Seniority and Pay Systems LO9000

MR GEOFFREY F FOUNTAIN (TFYY93A@prodigy.com)
Fri, 9 Aug 1996 14:51:49, -0500

Replying to LO8557 --

My belated thanks to Jack (LO8570), Jerry (LO8585), Joe (LO8590), Brock
(LO8597), and Robert (LO8596) for their responses to LO8557.

Based on their feedback, our benchmarking efforts, and latest team
discussions, below are a few benchmarking findings key conclusions to
date (my views, as the team has not yet finalized them). If it meets
Rick's criteria, the benchmarking summary to be completed by the end of
August as well as our final conclusions will be posted.

* almost all the sixteen companies benchmarked had individual merit pay
for performance; many also had annual bonuses for all based on
company/division-level performance

* optional, multi-rater development process are more effective when
separated from pay for performance process

* pay for performance process based on 3 to 5 ratings; no forced
distribution; companies using forced distribution expressed employee
frustration with the process

* pay for performance ratings determined in joint management meeting;
ratings and merits are then given to employees

* some companies had a documented performance review process to back
up the ratings; others did not; the difference appeared to be how
"visible" worker performance is to everyone; the more team-based, the
more visible; there was also more ongoing, informal, feedback; there
less need for a formal manager-to-employee documented performance
review (my conclusion)

* in companies where this was working well, there are no surprises at
merit time; the ongoing, informal feedback and visibility are
consistent with the final ratings

* here's one non-exempt/union system that seems to be working well -
the company has negotiated annual increases with no individual merit
compensation system (for exempt only); they do participate in the
company-wide risk/reward bonus system; this company also has a work
environment created by a people-based value system

* sticking my neck out - it appears those companies that have forced
distribution individual merit systems believe $$ is the dominant (maybe
only) motivator of people; further study might conclude in those
companies, there is no people-based value system in place

To paraphrase one of the companies (a great little-car company) we
contacted:

- the need to make money is the ultimate drive for our focus on people,
otherwise we would just be a mediocre company or go out of business.

>From The Fifth Discipline Fieldbook, page 15 in the section entitled
>"Why Bother ?" (a CEO's perspective)

- The essence . . is marrying together individual growth and economic
performance. You can never separate them.

--

Geof Fountain tfyy93a@prodigy.com

Learning-org -- An Internet Dialog on Learning Organizations For info: <rkarash@karash.com> -or- <http://world.std.com/~lo/>