This Focused Performance Weblog is a "business management blog" containing links and commentary related primarily to organizational effectiveness with a "Theory of Constraints" perspective. TOC is noted for its applications in Project Management and Multi-Project Management (Critical Chain) and Operations Management (Drum-Buffer-Rope), as well as in Marketing, Strategic Planning and Change Management (TOC Thinking Processes). If you are on an archive page, current postings are found here.
Monday, May 19, 2003
Performance-Based Salaries Don't Always Pay Off -- from HBS Working Knowledge, this article discusses the pitfalls of pay for performance. It reminds me of an experience with a client I had to fire once. Our project management process was clearly indicating what needed to be focused on to keep the big promise, but off on one of the non-critical chains was a milestone associated with a bonus that was negotiated before we put together the project plan, and which wasn't mentioned during the planning process. When they realized that the milestone date (which had no basis in reality, negotiated before any planning) was in jeopardy, the team (and the team leader) then decided the bonus was more important than the project promise. They veered off course, missed the milestone anyhow, and ate up so much project buffer in the process that the important promises were missed. As my friend Tony says, "Tell me how you'll measure me, and I'll tell you what damn fool things I'll do to make the measurement look good."
Keith Ray points to similar messages -- in Inc magazine on sales commissions, and in an interview with the author of Punished By Rewards, as well as a few others. Keith's comments come close to the heart of the matter -- whether there is anything such thing as "individual performance" that can be measured for reward by management. At least my errant client was in a mode of rewarding the team for an accomplishment, but in any organizational/team endeavor, the outcome is much more an effect of the interactions, collaborations, interdependencies, and communications between the individual participants than it is of the contributions of those participants in their little part. Long understood by practitioners of TOC, with only one exception, the performance of a system is not so much a matter of the links but of the linkages in the "value chain" and must be managed -- and rewarded -- as a holistic entity.
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