Performance-based pay has come under a lot of scrutiny in recent years. There appears to be a basic logic in tying pay or incentives to performance – if you promise rewards for hard work, people will work harder – the truth is much more complex.
The Real Story Behind Performance-Based Pay
There are many potential issues with performance-based pay. True high-achievers are often driven by motivations other than money, and offering money for achievement can actually decrease a person’s internal motivation to work hard and well. But on the other hand, good employees expect to be paid fairly for their work, and rewarding employees with raises or bonuses is a common way to acknowledge and show appreciation for them.
Given these contradictory facts, is there a right way to use performance-based pay?
Performance-Based Pay That Matters
A key to creating a performance-based pay system that actually works is to make sure that the system for giving rewards is fair and transparent. Many employees have become disgruntled by a perception (true or otherwise) that one employee is rewarded because he or she is liked better by management, not because of actual performance. Other employees become unmotivated because management sets production goals that are out of touch with reality.
In order to work, performance-based pay systems need to be absolutely fair and administered according to clear guidelines: here’s where using hard data on performance can help.
Shop Floor Data Reveals True Performance
Our Shop Floor Data Capture system can provide the data needed to make a performance-based pay system work. Data captured by the system doesn’t depend on a manager’s perceptions of employee performance. It provides a true picture of productivity. This makes assigning performance-based raises or bonuses more fair and transparent.
Also, capturing shop floor data gives management a clear picture of what is actually being produced in a given time period. Setting a realistic goal with a clear reward for meeting it is a proven way to increase motivation for both individuals and teams. Using real shop floor data can help management set realistic goals based on past performance.
If your organisation uses performance-based pay and incentives, you need to have hard data backing up your rewards, or your incentive system could do more harm than good. For more information about the benefits of shop floor data capture, please contact us.