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Question to Stimulate Thinking

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  • #32806

    Sinnicks
    Participant

    W. Edwards Deming, in his book “The New Economics”, warns of the evils associated with the merit system and pay for performance as pertains to his concepts of profound knowledge and systems thinking.  Although I agree on some of the adverse effects that such extrinsic systems of reward have produced, I am challlenged with a fundamental question…
     
    How do you ensure accountability without sacrificing  the numerous pitfalls associated with extrinsic rewards and ranking individuals?
     
    Any thoughts would be appreciated.
     
    Mark

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    #88004

    Mike Carnell
    Participant

    Mark,
    I don’t agree that pay for performance is a bad thing. The problem seems to be more that the performance is incorrectly defined (frequently in a manufacturing environment it is build as many as you can which leads to the waste of over production which can increase WIP and Finished goods inventory) and the feedback systems don’t exist to measure the performance. In that case pay for performance is a bad thing. As long as you know exactly what needs to be done and its effect on the system, measure it and communicate it to the person doing the job how can it be a bad thing? They should be doing exactly what you need done.
    Someone has to own the system and understand waste before it will work. Unfortunately those people are few and far between. Most of the people who define performance understand it to the point that it impacts their bonus.
    In the transactional and service world – you can read the posts on this site and see they for the most part don’t understand they even have processes which makes understanding processes from a system level impossible and therefor pay for performance a mistake.
    Just my opinion.
    Good luck.

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    #88007

    Thomas C. Trible
    Member

    Mark:
    No offense intended, but Dr. Deming would scoff at the idea of “accountability”.  Accountable for what?  Acountable for the organization’s systems?  Deming said that management owns the systems.  Accountable for an individual’s work performance, their jobs?  Deming’s Red Bead Experiment illustrates that even with the best of intentions – putting forth best efforts – one can achieve only what a system is capable of achieving – once again management’s responsibility..
    You mentioned systems thinking.  One of the fundamental problems with merit systems and pay-for-performance is that they can and do suboptimize outcomes of the system.  When pay-for-performance is on the line, a mananger will ensure that she makes her numbers – regardless of what happens to the organization.  What I have experienced with merit systems and pay for performance is that they do not achieve intended outcomes.  On the other hand, they are, for the most part, arbitrary, capricious and unfair.  They do tend to demoralize the workforce.
    Dr. Deming stated that the only fair evaluation of an individual’s performance is what an individual has learned.
    TC Trible

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    #88008

    vishwakarma
    Member

    How do you identify who gets promoted if there is no way to verify performance?  I believe people have it in them to be competitive.  It’s obviously energizing….Why are sports so popular?
     
    “If winning isn’t important, why do they keep score?”
    -Vince Lomardi

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    #88009

    Tierradentro
    Participant

    “What I have experienced with merit systems and pay for performance is that they do not achieve intended outcomes.  On the other hand, they are, for the most part, arbitrary, capricious and unfair.  They do tend to demoralize the workforce.”
    This is what happens when you have a management team that has minimal knowledge of human behavior. Deming was a statistician, not a behaviorist and therefore I would be skeptical when he talks about the evils of implementing merit and pay programs in the workforce. Contingency plans can work if proper training is given before an attempt to utilize such a program.

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    #88018

    Thomas C. Trible
    Member

    Sandeep:
    I agree with your suggestion that sports are a game.  In a game there are winners and loosers.  But, no harm done in winning or loosing a game.
    But management is not a game.  And contrary to your argument, individuals in an organization need not compete against each to other in order to win or loose.  To have some employees win and others lose does not help the organization.  On the contrary.  Quality improvement requires cooperation between management and employees, and cooperation between employees, in a work team, or in a work cell, etc. – to achieve organizational success.  This goes contrary to your theory of the need for win-lose on an individual level.
    In this forum, we hear from many with engineering and scientific backgrounds.  So those individuals can appreciate the point that there is no scientific evidence to support that 1) performance evaluations are good predictors of which people to promote; or 2) that performance evaluations actually improve the performace of those so rated and ranked.
    TC Trible

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    #88031

    Richard
    Member

    In classic HR theory, money is seen only as a demotivator rather than motivator.  It is very difficult to base a performance related pay on a performance criteria which is completly influenced by the worker (do you use sales return, EBITDA…).  The classic example is our company policy of giving the best sales workers the most difficult to get projects.
    Longer term performance can only be increased when the workers associate themselves with the company and develop the attitude, when the company is well, I am well.  You don’t acheive this by paying people differently from one another.
    If you want to reward performance, I’d recomend fringe benefits which are difficult to quantify such as a plesant working environment, company social activities etc.  When my team complete a project phase quicker than plan or under budget, I give a party or dinner.  Helps team building, makes the people feel good, the reward is bigger beacuse no tax is paid and most importantly, it shows a time commitment from management for the good of the workers outside of paid company time.
     

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    #88090

    Mike Carnell
    Participant

    Richard,
    If you are going to quote Hertzberg’s studies you need to get it a little closer to the actual result.
    Money is not a demotivator. It is a hygiene factor. A lack of money is a demotivator.

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    #88091

    Mike Carnell
    Participant

    Thomas,
    If you believe sports are a game you need to take a look at the money that is involved. It is business and it is serious business.
     

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    #88092

    Mike Carnell
    Participant

    Thomas,
    In one of you later posts you ask for data to prove the pay for performnce. That door swings both ways.
    As far as Dr. Deming scoffing. You know this how? You are qualified to speak in his behalf because …………? There is an intersting scene in the movie “Good Will Hunting” where some guy is quoting various authors about economics or something. Matt Damons character comes back and asks him if he has any thoughts of his own. We can all read Deming forourselves and can probably do without the Jim Baker type interpretation. Any thoughts of your own?

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    #88097

    Chris Butterworth
    Participant

    Mark,
    The problem with ranking employees is that it can’t be done. Well, not accurately and not honestly. Many companies waste resources on this activity in the belief that it will give them some sort of valuable information. If you think of it as a measurement activity and you are familiar with repeatability and reproducibility studies, you will appreciate the flaw in the process. If you are not familiar with R & R studies, consider this; How many other employees would come up with the same, or even similar, ranking? If you can imagine that there would be dramatic differences then you can appreciate that the measurement process is far less accurate than it needs to be for the job.
     

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    #88107

    anon
    Participant

    Well…
    Last mont we went through our biennial evaluation (it was the first time for me). I was independetly evaluated by my boss, two workmates and myself. The evaluation consisted in 28 questions with answers ranked from 1 to 5. All four evaluators sent the answered questionaries to my boss in a closed envelope, so non of us knew the other’s answers when evaluating me. At the end, in a meeting with my boss we openned all four envelopes and made together a “final” evaluation. I thought I would find a great lack of reproducibility… so I was surprised to find that no answer (to the same question, of course) differed from the other for more than 1 point in the scale.
    Anyway, I still didn’t like the activity. I found no much “value added” after doing it. Ironically, that’s in part because of the narrow dispersion in the answers. All anwers were close to my self evaluation, so learnt nothing that I didn’t knew before.

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    #88114

    Mike Carnell
    Participant

    Chris,
    Whether we like it or not and whether it is a formal system or not a person in any type of supervisory position will hold a ranking of the people working for them. For those that don’t think so and have been through a layoff watch a person in a supervisory position manipulte whatever criteria they can to keep certain people and get rid of certain people. They are trying to making the system fit their ranking. Their ranking is based on that persons ability to help them accomplish their “goals.” Unless a system level view has been applied to help them understand what are the Business goals, they become very short sighted and will frequently suboptimize the system. Walk through your work area and ask every supervisor you see who their best person is (if you ask for the worst they won’t necessarily tell you but they know who they think it is). If they know the best they know the worst and every other position in between.
    If you have seen the clip of Jack Welch speaking at Kellogg you will hear him make the remark “That’s half the fun of working. Knowing how smart you are and how dumb some others are.” How many people out there are getting all emotional over this string and the lack of insight over the inadequacies of the rating system? They will turn right around later today in a discussion of selecting BB’s and demand the “Best of the Best.” what is worse is they already know who they want because they – like Jack Welch said – know who is smart and they know who is dumb. If I am going to select a person to model my management system after – and I apologize to the Deming followers – but the data says Welch has a pretty good model. GE stood the test of time. How many of us are still driving a Fiero? 
    It isn’t indigenous to the supervisory roles – have you seen people who have a “favorite” machine they work on or a “favorite” supplier.
    The idea of subjugating the individual for the good of the group has been done in the communes of the 60’s and long term it doesn’t work. People will be allowed to excel and be recognized for it or they go where they will be recognized.
    I agree with you that the rating systems are poor at best but I have been fortunate enough to be exposed to some HR people who take their jobs seriously enough that they work to make it a better system every year (the first falicy – why wait a year?).
    The interesting part is the other HR professionals who can’t see the connection of SS to their jobs when the measurement of peoples attributes is the largest part of their job. You are on this site often enough you have seen the posts “I’m in HR and I can’t find a project.” The part of their business that is the biggest bar in their Pareto and frequently they don’t know it is broken. The most difficult part to breaking a paradigm? Knowing you are in one.
    When you do site support for the HR projects they will almost always either argue that “MSA does not apply to them because they are different” (check Dr. Deming”s obstacles to improvement) or they will select a project that deals with something so obscure to their process that the effect is negligible because it will “allow them to use the tools.”
    The rating will occur either formally or informally. Expecting people to perform at a high level without individual recognition is naive. If we have a manufacturing process that is difficult to measure but you can’t eliminate it – what is the option? You fix it. Who has actually sat someone from HR down and said “You are in the measurement business. What does your MSA look like?” Until that happens you will continue to get the tail (a few enlightened HR pro’s) trying to wag the dog.
    Just my opinion. Good luck.

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    #88115

    Mike Carnell
    Participant

    Anon,
    I really hope you are not a BB/GB – it would only make your comment more ridiculous than it already is.
    You self evaluation was not what you knew about yourself – it was what you believed about yourself. Now you have data and it can become closer to actual knowledge. One point doesn’t make a trend. To quote John Lupienshi “One point is random chance. Two points is coincidence. Three points is a trend.”
    Just remember if you set 20,000 monkeys at pianos long enough sooner or later one will play Motzart. You aren’t him yet.

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    #88119

    anon
    Participant

    You are right (hard, but right).
    I hadn’t ssen it from that perspective. I guess that now I can say that I failed to reject that what I belived about myself is different from what the rest of the organization does. That’s an information I didn’t have before. Now I have that “trend” you mention.
    And, you are right again, I am not a BB or GB. Yet, I am used to hypothesis, MSA, understandig variation, data based conlcusions and so on. So not being a “belt” is no excuse. I should have seen that.
    Thanks for openning my eyes.

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    #88120

    Mike Carnell
    Participant

    Anon,
    My apologies if it came across as hard. I think we are all guilty of taking our beliefs as a fact. That is why stats can be used effectively to solve problems – it enables us to detatch ourselves from our beliefs with some form of rational.
    Good luck.

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    #88123

    billybob
    Participant

    Hello folks,
    Of course sports is a business, team managers get fired for losing seasons, players get traded or contracts don’t get renewed.  Don’t ball players get paid bonuses for achieving hits, homeruns, or games won. Its all incentive. Thats why there isn’t “honest sports” when it comes to sports. 
    When’s the last time a ball player called himself out when he knew the umpire made a bad call and called him safe instead; or a football player says, “Yes I was really out of bounds and you missed the call.” All we hear the players and managers say when bad calls are made is; “that the call was made in my favor!”
    Later,
    Billybob
     

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    #88126

    TC
    Member

    I have been told:
    1.  People TEND to repeat behaviors that result in pleasure (reward, recognition, etc)
    2.  People TEND to avoid behaviors that result in pain.
    I have been working for 16 years in five different companies and I must say that the above two statements have proven to be generally true for almost everyone.  However, since we are human a few people will surprise you from time to time.

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    #88128

    Mike Carnell
    Participant

    Billybob,
    Sports is probably slightly less complicated than motivating possums. Any trade secrets to share?
    Regards,
    Mike

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    #88134

    Chris Butterworth
    Participant

    Mike,
    You have some good points in your reply. I also agree that we all rank our stars and our laggards. But it’s the group in between. If the distribution of performance were normal, the stars and the bums are in the tail areas and easy to spot. The rest are clustered and are really indistinguishable. That’s my point about the measurement, or ranking of employees being impossible.   

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    #88137

    Mike Carnell
    Participant

    Chris,
    I think we can do it – technically. We have had 3 deployments that used a tool called Vector Analysis to identify BB candidates. It seems to be able to run some questions and bounce them off a model (hypothesis test for the HR types that can’t find a project or believe the tools don’t apply) to check for fit. In the one company we were adjusting the interval between sessions. We knew 4 was to long so we dropped it to 2 weeks. The candidates were so strong it is the only wave we have graduated since 1995 that 100% made it across the finish line.
    If you look at Myers Briggs it has a model that has been validated in a huge number of countries (I remember it as 81 countries but I can’t back that up). That is a pretty robust model.
    We can make the measurements around people and characteristics. I think it goes back to the requirements we place on the HR people. Has the VP or whoever is responsible ever been told get me the % Study Variation for your review process. Even better how many distinct catagories does it have. Once they get the number they get to keep their job if the number drops by 68% each year.
    The next question is is it worth the money to do it. I think we agree that we can identify the stars and the slugs. If it is normally distributed then we know 5%. That leaves 95% but out of that 95% there is 68% that are average. How important is the stratification of that group? We might not get them in the precise order but the +/- 1 sigma group will be relatively accurate. The +/- 2 sigma group is where the problem might be but we are really trying to find the top 13-14% and bottom 13-14% of that group of 95%. That isn’t that hard to hit. It is really how much resolution do you need? That is driven by how finely do you divide up the money between rankings and how much money difference does there have to be before people feel there is a difference.
    It sounds pretty cold but in terms of value to the business how important is it to have the order 100% precise.
    Now that I have probably spun up most of the herbal tea drinkers, we owned a company called Six Sigma International. We had one pay rate, $120,000 per year for 152 days. The bonus was $1,000 per day for a maximum of 40 days per year (a total of 192 days per year max – that is an average of 16 days permonth away from home and that was really to much but the last 40 days were optional). Very few people did not max out the bonus so for the people who still buy into the Hertzburg stuff – how old/relative is it? It is a good thing nothing has changed recently. The problems began when we moved away from the single pay scale for various reasons. The only performance measurement was customer ROI and we did not do reviews.
    Good luck.

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    #88140

    Chris Butterworth
    Participant

    Thanks for the info, it’s helpful. I think we’re on to a practical idea for people responsible for performance appraisal programs. If the top players are obvious – and they usually are – rewad them appropriately. Same for the bottom players but instead of rewarding them you work with them. As for the larger group in the middle, rather than spend resources in an attempt to quantify and rank performance, spend resources on a development activity (bring in a motivational speaker, provide X hours of class training, whatever works). It’s a better way to spend the money.
    It’s a dodgy topic with people on both sides all holding valid arguments and the debate has gone on for a long time. The objective is to improve performance of the whole organization and evaluations are just a first step.
    I’m familiar with the Myers Briggs Type Indicator but not the model you’re suggesting – I’ll look it up. Thanks for the insight.
    Chris
     
     
     

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    #88159

    mcleod
    Member

    Mark,
    When Dr. Deming said that performance evaluations were a bad thing, he may have been thinking of employees like me.  Every single time I have been in a meeting where the performance evaluation and/or merit pay system is discussed, I inevitably leave in a totally demoralized state.  The reason is that no matter what they say, all I hear is “You are a lab rat.  Here is the cheese.  Get in the maze.”
    Scott

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    #88160

    David Hevel
    Participant

    Douglas McGregor did a lot of work on this one a long time ago and his conclusions still hold true.  All performance appraisal systems have this problem.  The perceptions and world views of those involved create self fulfilling outcomes for the process.  Said another way,”The perceptions the evaluator has about people will deeply inform their impressions of me and my work”.  Therfore they will only partially be able to analyze for performance.  One of the values of a well done 360 feedback system is that you get some other perspectives of your performance but we can only learn from that when we can talk openly about what the activity was that created those perspectives in the first place.  That kind of authenticity is rare in any system of appraisal.  To base performance pay on such an “out of control” system seems a poor application of process redesign.  Ultimately, performance appraisal processes with reward as an end results, are trapped by this human issue.  A good book to read on this topic is “Punished by rewards” by Kohen.  People are motivated by complexity of work and the results they produce from it, not “The cheese”.   Scotts got it right.  I have had a few bosses in my day who did this well and they mostly ignored the conventions of the organizations appraisal system and personalized it to me and my personal performance measurement system.  I’m a lot tougher on “me” than any appaisal system would be willing to be.  

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    #88161

    Curtis
    Participant

    When talking about pay in the workplace, I think we confuse motivate with incent.
    If we use Herzberg’s M-H theory as our starting point, motivation is a specific affect related to the need to accomplish our intrinsic personal needs. According to that body of research (which I know has just as many other studies attempting to dispute it–that is another topic altogether), the only factors to motivate are the Motivator factors (see The Motivation to Work for the full list).
    If we find that pay is eliciting the type of behavior we want, I posit that what is happening, is an incentive for a short-lived behavior change. It is not motivation. Motivation, in the Herzberg sense of the word, must be elicited for intrinsic reasons. To that end, when talking about human resources, I have found that the word motivation is used much too freely to describe behavior-inducing efforts that are really incentives. Incentives aren’t inherently bad, but they are not the means to motivate the workforce.
    Regarding sports, it is true that it is a business and money is a major concern. The main difference between sports and work is that individual performance is much more clearly quantified (batting avergaes, RBIs, ERA). Information regarding performance is, specific and freequent. In addition, numerous achievements are available to players (HRs in a season, All-Star game). In work, in many cases-but not all, performance is more ambiguous and it is unclear when an employee has achieved–the chief Motivator in Herzberg’s theory.
    In both sports and work, the requisite amount of pay is provided for the level of skill/performance. Pay is always a hygiene factor because it is environmentally bound–it is a function of society. An analogy of this is, children don’t come out of the womb and want money. However they do have an intrinsic need to grow, learn, achieve new things, and be recognized. It is only after children are taught that money has value, that they begin to recognize it as something they need to have–not intrinsically need, but need as a mechanism for survival and getting other things.
    Anyway–those are some jumbled thoughts–not precisely explicated, but enough  for me to jump in and provide my thoughts on this topic.

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    #88165

    David Hevel
    Participant

    Right on Curtis.  Since most appraisal systems are annual, to believe that a person’s performance will be raised by a finanacial reward, is only likely to have an impact just prior and just after the appraisal.  The rest of the year it will do little to create increased effort.  But if the reward is on the satisfier(intrinsic) side of the equation then the employee is “reflecting” as a routine part of their self evaluation of performance all of the year.  We’ve become so addicted to the view that money or someone giving us praise for doing a good job, says something about our personal value that we put stock in antiquated and non value added activities such as performance appraisals.  When it’s all said and done,  performance appraisals should be customized to the readiness of the employee.  What works for me may not work for another employee.  The wise manager knows this and manages according to the needs of the person they supervise.  Does that mean the bosses opinion doesn’t matter.  In a word,”yes, it doesn’t matter”.  Only the data about what was agreed upon and how well did we do to get there and what are we going to do in the future.   Since money and praise are such poor ways to reflect upon performance, why do managers and managment systems continue to insist on using them?  It’s an addiction.  We actually think we need it to distinguish one employee from another.  Why? It only matters what each employee does in service to the organizations goals or activity.  Pay should be based upon the market value of positions and not some “pull” reward system.  If an employee grows to the point that they have outgrown the pay offered for a position in their company, something will change.  Either the company will recognize that changed market value or the employee will and go elsewhere. Market value should be the driver for pay systems not merit.  Intrinisc or, when required, extrinsic motivation should be the driver for performance appraisal.  Lincoln welder learned that if you use an extrinsic reward system, provide hourly performance numbers, stay out of the way of the tow motor and expect a higher turnover rate.  It’s not for everyone.
    Now I’ve got to get to work on the report I’m not too motivated to produce. It’s due this afternoon and that’s influencing my current activity because “I will have it done and done well”.

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    #88174

    Curtis
    Participant

    One thing I did not comment on was the idea of “ranking” employees.
    I do believe it is necessary for organizations to do their best to quantify employees’ performance and provide data regarding that performance as frequently as possible. Just like a process, the only way an employee knows where he or she stands is by the data. If an employee has frequent and specific information and consistently fails to perform, they must be helped. If they can not improve after that, they should be let go.
    Someone who is consistently not perforiming is: 1) not acheiveing (not fulfilling personal needs), and 2) not adding value to the orgainzation (not fulfilling the needs of the organization). By cutting them loose you are making them evaluate what they are good at and what they want to do and hopefully they will choose a job better suited to them. For the company, you are constantly improving the quality of the workforce.
    I do not; however, believe in ranking employees for the sake of motivating them thruogh competition with each other. My interpertation of achievement in this case is close to Deming and his views regarding internal competition vs. external competition. Achievement should come through the individual meeting their own goals related to previous goals (i.e. last year’s performance  vs. this year’s performance), not their goals versus others’ goals. If neither the performance of last year or this year is satisfactory…reference my comments above.

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