The link between pay and performance - The Institute for ...

working environment. The next question to ask is whether inreality money seems to motivate employees.Various researchers (eg Wallace and Szilagyi, and Gupta andShaw) contend that money is indeed a motivator. This isbecause it can be seen by individuals as a goal in itself, as ameans of giving satisfaction, and as a symbol of (internal)recognition or (external) status.There is a counter view, however, that there is no real researchevidence that money does indeed motivate employees. Kahnhas argued that extrinsic rewards damage intrinsic job interest.Employees lose focus on the needs of the job in hand and aredistracted by the promise of the reward. Performance-relatedpay has a tendency to produce temporary compliance ratherthan sustained improvement. It does not change attitudes orbehaviour, merely a superficial conformity with what theorganisation signals to be important. At worst, a simplistic payfor performance approach is coercive. The risk is that it mayalso produce the wrong sort of behaviour. For example, asPfeffer says, individual performance-related pay emphasisesindividual contribution, whereas the task might requireteamwork; it might lead to short-termism when you need alonger-term perspective, or it may encourage conformity whenyou need challenge.In truth it is hard to construct the evidence that proves thatindividual performance-related pay works. It is very difficultto identify a causal link between pay and a desired outcome —there are so many intervening variables. The generalconsensus, however, as expressed for example by Brown andArmstrong, is that such schemes clearly work in somecircumstances, but not in others. Results depend on theoccupational group and their work setting. You can only reallyeffectively pay performance if you can measure performance,and do it in a consistent manner. As Armstrong pointed out:‘When PRP fails, it is often because the assessment process isflawed.’ This fits with Lawler’s research in the USA in the1970s. In a survey of employees he found that objectivemeasures had much more credibility in the eyes ofparticipants than did managerial ratings. Increasedtransparency of decision making also provided credibility. Ofcourse, objective and verifiable measures are much easier tocommunicate than the subjective judgements of managers.This understanding gives credence to the commonly held viewthat a sales force is motivated by the possibility of increasedbonuses, whereas this is not true for research scientists. Thismay be partly due to the different personality traits involvedin occupational selection, but it certainly has to do with thecontrast in the nature of work satisfaction and the fact thatThe Link Between Pay and Performance 5