In the previous post, I endorsed a recent article in the Sunday Times, which pointed to a number of flaws in the widespread practice of linking individuals’ pay to their perceived performance.
In addition to the problems identified in the article, I called into question the fundamental premise on which performance-related pay is based. That is, that direct relationships can readily be established between organizational outcomes and the decisions and actions of specific individuals. The complex social dynamics of organization make such links impossible to establish. In other words, it is simply not possible to isolate the effects that the intentions and contributions of a particular individual have on organizational performance.
So the challenge to target setting and performance-based rewards for individuals can be made on two fronts:
- First in relation to the supposed effect that these have on an individual's tendency to work more effectively than he or she might otherwise do (that is, the proposition that targets increase motivation, focus effort, and enhance accountability).
- Secondly, as regards the complex social dynamics of organization that inseparably intertwine the intentions, interactions and contributions of those we are seeking to appraise with the intentions, interactions and contributions of all other participants – both ‘within’ the formal boundaries of the organization and ‘beyond’. These dynamics render the notion of cause and effect meaningless in relation to the effect that individuals' contributions have on organizational outcomes.