Staff Report 1982 No 18

Cover Staff Report 1982 No 18
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Merit pay works best at improving productivity when it is as directly connected to performance results as possible and performance appraisal motivates best when it is not used to directly decide pay issues.
POSSIBLE APPROACHES: Organizations have found that the two processes are compatible for jobs where results can be easily and precisely measured; for example, where results can be counted or timed. In these cases, merit pay can be tied directly to a measure of results and there is much less l
...ikelihood that the employee and supervisor will disagree about the level of performance.
In these types of jobs, incentive pay systems have worked well in im- proving both the productivity and the satisfaction of workers.
In other types of jobs where precise measurement of performance is more difficult, the two processes are not as compatible. Private companies often solve this problem by making individual pay decisions based on a wide variety of factors at a time other than the performance appraisal interview.


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