Monday, December 13, 2004

More on separating pay from performance

In the last few weeks, "Agile" performance reviews have come up on one of the many lists I (sometimes) read. Since I've been thinking about this a lot lately, I piped up suggesting that traditional performance evaluations aren't actually helpful.

My suggestion didn't get much response on the thread, but one person wrote me off-list to ask how to distribute bonuses, if not based on performance.

Here's how I responded:

"...let me start with the ideas that underpin my thinking:

  • In my research on this topic, there seems to be little to no evidence that people work better under "pay for performance" systems. Alfie Kohn (most notably) has done research that proves the opposite.
  • The purpose of pay is to provide just compensation and to retain employees by paying within a reasonable % of market rates. The best thing companies can do is pay fairly, then manage so people aren't focused on pay.

    Focusing rewards on individuals works against collaboration. If competition is the desired end, then individual rewards work, though often to the detriment of team goals and even corporate goals.

    I'd look at what is behind superior performance in your group... is the person truly outstanding based on objective data and in the assessment of peers? or is his situation different? or is there something else behind exceptional performance? I've seen people who look great because the work *against* their peers, by withholding information, refusing help, etc.

    Some people *are* exceptionally gifted. Studies in our field show huge productivity differences between the best and worst programmers (Weinberg, and Lister/DeMarco have done work on this).

    If you want to do something for outstanding performance (based on data, and understanding of what is behind the outstanding performance), recognize that their market value is higher, and move them to a higher pay grade.

    You could divide the bonus pool equally, or give it as an equal % of salary."

    I'd add this:

  • It seems to me that we've come to confuse performance reviews with feedback.

    Somehow the review process is supposed to give people information to help them improve. But ranking, rating, and performance evaluations are judgments not feedback. Once you pronounce a judgement, people are less likely to hear whatever feedback you have to offer.

    The fact that I don't think performance review/rating are helpful doesn't mean I think companies should pay good money (and give raises) to people who aren't doing their jobs acceptably.

    When people don't have the skills to do the job, and they have the capacity and desire to develop the skills in the timeframe necessary, work on building skills.

    A person who is not doing his/her job and is not interested in improving does not have a very high market value. Why pay them at all? Move them off the team.

    Oh, dear. I'm on a rant.

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