Performance Pay: Here to Stay?

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Performance Pay: Here to Stay?

Thursday, August 27th, 2009 - 11:56
Not unlike the recent public healthcare debates, the mention of performance-based pay generates much passion.  The continued rollout of the Defense Department's version of performance pay was put on hold at the beginning of the Obama Administration, pending...

Not unlike the recent public healthcare debates, the mention of performance-based pay generates much passion.  The continued rollout of the Defense Department's version of performance pay was put on hold at the beginning of the Obama Administration, pending a study.  That study is now out.  It is short and clear:  continue the pause, rethink some of the initial premises put in place in 2004, engage employees in re-designing the system, and be sure to invest in training managers. While the report concludes” “Successful performance management systems have the potential to enhance organizations performance and drive effective results,” it pointed to several implementation actions taken in recent years that led to frustration by both managers and employees.

Media played up the unions’ disappointment that the system was not rejected outright.   But separately there were strong signals from John Berry, director of the Office of Personnel Management, that President Obama is committed to linking pay to performance as a condition of any broader governmentwide pay reform efforts.

What should be the focus of the “rethink?”  A coalition of good government groups, the Government Performance Coalition, outlined several “key drivers for enhancing the prospects of success:”

Focus first on instituting a proven performance management system.  Performance management must initially be separated from pay.  The system has to be tied to proven improvements in performance, and “an effective performance system must be recognized as benefiting employee motivation and engagement, as well as recruitment and retention, regardless of pay.”

Second, provide for the proper level of transparency.  Without the ability to understand one’s rating or the way in which the process functions, a major reason for the enhanced system is lost.”

And third, reinforce the value of constructive ongoing communications.  Employee-manager feedback and dialogue are important, but oftentimes difficult to achieve.  Training helps, but it is important for leaders to “sustain a workplace culture that values constructive communication.”

Interestingly, these elements were reflected several years ago in an assessment of the performance pay system implemented at the Government Accountability Office.   This isn’t a new topic.  This blog has highlighted several other related IBM Center reports on this topic, if you want to dig into some of the background.