When Performance-Related Pay Doesn't Work

Summary of video

• Incentivization only improves performance for simple tasks that have a simple series of procedures to reach the desired outcome.
• Many of these procedures are increasingly being performed by computers
• For high-level activities,

  when the outcome is incentivized.

• Therefore, for businesses (in fact, any institution where there are people working on complex, high-level tasks) performing complex skills and working on creative solutions to challenges, another model is needed, otherwise the business suffers.
• Cutting edge companies who realise this are now working on more effective ways to enhance performance, which enhance the following core outcomes:
  • Autonomy
  • Mastery
  • Purpose
• Autonomy

is enhanced through creative time-out (eg, Google engineers are allowed 20% of their work-time for working on their own projects, which have produced Google News, Gmail, & Orchid, to name but a few)

So Where Does This Leave Performance-related Pay

In my view: On the scrap heap. Incentivization doesn’t work for the complex decisions and high-level thinking that are now the norm not the exception, for the majority of the workforce in any organisation.

For this large majority, performance-related pay harms the desired-outcome of enhanced productivity.

So why is still the default position for many businesses? Perhaps the answer is because in those organisations, they haven’t heard or realised that the "default" paradigm (expressed or just assumed) doesn’t work any more.

So why does this ‘default’ position exist at all?

At heart, every business, every organisation, every individual, has within them, a belief about how things are, whether or not they have been articulated.

In my next post, I’ll unpack more of why this is the case, and, if you don’t like the way things are, what you can do to change this "default future".