We hear and read a lot about pay for performance. We see it in large corporations, in healthcare (physicians and hospitals) and even in small businesses.

And if you want to take one step toward mediocrity – put in a pay for performance system.

Now don’t get us wrong, pay for performance is a sound idea. Who in their right mind could or would be against the premise? The problem we have is that we don’t have pay for performance systems in many organizations that claim to. What we really have is a modified unearned bonus structure disguised as pay for performance. And the crux is that it all depends on how you define performance.

We have seen pay for performance ending up being an artificial intervention into an otherwise dysfunctional system to start. A system that can’t effectively perform on it’s own so we decide to pay for it (performance, that is). It’s like having your children behave badly in front of guests and paying them to behave nicely. And worse yet, paying them whether they behave nicely or not!

Another problem is pay for performance often becomes a dual cast system: those that get it and those that don’t. And when you end up paying for poor performance, as you often read about, just imagine how the employees feel when company performance tanks, jobs are lost, and “performance” is richly rewarded (for those executives on a pay for performance plan).

Now this certainly sounds like a rant. Perhaps it is. But we also want to reinforce that sometimes good and well-meaning ideas go terribly wrong; It’s what is referred to as the Law of Unintended Consequences.

We’ve written recently about becoming a talent gravity organization, about drawing high-potential talent to you. Well, there is absolutely no way you will do that if you have a pay for performance system that truly doesn’t reward good performance, or where performance is poorly defined, or if poor performance is really a cast system. Now change the “or’s” in the previous sentence with “and’s” and you simply have a bad policy in a poorly performing company.

If you truly believe pay for performance is a good idea, fine, put it in, but put it in for everyone. Clearly define performance as meeting or exceeding aligned company goals, as working together to focus on customer needs, as breaking down silos. But again, then you can just development a culture of alignment and performance and watch your company, careers and compensation grow.

For additional information on key issues and topics on Leadership and Business Growth see our blogs, free articles, white papers and videos at: www.kubicalaforestconsulting.com

Copyright 2012 Kubica LaForest Consulting

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