The Tribune

We have long toyed with the idea of merit-based pay as a means to increase productivity and efficiency in the workplace. Despite many years of throwing these thoughts around, and the cries from many businesses to adopt it, few have implemented incentive-based pay for employees.

It makes sense and sounds good. No one objects to giving a worker who takes initiative, and works the extra hours to ensure the project is successfully completed, more in salary than the warm bodies that generally populate corporate Bahamas. Our task today, though, is to weigh the benefits and problems we must think through as we take another look at merit-based pay.

The benefits are clear:

1. It encourages and motivates hard workers, rewarding them for their efforts and ultimately increasing productivity

2. It encourages some underachievers, who may be disengaged, to achieve more, ultimately increasing productivity

3. It helps an employer differentiate between the performance of high and low-performing employees

4. It allows an employer to differentiate between the performance of the company as a whole and the performance of an individual.

5. It forces businesses into taking performance management seriously, and to implement metrics that scientifically determine the value of each employee’s contribution

But with all bold business decisions, there are some drawbacks and potential roadblocks that the senior executive or business owner must consider. Let’s explore a few of them:

1. Despite merit-based pay, some employees will never engage, and if a company is not prepared to release an unproductive team member, the company will continue to be staffed with those who settle for doing the bare minimum.

2. No single performance instrument is foolproof and succinctly identifies the true value of the employee. The most desirable accomplishments and contributions are almost never measurable, so the manager or supervisor’s opinion remains a constant in determining merit pay.

For example, to award a teacher a greater level of pay because her students pass their exams may be viewed as folly, since any number of variables may have contributed to such as occurrence. The teacher may have inherited a class of overachievers, while the strong parental involvement at that particular school may be the controlling influence in the student’s overachievement.

It might be grossly unfair, then, to deny a teacher facing circumstances their merit pay, when their contributions may be as significant. I watch daily as we celebrate many in the public and private sector who are truly not as bright or talented as they are made out to be, but are simply dealt a hand that unquestionably - and perhaps deliberately - is more advantageous. In light of these realities, merit pay may not be the best option as it will lead to further frustrations and complaints of injustice.

1. Some might argue that the amount of time and energy that companies invest in an attempt to measure performance for merit-based pay, including developing competencies, measurements, base lines for performance and so forth, is better spent on delivering service for customers.

Whether we lean to the right or the left, there is no denying the fact that while the wheat and the chaff must grow together, what is good for the goose is not good for the gander. People must be compensated based on their value and worth at the time they give it (not years after or posthumously). Our job in business is to determine the most appropriate and intelligent way to make it happen.

• NB: Ian R. Ferguson is a talent management and organisational development consultant, having completed graduate studies with regional and international universities. He has served organsations, both locally and globally, providing relevant solutions to their business growth and development issues. He may be contacted at tcconsultants@coralwave.com.