Many organizations retain an almost messianic belief in the power of performance-related pay and bonus targets to generate commitment and deliver high-quality performance. This is most evident in the approach to executive pay, which is rarely out of the headlines. But the same thinking often penetrates much more deeply into organizations - whether translated into formal pay systems or simply governing the organization's general approach to managing performance. Unfortunately, commitment can't be gained simply by setting up a process of formal target setting or arranging periodic 'performance review' meetings. People might comply - for a time and in a fashion - with externally imposed routines and targets. But commitment is an inner drive. It arises naturally where people feel that they have the motive, means and opportunity to excel at what they are doing.
One of the main problems with performance-related pay systems is that these reflect fundamentally negative assumptions about the nature of people and their need for externally imposed controls. In particular, it suggests low expectations of people’s willingness and ability to contribute spontaneously to worthwhile objectives. And this runs counter to most organizations’ professed belief in such notions as visionary leadership, staff empowerment and mutual trust.
Pay and other extrinsic rewards rarely motivate people to perform well over the longer term - if at all. These can, though, be powerful de-motivators if they are felt to be unfair, whether in terms of outcome or process. To counter this, the use of financial incentives to encourage high performance is often presented as a positive approach to people management, because it uses the 'carrot' of increased pay to incentivize achievement rather than the 'stick' of reduced pay, job loss or demotion to punish failure. However, where rewards can be withheld at a manager’s discretion, carrots are really nothing more than cleverly disguised sticks! Control remains with the manager rather than the employee. And this is just as likely to ‘switch off’ commitment as it is to generate it. See Alfie Kohn's Punished by Rewards (UK) or (US) for more on this. Besides arguing that rewards punish in this way, he further maintains that rewards:
- rupture relationships
- ignore the underlying reasons for performance success or shortfall
- discourage risk-taking.
Leading for commitment
Enlightened performance management focuses instead on unlocking people's latent talent, intrinsic motivation and creative self-expression. It sets out to help them contribute enthusiastically and constructively to the organization’s success in ways which, at the same time, enable them to move towards the realization of their personal goals and aspirations. One central aspect of leadership, therefore, is the ability to unlock the inherent motivation of individuals around themes that are both organizationally beneficial and personally meaningful. When work is meaningful and ‘system’ barriers do not undermine their efforts, most people will ordinarily strive to perform as well as they can within their capabilities. Compelling them to do what they would otherwise do willingly, shifts the locus of control from individuals to the organization. This is likely to undermine their motivation, rather than reinforce it.
Kohn's advice to managers in the above book is to:
"Pay people generously and equitably. Do your best to make sure that they don't feel exploited. Then do everything in you power to help them put money out of their minds."
To bring this about, he suggests that organizations should:
- abolish incentives
- re-evaluate the evaluation process, to focus on overall performance improvement rather than simply on rating individuals
- create the conditions for authentic motivation to occur.
A number of the themes set out by Kohn to achieve these conditions are reflected in the Providing Vision chapter of Informal Coalitions.