that Donald Trump will have repaired in four months for far less money? Perhaps part ... were published, one by Fred Lange, a personnel executive, the other by.
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By Richard E. Kopelman
— n his provocative recent essay, widely documented finding that unable to repair an ice skating rink "The Demerit of Merit" pay-for-performance plans typically that Donald Trump will have (Personnel Administrator June produce 30 percent greater repaired in four months for far less 1986), Charles Hughes productivity in comparison to timemoney? Perhaps part of the advanced five arguments based (hourly pay) plans?' explanation resides in the two pay against the use of merit pay. In the Moreover, why are there so many systems used. Would any city August issue, two thoughtful replies instances of organizational lethargy employee have been financially were published, one by Fred Lange, and ineptitude in the public sector, rewarded if the rink had been a personnel executive, the other by an arena where pay and repaired efficiently? Were any city Donald Ames, a consultant. In performance are often completely employees denied a pay increase essence, both replies noted that decoupled? Why, for example, after because of the ineffective merit pay systems can work, if the passage of six years and the performance? implemented properly. However, expenditure of more than $12 Third, Dr. Hughes states that pay neither critique really addressed the million was the City of New York is not a motivator. If he thinks this is several arguments that Ted Thai/Time Magazine so, perhaps he should Hughes advanced. Thus, conduct the two-step this piece is not "beating experiment suggested by a dead horse"; how can Clair Vough of IBM: 2 it be if the legs are still Step One—list all the kicking? social, psychological, First, Dr. Hughes and material benefits argues that differential people receive from pay increases may cause their employment. Step some of the recipients of Two—systematically take low raises to experience away one factor at a time pay inequity. Perhaps so. and see what happens. But if all employees are Most people will paid the same, would continue to work in the this eliminate perceived absence of MBO plans, pay inequity? Of course challenging tasks, quality not, because equal pay circles, etc.; few, though, will not be seen as will continue without equitable. Further, does pay, working just "for it make sense to avoid laughs." pay inequity among lowFourth, Hughes claims as compared to high(but cites no evidence) performing employees? that merit pay plans only Why should motivate people for eight weeks a year organizations invest in the satisfaction and essentially around the annual performance retention of those who review. It may be true contribute the least? that many people "get Second, Hughes argues that merit pay Richard E. Kopelman is a plans "encourage professor of management at mediocrity." If so, how Baruch College in New York City does he account for the Wollman Ice Skating Rink in Central Park, New York.
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PERSONNEL ADMINISTRATOR
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their acts together" because of the annual review One wonders, however, how many people would get it together at all, if the annual performance review had no material consequences—if it were purely "academic." Fifth, Hughes states that merit pay systems "require" managers to make person-to-person rather than person-to-standard evaluations. Not so. As Lange and Ames have noted, it is possible to evaluate employees based on pre-established goals or standards. Additionally, it might be noted that Hughes acknowledges that merit pay plans will cause some employees to "dramatically improve" their performance. He notes also that because average levels of performers will improve, some low performers may still remain in the bottom half. True on both counts. But Hughes cannot (logically) have it both ways: It is inconsistent to argue (1) that merit pay plans encourage mediocrity and (2) that they will raise the average level of performance. In conclusion, as John Gardner has observed, there are three ways by which a society can distribute its resources: birthright, egalitarianism and competition. 3 Similarly, organizations can rely on nepotism/favoritism, across-theboard distributions, or merit. While it is not easy to implement a merit reward system, one must also examine the alternatives. The nepotism/favoritism approach (i.e., who you know, or what you know) produces political alliances, coalitions and power plays. The everyone-gets-the-same approach produces bureaucratic apathy, demoralization and inefficiency. Are these better ways? ■
References
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PERSONNEL ADMINISTRATOR
1. Richard E. Kopelman, Managing Productivity in Organizations: A Practical, People-Oriented Perspective. New York: McGraw-Hill, 1986, pp. 35-65. 2. Clair F. Dough, Productivity: A Practical Program for Improving Efficiency. New York, Amacom, 1979, p. 14. 3. John W. Gardner, Excellence. New York: Harper & Brothers, 1961, pp. 3-29.
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