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Congratulations! This post was selected as one of the five best business blog posts of the week in my Three Star Leadership Midweek Review of the Business Blogs.


Wally Bock

Interesting analogy, you definately did it justice!

To bring the idea full circle ... how do you reccomend shifting the managers focus from short-term (raising teams wages), to long-term company success?

Holding "managers accountable for their roles as stewards" has a nice theoretical ring to it, but if: 1) Nuts and bolts training and
2) Performance based pay systems, aren't the answers ... then what is?

What are some effectual processes, tools or practices that can motivate managers to put the company long-term success before the immediate compensation pressures of their team?


Thanks! Always an honor to make the Midweek Review cut!


Great questions... hmmm, perhaps a follow-on post is in order. Back to you on that.

Ann - Beauty of a post! You really got me thinking about this issue...

As a compensation expert, do you feel that pay for performance plans can be saved by more strictly defined performance metrics and accompanying rewards? ie... Attaining a manufacturing defect rate of less than .01% earns a $1000 bonus... .001% earns a $2500 bonus etc.

I see the prevelance of the problem you described above, but I can't help but wonder if it's the concept of merit pay that is flawed or if it's the systems that organizations implement that are causing this problem.

-Chris Young


Thanks for the comment, and for featuring the post on your "Fab Five" this week. Readers, if you aren't already familiar with Chris' blog, Maximizing Possibility, be sure and check it out!


You ask some great questions. I do think that clear communication, up front, about what will be rewarded and how, is essential if we are looking for a reward plan to actually impact behavior and efforts. As in the example you provide. And, of course, we need to be VERY careful about what we choose to reward, ala the law of unintended consequences.

Merit pay - the attempt to reward performance by differentiating salary increase amounts - faces a myriad of challenges in today's organization, not the least of which is trying to do so with 3-4% salary increase budgets. And yet ... even in light of these difficulties, I still think there is merit in the concept of merit pay.

See more discussion in this earlier post on the "merits" of pay for performance:


Classical 'Tragedy of the Commons' may be solved by 'splitting' Common to small parts.

So, why not fix amount of money distributed by each unit manager?
When distributing fixed amount of money, unit manager would have no reason to increase average scores of his/her unit.

The amount or money for each unit (unit increasing program) may be calculate on base of:
1)'calculable outcomes' of unit work (if exists) - as Chris Young
2)unit work evaluation from the top management,
3)common % increase for each unit total salary summ.

Is this the Solution?

Ann - Thanks for the follow up and link to your previous post.

Your posts really bring to bear the complexity and nuances of compensation plans.

Thanks for the food for thought!


It is a worthwhile suggestion, and mirrors the relatively common approach of asking individual work units to adhere to a particular merit budget. While this keeps managers - in theory at least - from dipping into the collective pool of merit funds, it also relies on the assumption that performance is evenly distributed across all work units. In other words, it assumes that you won't have a group of relatively higher performers in one group and relatively lower performers in another - an assumption that gets trickier as work groups get smaller. My concern - are we setting up for some of the same issues as when we force performance distribution?



I agree - the same problem of distribution would arise 'one level higher' (problem to distribute scores and money between units).
We can construct all-level hierarchical 'feudal-like' structure from top to down: manager 'one-level-up' fixes 'increase amounts' distributed by managers 'one-level-down'. But it would be too tangled (and may give way to corruption).

The other way - to diminish using of 'evaluating by managers'.
We can use 'measurable' outcomes of unit and employee work instead.
And if we need evaluation - better using 'evaluation by inner clients' (those units/persons our unit make job for).

The third way - to improve manager culture.

Unfortunately all the ways are not easy :-)


Great and very thought provoking comments! And, I agree with your closing statement: If any of these were easy, I guess they would already be happening, right?

Thanks for lending your well-considered perspective to this!

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About The Author

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    Compensation consultant Ann Bares is the Managing Partner of Altura Consulting Group. Ann has more than 20 years of experience consulting with organizations in the areas of compensation and performance management.

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