Recognition Wont Buy Bread

(Adopted from: Encounters in Organisational Behaviour: Problem Situation

Robert D. Joyce )

Mr. Suman Deshpande does not particularly like the performance appraisal and
merit increase system his company uses but he has to live with it. Neither much
better nor worse than most others, has it worked on the pool of money available
concept, for example:

If the total payroll for this fiscal year is one million rupees (and if business is
stable and cash available) a fixed percentage is established for merit increase for
the coming period. If this fixed percentage is five percent a pool of money is set
aside for salary increases amounting to Rs. 50,000.

In theory the supervisor is to reward the better producer with a large increase and
give the average worker only a nominal increase. The marginal employee should
receive no merit increase whatsoever. (*) However in practice, the situation is
often quite different. Faced with the five- percent rule, a supervisor such as Mr.
Deshpande finds that he cannot use his merit pool in a way, which will fully
reward the most competent performers. In practice, almost everyone gets some
merit increase to keep the complaints to a minimum.

Mr. Deshpande describes the inequalities of the merit review system as it operates
in his organisation and tells of other recent experiences:

Almost everyone has to get some kind of increase or you have a near rebellion on
your hands. I hate to admit it, but the average performer ends up getting the
average (five percent) merit increase. If the guy is a cut below average he gets 2-3
percent. Anything less than that and the man is insulted. So that leaves 7-8
percent for the top contributors. As a raise it is not bad, but its only 2-3 percent
more than Mr. Average, hardly an incentive for extra output!

The system really bothered me until I attended a short management seminar

which our company sponsored. Seventeen supervisors attended the programme,
which was conducted by some big name management consultant from India.

This consultant made a big issue out of the fact that we place far too much
emphasis on money and raises. He said that money does not motivate people.
Then he went on to list his findings on what did motivate people. I dont
remember the order exactly, but it was something like this:
_________________________________________________________________
_
* Cost of living increases are usually handled separately from merit increases
based on work performance and are given to all employees as a fixed percentage.
(e.g., 0.7 percent) regardless of actual performance on the job.

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Challenging Work
Interesting Work
Variety of Work
Freedom of Action
Responsibility
Sense of Accomplishment
Personal Growth and Development
Recognition
Friendly Co-workers
Good Working Conditions
Salary

Imagine: salary was at the bottom of the list. At first it was hard to believe, but
when I thought about it I could see that all of those other things were pretty
important too. Somehow I felt a little less concerned about merit review
limitations for later employees to the conclusion of the seminar.

The week after the seminar I reviewed the performance of one of my top people.
We use an anniversary date (from date of employment) to stagger reviews, and
this man had completed his full year with the company.

Remembering what I had learnt at the management seminar, I stressed the mans
contributions and made a special point of recognising his individual achievements
since he had been hired. Then we spoke of ways to enrich his job, to make it more
interesting and challenging. We even set objectives for the coming months and
yardsticks for measuring goal achievement. I was pretty proud of myself until we
got around to the specific amount of his merit increase.

He was really upset. Five Percent? He said. Is that all I am worth after all
those words about what a great job I have done? Save those fancy words for some
other guy recognition wont buy bread at my store.

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