Why so-called performance related pay doesn’t work
The behaviour of each of these shapes/colours is determined by the system in which they operate.
Don’t you think that the pinks are especially high performing? Don’t they deserve special recognition? Yes, let’s give them a good bonus this year and a higher salary increase than the others. They deserve it.
Performance related pay doesn’t work because organizational behaviour is a result of the system (the responsibility of management). Paying people differently for what is a result of the system is always unfair. It also leads to concentrating on individual performance rather than on improving the system.
W. Edwards Deming has shown that in any organization 94% of opportunities for improvement come from the system and only 6% from individuals within it.
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