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[Merit Pay] - A Bad Idea That Needs To Die
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It is generally understood to have positive or neutral effects on morale. IME most people want those bottom 10% fired, and get ticked off if you don't.
EDIT: Actually 10% every year is probably a little high. But as I understand it, it isn't "fire them" but the idea is that you put them on specific plans to get them up to a minimum standard, where they are successfully fulfilling every single aspect of their job. If everyone met this, the bottom 10% would be indistinguishable from the bottom 50%, and hence you don't need to fire. However, anyone who doesn't live up to the plan needs to go.
This sounds like an actual management strategy, rather then the rather more literal interpretation which is what rank-and-yank is.
No one's opposed to "we should look at if people are performing their job poorly". The reaction is that, as I understand it, the concept is implemented rather more literally - without consideration of if your "bottom 10%" are actually doing their job badly.
That's more reasonable, but it still presents the problem of managing via an arbitrary number.
Considering that current administrators are too lazy to go through the effort to get bad teachers fired now, you think they'll go the extra mile to ensure that good teachers are axed under a rank-and-yank system?
Teachers already rank and yank themselves. Nationally, 50 percent of teachers quit within five years. In my state, the number that is gone after five is 75 percent. Enrollment in schools of education is also falling. You already have a culture where attrition is at the point where turnover is massive, morale is low and new talent is not staying.
The issue here isn't that we are keeping bad teachers. It's that we aren't keeping any teachers, and we are going to be facing a massive labor shortage when the Boomers finally retire.
If people are so purpose driven, why is it that society seems to have flourished the most under a profit driven system, namely capitalism? I think I am missing something here...
Because capitalism efficiently allocates resources for tasks. That doesn't mean that every successful person did it for the money. Bill Gates is fabulously wealthy - but he got into computers because he was interested in them. He was an enthusiast. They just turned out to be hugely important as well.
I thought capitalism was notoriously inefficient at allocating resources? For example, shipping tons of goods from overseas when they could be made more locally. That seems like a pretty big waste of resources.
That's not inefficient if oil is cheap. And it is cheap. Why not do it?
Capitalism is inefficient though when we fail to appropriately price externalities, despite forseeable downfalls - i.e. not producing goods locally, leaving a vital, fixed-market good - like food - dependent on overseas supply.
Every tool has an appropriate use, and capitalism is good at allowing large scale systems to operate freely and accountably, if there is appropriate corrections for the edge cases.
But isn't the profit motive the primary driver of most of capitalism? I mean granted I do accept there are visionaries that do things out of a sense of purpose, but it seems like they are in the minority.
It's worth noting at this point that merit pay for teachers was a big thing in the 1970s. It was tried, most notably in New York State, and eventually abandoned.
Teachers initially welcomed it, but they turned against it when merit pay devolved into a way for administrators to reward their cronies and favorites. The pay was supposedly based in verifiable metrics, but the end result was corrupt distribution and teachers learning how to work the system to get the pay. Performance did not, in any measurable way, improve.
It's another zombie conservative policy. Like trickle down and Social Darwinism, it doesn't work but gets brought up every few decades after people forget about the initial failures.
Well, like I said, I am not really concerned with the performance aspect of things only how fair it is. As far as something like teaching goes, I would only advocate a teacher get more pay if they taught more classes or had more duties. I mean it would be pretty unfair if one teacher had to teach 6 classes and the other taught 2 but they were paid the same (yes there might be exceptions). That is why I like the idea of pay being at least somewhat based on merit, though probably not entirely.
edit: I would be concerned with the performance aspect if it made a noticeable difference, but primarily I am concerned with what is fair.
That's not merit pay, though. That's getting compensated for extra hours, unconnected to any measurement other than time on task.
Well in the case of teaching, it is also merit. You are teaching more students and doing more work. Look at this way, lets say two people worked in a production facility of sorts 8 hours a day. If one guy produce 100 widgets and the other guy produces 80 widgets. The guy who produced 100 should be paid more even though they worked the same number of hours.
Now this, children, is what we call an unexamined assumption.
Merit pay and compensation for time worked are not the same thing. Yes, you are doing more work, but merit pay is based on an evaluation of work done, not just a formula for time worked.
Because 9% think it's too high, and shouldn't be cut! 9% of respondents could not fully
get their arms around the question. There should be another box you can check for, "I
have utterly no idea what you're talking about. Please, God, don't ask for my input."
I know that Deming was particularly critical of all performance review systems. Which is an understandable position - if you're starting from the assumption that individual performance is a consequence of organizational health rather than a cause of it, then employee reviews seem kind of silly. To a certain degree, that assumption is sound; if individual performance weren't caused by organizational factors, then it wouldn't really matter what a company does other than "hire good people." I think that American companies tend to focus far too much on individual performance rather than organizational performance, but realistically we should recognize that focusing entirely on individual characteristics or entirely on organizational factors are each myopic without the other.
And that's the rub - a lot of the criticisms levied so far in this thread apply to any performance review system for knowledge & creative workers. At least, any performance review system with teeth. Nobody's happy when they get a bad review.
You're not exactly 'missing something,' so much as Dan Pink glossed over the limitations of the research his talk is based upon.
My argument is about to be bordering on tautological here, but time worked seems to me as part of merit. Merit is anything that justifies a greater reward. Working more hours justifies a greater reward. I think quality of work should definitely be part of a merit based system but not the only part. As for the whole teacher thing, I am not interested in a specific example of how exactly we determine merit. Obviously the way in which you determine merit is going to vary from job to job. In principle though, I don't see anything wrong with it. I mean I see people claiming it doesn't increase productivity and that's fine. That is not the goal of having people paid on merit. I mean imagine a workplace that is purpose driven that also has merit based compensation, it seems to me such a place would be both productive and fair.
That's not really what the research mentioned in the Dan Pink talk is talking about.
That research is talking about immediate monetary incentives for performance, which is arguably a different animal from a yearly salary raise.
Not all incentives are the same.
But that isn't really an argument against merit based pay, just an argument against immediately rewarding someone.
Exactly.
Rank and Yank is arbitrary because it's about firing people based not no their performance, but on an arbitrary percentage someone picked for how many of your workers are useless.
The effect of the immediacy of the reward on performance hasn't been experimentally tested, to my knowledge. My gut instinct is that immediacy is bad, but there's no study I can point to that proves that.
The more salient problem seems to be that "merit pay," aka "pay for performance" as we understand it is revokable. If you don't perform excellently, you don't get merit pay. The stress this causes has a deleterious effect on creative thinking.
When you apply this to any creative or knowledge profession, you get poor results. When you apply it to teachers, you get particularly poor results, because it magnifies the difficulties we have with judging teacher performance.
But losing ones job because of bad performance isn't stressful?
edit: Can't you just have a base pay and then add merit on top of that? Would that really create too much stress?
Yes, it is stressful, which is a big reason why it's hard to get creativity in the workplace.
It's also a big reason why having a robust unemployment safety net, severance packages, and other types of soft landings are good for white collar workers. Well, they're good for any worker, really.
But there's big difference in degree (if not in principle) between losing your job for being particularly bad, versus getting partial pay for not being excellent.
This is somewhat paradoxical if you're coming from the perspective that incentive=motivation. If I tell you, "I'll give you $30 for doing Y and $0 for not doing Y," that is oddly less stressful and less distracting than "I'll give you $20 for doing Y, $30 if you do Y really well, and $0 if you don't do Y." People come to expect that $30 in both scenarios, and then they're frustrated when they only get $20.
You can tell people all you want "your baseline pay is $20 and there's a $10 performance bonus" but if your performance bonus is too rigid and baked in too deeply to your compensation program, people don't really feel that way. They feel like their baseline pay is $30, with a -$10 demerit for being insufficiently awesome.
But that's not what anyone else is talking about. When the politicians and educators are discussing merit pay, they are not talking about paying people for hours worked. They are talked about creating a qualitative ranking system based on subjective/objective metrics. If we were talking about paying people more for working more hours, there would be no resistance from teachers.
The reasons merit pay have gotten a bad name, beyond the research that shows it is a bad idea to move the focus of a job from doing the job to fulfilling arbitrary metrics - is that the historical evidence is that it quickly degenerates into paying employees more for mastering office politics and sucking up to superiors. That's why it got a bad name in New York in the 1970s, despite initially being welcomed by teachers. It quickly became another form of patronage and gamesmanship, without any measurable benefit to the teachers or the students.
You are inserting a personal definition into a discussion of an existing political issue. That means that you are going to be talking at cross purposes to people who are discussing the issue at hand.
Out of the theoretical and onto the front page. It looks like Bloomberg is going to push hard for this. Personally, I think that at the least, the loan forgiveness is a winner. I'd love to see the implement a firing procedure that would get the city that $700 million in fed funds, but knowing the UFT, they will gladly cost the schools the money to protect tenure in schools that are not working.
One part of the whole tenure issue we never touched is how it leads to tons of teachers getting fired right before they would get it, no matter how good they are, because the district doesn't want to get saddled with yet another person on payroll they can't fire. This literally just happened to my brother-in-law this week, and now he will have a harder time getting a new job because any district that hires him will have to tenure him within 2 months. . . How is this a sane system?
"There are no necessary evils in government. Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing." -- Andrew Jackson
So you can't have a fair system without creativity suffering? There has to be a way to accomplish that.
I'm sorry, the cluster of unspoken assumptions in your blatantly loaded question is impeding my ability to respond.
So you think two people who do the same job, one who does it just okay and one who does it amazingly should be payed the same?
edit: Assuming you are talking about my assumption on fairness
What it replaced was pay by piece wages. That seems fair, after all better workers make more because they are more productive so why not reward them for doing so?
The trouble was that, in practice, pay by the piece was an easily manipulated system that could be ratcheted up and down to suit the employer's whims. It created a competitive environment and production pressures that made conditions intolerable in many factories. Getting rid of it was one of the first demands of American organized labor.
Merit pay is just piecework pay in abstracted form. This is why it was dropped in its first iteration with teachers in the 1970s. The employees rebelled.
So because paying people based on how they actually perform should be abandoned as an idea because it has some problems associated with it? It seems like creative solutions must exist to solve the problems mentioned.
I didn't say anything like that, and in fact I've said the exact opposite a few times.
Besides that, there are other ideas for what makes a compensation system "fair." I'd say that paying people more for doing the same job particularly well is actually intrinsically unfair but it's a form of unfairness we can (arguably) tolerate when it incentivizes productivity (and should be abandoned when it doesn't).
There are other ways to do this besides merit pay.
Like, y'know, giving a strong employee a promotion and/or a raise. Bonus systems work, too, if well-implemented.
Which aren't "merit pay."
Which has been explained a couple of times in this thread, so don't come back and say "but those are forms of pay based on merit ergo those are 'merit pay'."
What is the difference between a bonus and your 20$ base pay example you used? Isn't that exactly what a bonus is?
The usual HR term is "discretionary bonus" which is not baked into the individual employee's compensation program.
IE, it might be collective ("if the whole company does well, we'll give everybody a Christmas bonus") or non-contractual ("we're giving you this bonus just as a thank you gift for some extra work you did this year")
There are many ways to structure a bonus. My bonus is based on company performance overall, for example.