward. What this boils down to is that the system loses when pay is tied to performance.
I have seen organizations go out of business while everyone is still getting bonuses for performance. How can this be? Some claim it is just the wrong measures and miss the point. The problem is that pay is tied to performance in the first place.
Improving performance requires redesigning our organizations be they governments or private companies. Working on the 5% is just dumb and wastes what little time we have already. This requires a shift in Western mindsets about how we think about work. It wouldn’t hurt to have governments start to learn this with teachers, police officers and other government jobs.
Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public). His organization helps executives find a better way to make the work work. Read his articles at Quality Digest and his column for CustomermanagementIQ.com. Learn more about the 95 Method for service organizations. Reach him on Twitter at www.twitter.com/TriBabbittor LinkedIn at www.linkedin.com/in/trippbabbitt.
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Related to this piece: and article on how a national school performance system is being ‘gamed’. http://www.dailytelegraph.com.au/news/opinion/naplan-deceit-robs-students-of-help/story-e6frezz0-1226171070770
The system ‘pretends’ to identify schools that need help, but parents and educators use it as a competitive ranking system; parents to choose the ‘best’ school for their chln. Of course, schools want to be ‘best’ to, so they tend to organise their resources for high test scores, which then, of course, reveal nothing!
uuum the so called 95/5 rule has never been validated. There is one mention in Demings out of a crisis which references a 1950s industrial engineering journal. This journal in turn references the so called 95/5 rule with respect to prison riots in the Southern US in 1920s . Obviously 21c management has a lot in common with a 1920s US prison. Deming never even bothered to validate this so called law so why do keep repeating this rubbish
I have stated in my blog posts that there is no empirical evidence to support 95/5. Dr. Deming used it based on his experience in working with organizations world-wide. It is important to realize that organizational performance is more down to the system and the work design than the individual. So, it doesn’t matter if you believe it 51/49 or 80/20 or ?, the important part is that the system workers are in influences their performance more than there own effort. Regardless, me writing this won’t convince you . . . you have to look and discover for yourself. Obviously, you have not or you would not discount 95/5 as “rubbish.”