Performance pay or meritocracy? - 14 Nov 2008

Performance pays or meritocracy?

http://www.expresscomputeronline.com/20081117/technologylife01.shtml

It is important to recognize and reward both performance
and meritocracy. Both hold their own significance at crucial junctures, writes
Renuka Vembu

Pay
packet essentially stands out as one of the most important attractions that
lure people into a company. Work culture and ethics, job role and satisfaction,
rewards and recognitions do not take precedence; they come in at a much later
stage when an employee assimilates into the company and is on the job. And once
into the organization, every performer wants to be recognized and rewarded for
his contribution and overall achievement. Performance and meritocracy are separated
by a thin line—one being the actual output shown/produced while the other
is the skill-sets, knowledge and talent possessed, which do not translate into
the expected result.

Parminder Kaur, Head HR, Tricom, said, “In its simplest terms, meritocracy
means providing employees with better compensation and opportunities to advance
as they do more for the company. Typically, meritocracy is referred to as pay
for performance. Unfortunately, this misses the mark a bit, although there are
very few resources for true meritocracies, other than case studies. A meritocracy
is more than pay for performance. It is an understanding between the staff and
management that high performance and the rewards for it are a foregone conclusion.
This requires a great deal of communication and sincere dedication to the concept
by management.”

Understanding the difference

Is it fair to have a difference in the pay scale for performance and meritocracy?
And if yes, on what basis should it be, and if no, are these reasons to maintain
parity? Mona Gupta, Senior Manager, Human Resource, Cincom Systems India, gave
her reasons on the fields under which the difference area could be—

• Often the final result is not in an individual’s
  control—these are business induced conditions


• Dependence on others to complete a task


• When goals are not firm and keep changing during
  the year, then despite best efforts, targets get missed. One has to take a
  view in such situations on how much to hold the person responsible. Holding
  skills and credentials doesn’t make you valuable to your employer; it’s
  the results you can affect with those skills and credentials that matter. 
  

Turning merit into performance

At the end of the day, it is the productivity that matters. Skills learnt and
talent infused wouldn’t suffice if it does not materialize and showcase
into an effective output and match the set scale/target. Deviance between the
expected and the actual needs to be bridged because it is conversion of what
lies within oneself to what is expected of them in the real world is of significance.

Gupta asserted, “Results matter the most, which goes without saying; so
performance based pay is what has to be driven and focused on. One can give
the benefit of doubt to a high potential employee who misses the result, but
not each time. Good potential needs to be worked upon to deliver results; it
does not automatically lead to results. This can be done by having performance-oriented
goals, not effort-oriented. We have a tendency to reward ‘hard-work’
rather than ‘results’—that has to change first. We also need
to work on people’s strengths.”

Skills mat get an individual into the company, but the driving force to stay
and grow is performance. An organization’s role, its team of HR personnel
and the immediate and middle-level managers should concentrate on this transformation—from
possessing capability to converting it into something tangible, visible and
measurable. Also, whether a high performer is recruited or a meritorious candidate
is selected depends upon the position for which the vacancy needs to be filled
and the organizational policy with regards to the same.

Anuraag Rai, Vice President, Human Resources, Sterlite Technologies, said, “Fundamentally
every organization would like to believe this—‘capabilities leading
to excellence,’ but in reality, even after spelling out everything clearly
one find gaps, in displaying the right behavior, i.e. the ‘Walk the talk’
attitude, thus leading to dissatisfaction. Sometimes within the organization,
the leadership team is unsure of what capabilities are needed or are to be nurtured.”
Functioning effectively and efficiently, changing with changing times and adapting
to the changes in the most effective manner and growing the business is the
new-day mantra; hence aspects like excellence in performance should receive
right and timely attention, from defining to recognition.

The variations

Companies have their own policies and reasons with respect to recruitment, increment,
appraisals, etc. During appraisals, it is most often than not, the KRAs that
are looked into, compared as against the expected performance and valued for.
Merit often holds prominence only while getting an entry into the company; thereafter
it is the work and productivity that needs to shine and steal the show. But
it has to be featured highly in the initial stages for employees and clients
to hold high the company, its values and its philosophy.

Rai explained, “The internal and external recruitments are essentially
based on technical skills, people skills and conceptual skills. Depending upon
the levels, prioritization is done by hiring team—for example at the lower
and middle level, one will definitely seek confirmation on technical/functional/people
skills to map a candidate; whereas at the senior level it will be mostly on
conceptual plus people skills because all these skills supports superior performance
and excellence.” In appraisals also, an organization needs to define performance
levels, and when measurement and review happens, business must attach all sincerity
to these processes and norms.

Kaur was of the view that organizations should adopt meritocracy. She felt,
“In creating meritocracy solutions the strategy literally pays for performance,
the result is that on the base salary side of the equation, your top people
may receive as much as two times more reward than employees who are ‘keepers,’
but not top achievers. A company that commits to a pay for performance model
will likely set apart their top 10%-25% of employees for special rewards too,
in addition to base salary differences.” Employees need to be aware of
the above facts, and the company has to have the right kind of tools that can
build a culture of top performers. This might include base salary programs and
automated tools that provide guidelines for differentiation to be used by managers.
Consider creating a performance scale with four or five delineated points, then
providing your managers with tools that help them recommend salary increase
percentages, she pointed out.

In a materialistic world, even a slight unevenness in the monetary value can
create a rift. Companies need to be clear of their policies and transparent
in their working and processes. At the end of the day, whatever it be, performance
or merit, it all boils down to optimum productivity, performance par excellence
and retaining the best employees.

renuka.vembu@expressindia.com