More Proof Merit Pay Doesn't Work

The desire by corporate education reformers and anti-tax groups to implement "merit pay" has been the driving force behind the growth in onerous and ineffective teacher evaluation systems. However, study after study reveals that not only do these teacher evaluation systems not work in predicting who is, and is not, a high performer, the actual concept of merit pay itself continues to prove lacking in effect.

Bloomberg business reports on yet more evidence this is the case, in an article titled "Proof That Your Performance Bonus Is a Total Lie, Even bad workers are getting rewarded for their work, and performance reviews aren't helping." The study the article relies upon finds: 

  • Only 20% of employers in North America say merit pay is effective at driving higher levels of individual performance.

  • Over a quarter of employers, 26%, pay bonuses to employees who fail to meet expectations.

  • Many managers and business leaders are updating their definition of effective performance management to better support changing business models.

The prescription being offered? Even more focus on trying to evaluate performance, rather than simply letting people get on with their jobs

Given the sad state of the annual performance review, many companies are again rethinking the process. Fluffier reviews followed as more aggressive "stack ranking" processes fell out of favor. Numerical rankings and bell curves are too simple and strict. Although such companies as Yahoo! still use a curve to rank and reward (or punish) employees, the ideal performance review is now a dialogue that includes clear metrics for measuring success and attaining goals. The trend is to conduct more reviews, more often. SHRM recommends that managers meet with employees at least four times a year. 

Maybe one day a realization that professionals are often more motivated by non-monetary rewards, such as better working conditions, professional development opportunities, increased responsibilities, creative freedoms and so forth.