The Great False Dichotomy – Pay for Performance

OK, here we go . . .  the pay-for-performance thing keeps coming up in conversations.  I’ve talked about this subject in many posts.  This will be  a long, but high-level post.  The curious will seek more information from the sources I cite.

The dichotomy exists because the most prescribed solution to government, education, and business performance improvement is a problem of motivation.  I have long shared W. Edwards Deming (from a statistical viewpoint) found that to 95% of  performance is attributable to the system (work design, structure, management, technology, measures, customers, etc.) and only 5% is attributable to an individual (The 95/5 Rule).  The overwhelming evidence is that we need to improve the system to get large improvements, focusing on the individual doesn’t give us large returns.

But let’s look at some of the other people talked about and have researched this subject.  Alfie Kohn and Frederick Herzburg are two people among many that spoke and researched this area.

Frederick Herzburg who wrote an article titled One More Time, How do You Motivate Employees? has been published in the Harvard Business Review many times.  In this article he found many other stronger motivators than pay for performance by virtue of studying worker attitudes.  The greatest satisfiers were found to be:

  1. Achievement
  2. Recognition
  3. Work Itself
  4. Responsibility
  5. Advancement
  6. Growth

Additionally,  job dissatisfiers were items that would not positively affect their attitude, but more likely negatively affect it (in order of dissatisfaction):

  1. Company Policy and Administration
  2. Supervision
  3. Relationship with Supervision
  4. Work Conditions
  5. Salary
  6. Work Conditions
  7. Salary
  8. Relationship with Peers
  9. Personal Life
  10. Relationships with Subordinates
  11. Status
  12. Security

Herzburg also referenced physical and psychological KITA (i.e., Kick in the Arse).  The problem with physical means is that it may get a person to move, but like a dog, anytime you want them to do something it requires kicking them again.  There are hazards to this method including retaliation and lawsuits.

So this leads us to to psychological KITA, this is mental warfare.  I see many organizations deploying this approach these days.  It is more of a game of one-upmanship where things like comments, moving employees to smaller offices or worse working conditions.  Negative KITA of any sort leads to compliance not motivation.

Positive KITA has the same affect.  You give a reward and you get the result but no long-lasting motivation until you offer the next reward.  This is short-term thinking and certainly not systemic to the individual or the system.

Herzburg advocates an approach that can be summarized by his quote “If you want people to do a good job, give them a good job to do.”  He suggested certain steps for job enrichment that he outlines in his article that I linked to above (this will take curiosity on the reader’s part).

Alfie Kohn was referenced in The New Economics by W. Edwards Deming.  His two books (more research papers) No Contest and Punished by Rewards are attacks on the management assumption that competition and rewards are good.  Too few seem to either grasp the concepts while most ignore the evidence.

He believes that incentives fail for these reasons (from Punished by Rewards with my comments):

  1. Lack of necessity.  Managers introduce incentives even when the system is performing well.
  2.  Secrecy.  No one is supposed to know how much money is paid, but this creates organizational havoc and reduces morale.
  3. Pay doesn’t match performance.  Recent CEO bonuses show this to be true.  Company loses money, but bonuses are paid out.
  4. Expense.  These incentive programs are expensive to administer.
  5. Too big vs. too small.  Too small and it does nothing.  Too big a few can get them.
  6. Short-term vs. Long-term.  Most have been designed with short-term thinking, can anybody say banking crisis?
  7. Objective vs. subjective.  There is no objective appraisal of performance to a systems thinker.  All individual assessments are subjective (a popularity contest).
  8. “Performance evaluation is an exercise in futility.”  From Peter Scholtes (above quote), it is impossible to separate individual performance from the system performance.  Too many companies try and spend much in the effort.
  9. “Pay is not a motivator.”  This doesn’t mean we don’t want to be paid, but that money doesn’t produce sustainable motivation.  Low pay can be dissatisfying.  Greed tends to take over when it is a prime motivator for the few that this attracts.
  10. Rewards punish.  Coercive tactics are used to get people to do things they don’t want to do.  I find it better and easier to improve the work.  Deming’s Point #8 – Drive out Fear is not mainstream American Business as many executives believe fear is a good motivator.  GE believed that making the bottom 10% uncomfortable is good business, this is non-sense.
  11. Rewards rupture relationships.  If you are rewarded for better method, will you share with others?  Or is the system being manipulated to achieve the reward?
  12. Rewards ignore reasons.  Working in a poorly designed system with rewards is not motivating.  The reward solution ignores real causes of problems.
  13. Rewards discourage risk-taking.  I have to add that we seem to have two paths here.  The front-line forced into compliance with rules, scripts, policies, written procedures, monitoring and inspection that doesn’t allow experimentation with method where we need it.  Executives however are free to make huge mistakes in pursuit of rewards that are huge – like bringing world economies down (banking).
  14. Rewards undermine interest.  Intinsic motivation is pushed out by extrinsic motivation.  We need people to enjoy work and so few do.

Herzberg and Kohn have given us plenty to think about with regards to pay-for-performance.  But there are other reasons that I see also.  When working with service organizations pay-for-performance becomes what I call a “faux target.”

Sure pay-for-performance will get people’s attention (if only for awhile).  In service organizations who will employees serve the customer or the “faux target?”  I see these things at odds with each other.  The customer more often loses the attention battle.

The bad news for service organizations is that many people plan to leave their jobs when the economy recovers.  The good news is that organizations have time to redesign the work and their thinking about work to keep employees.  Let’s start by losing the false dichotomy.

Leave me a comment. . . share your opinion!  Click on comments below.

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.  Download free from “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at LinkedIn at

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