Tag Archives: Salary

Injuries, Injustice and Bad Timing: Why Pay-for-Performance Doesn’t Work

What are you worth?

Few subjects elicit more emotion than compensation.

While researchers are shedding new light on the emotional complexities of salary determination, fairness and transparency… is anyone looking at the clock?

Dispelling two compensation fallacies…

  1. Pay me more and I’ll be happy! (NOPE)

While research conducted by Kanas State University supports the long held belief that happy employees are less likely to leave their jobs and improve organizational performance; two separate studies indicate “Being top dog makes us happier than simply getting top dollar”. Employee satisfaction is as much about what you earn RELATIVE to others, as it is about how much you earn as an OBJECTIVE figure.

The importance of relative-pay may explain why research published in the Academy of Management Journal reported that secrecy about pay-levels stifles performance because employees are left to guess their relative salary rank and can’t see a clear link between performance and pay.

  1. Pay me more and I’ll perform better! (WRONG)

A decade long study of professional basketball and baseball athletes found players consistently boosted their performance in the year leading up to a contract renewal, only to have that performance drop in the year of their new contract—what the researchers dubbed the “contract year syndrome.”

Why we need to watch the clock…

Pay-for-performance schemes assume that last year’s performance is a solid indicator of what should and can be attained this year and that we’ll be incented to perform right now even though we’ll be paid much later.

My advice?

Find a company with has their product and pricing right, eliminates the gap between performance and pay, is financially transparent and values you as a person… Good luck with that!

Sources:

University of Missouri-Columbia. “Athletes’ performance declines following contract years.” ScienceDaily. ScienceDaily, 22 January 2014. <www.sciencedaily.com/releases/2014/01/140122170622.htm>.

Belogolovsky, P. Bamberger. SIGNALING IN SECRET: PAY FOR PERFORMANCE AND THE INCENTIVE AND SORTING EFFECTS OF PAY SECRECY. Academy of Management Journal, 2014; DOI: 10.5465/amj.2012.0937

Brown et al. Does Wage Rank Affect Employees’ Well-being? Industrial Relations, 2008; 47 (3): 355 DOI: 10.1111/j.1468-232X.2008.00525.x

Kansas State University. “Happy Employees Are Critical For An Organization’s Success, Study Shows.” ScienceDaily. ScienceDaily, 4 February 2009. <www.sciencedaily.com/releases/2009/02/090203142512.htm>.