The government-commissioned Fair Pay Review, was published earlier today. Led by the Work Foundation's Will Hutton, the review team recommend a new performance-related pay deal for senior executives that might eventually be extended to middle managers. The proposals include a suggestion that managers should have to "earn back" a proportion of their pay (say 10-15% of it) by meeting personal performance targets. Provision would then exist for "excellent performers" to earn an additional, bonus sum.
According to an article in HRZone, Hutton maintains that no pay system can be fair if it fails to reflect individual performance. And there's the rub. The whole pay-for-performance approach - whether in the public or private sector - rests on the proposition that organizational outcomes can be related, in a simple cause-and-effect way, to the 'performance' of individuals. They can't.
A common sense approach?
It might seem like common sense to pay people according to their perceived performance. But it is a version of common sense which still sees the business world as ordered, predictable and ultimately controllable. So where is the flaw in this widely used practice? And is there an alternative?
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