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1、PayforperformanceNoteveryoneseesthetrendtowardpayingforskillsand/orcompetenciesasagoodthing:Itwouldbeeasytoconcludefromreportsinthebusinesspressthatmeritpayisdeadandorganizationsneedtoreconstitutepayplanstopaypeopleinsomenewway.Suggestionsincludepayinge
2、mployeesfortheknowledge,shills,abilitiesandbehaviorstheybringtotheworkplace.Althoughinteresting,thiscallforwholesalereformoverlooksfundamentaltenetsofeconomicandbehavioraltheories.Payforperformanceistheholygrailofmoderncompensationadministration—widelys
3、oughtbuthardtoactuallyachieve.Payforperformanceistheflag,motherhood,andapplepie,butitiseasiersaidthandone.Oneprimaryproblemisdefiningperformanceproperly,sothattheorganizationpaysforresultsandnotforeffort.Onceoverthathurdle,thereremainsthelargeimpediment
4、offindingenoughmoneytomaketherewardfortopperformancemeaningful.Manydifferentapproachesareused—variousvariablepayschemes,annualawardsinlieuofpermanentincreaseinbasepay,andthetraditionalmeritpaysalaryincrease.Theconceptofpayforperformancehasdifferentmeani
5、ngstodifferentpeople.Manyeitherfailtorecognizethepayforperformancefailswhenthedifferentinrewardbetweenadequateperformanceandoutstandingperformanceisinconsequentialorcannotsolvetheproblemoffundingadequatedifferentiationwhiledealingwithessentialrangemaint
6、enancecosts.Forexample,Loguereportedontheintroductionofperformance-basedpayforunionizedemployeesinapublicuniversity.Theoldsystemhadfourannual,essentially“automatic,”5percentstepsfromminimumtomaximum.Thenewsystemadded10percenttothetopofthesalaryrange.All
7、employeeswouldmovethroughtheregularrangeautomatically,butgrowthwithinthetop10percentwasbasedonlyonperformance.Since20percentofallsalaryincreasefundswereallocatedtoperformanceincreases,topperformerscouldreceiveadditionalamountsoverandabovetheautomaticmov
8、ementthroughthestandardportionofthesalaryrange.Suchperformance-basedsalaryincreases(PSIs)wentto12percentoftherepresentedemployees,whoreceivePSIsrangingfrom3.9to5.9percentinthefirstfiscalyear(2000to2001).PSIsrangedfrom0.5to4percen
