New Business 21 Study: Companies Aren’t Crazy About Pay for Performance

B21 surveyed 177 HR executives and found out that more than 50% of companies either don’t have any sort of pay-for-performance program, or they have one but don’t believe it’s effective.

(PRWEB) November 2, 2005 -- A new study by Business 21 Publishing shows that companies are much less committed to pay-for-performance than you might think.

B21 surveyed 177 HR executives and found out that more than 50% of companies either don’t have any sort of pay-for-performance program, or they have one but don’t believe it’s effective.

All pay-for-performance schemes share the idea that where a worker can vary output according to effort, the prospect of increased pay will lead to greater performance. Such systems hope to ensure that those who work harder, and get better results, are compensated better that others.

There are many reasons why pay-for-performance programs either fail or simply don’t meet expectations. In the Business 21 Publishing survey, 25% of respondents said the reason they don't do pay-for-performance is that the line of site between tasks and outcomes is so hard to establish.

One reason is that inexperienced managers often set bonus criteria for employees, not realizing that flawed line of sight, or simply making performance bogeys to hard or too easy, can have negative consequences down the road.

When this happens, demoralized employees complain that “The goals were set unfairly high,” or “There was no link between my job and the results.” Those who get bonuses too easily end up with distorted expectations and a sense of entitlement; next year, or the year after, they’ll be deeply wounded when they miss out on the “easy money” they felt was their right.

The Business 21 study suggests that companies recognize that pay-for-performance is not for amateurs. Get it wrong and you risk creating serious morale problems that will drive top performers out the door.

At companies that opt for pay-for-performance, the managers who link performance to pay require extensive training so they can accurately establish 1) the line of sight between each person’s tasks and outcomes; and 2) the appropriate level of difficulty required to earn performance bonuses.

To see complete survey results and read an in-depth article about why pay-for-performance programs so often fail, click here http://www.b21pubs.com/hrintellcenter/Benefits/benefitsarticles/merit-pay-study.asp

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