Finsec, New Zealand's finance sector union

Target-based pay is hurting finance workers

Target based is now a big part of today's workforce - particularly in the finance sector and call centres. Many workers now have financial rewards dangled in front of them in return for a commitment to reach or exceed targets set by their company. Employers argue that target pay leads to increased motivation.

Unions like Finsec have pointed out that target pay is often used to mask under-staffing, by encouraging people to work beyond their normal hours. Many target pay systems start to impinge upon people's work-life balance and generate stress. Most major finance companies have pay systems that compel their staff to continuously sell more and more products to customers. They set sales targets for their staff to meet if they are to receive the performance component of their pay. They then regularly revise those targets upwards so that more and more selling is required each year.

Research and Information on target pay

Alfie Kohn

Alfie Kohn, is a respected US academic who specializes in the field of motivation and incentives. He is the author of nine books, including Punished by Rewards: The Trouble with Gold Stars, Incentive Plans, A's, Praise, and Other Bribes

(1993), and No Contest: The Case Against Competition (1986). He has also written these three articles below strongly attacking performance pay:

For Best Results, Forget the Bonus (Alfie Kohn)

"...Incentives are basically rewards, and rewards work, don't they?
The answer, surprisingly, is mostly no. While rewards are effective at producing temporary compliance, they are strikingly ineffective at producing lasting changes in attitudes or behavior. The news gets worse. About two dozen studies from the field of social psychology conclusively show that people who expect to receive a reward do not perform as well as those who expect nothing..."

Another Look at Workplace Incentives (Alfie Kohn)

"...not a single controlled study has shown a long-term improvement in the quality of work as a result of any reward system. That would be an astonishing fact were it not for the existence of scores of studies ... that have demonstrated how rewards tend to be not merely ineffective but powerfully counterproductive..."

Challenging Behaviorist Dogma (Alfie Kohn)

"...My formula for how to pay people distills the best theory, research, and practice with which I am familiar into three short sentences: Pay people well. Pay people fairly. Then do everything possible to take money off people's minds. Notice that incentives, bonuses, pay-for-performance plans, and other reward systems violate the last principle by their very nature..."

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Lisa Haneberg

Lisa Haneberg is an American professional management and leadership consultant. Below are links to several of her weblog entries on why managers should scrap their performance appraisal systems and the merit pay that goes with them

Part 1 Scrap Performance Appraisals (Lisa Haneberg)

"...Most people in their heart know that appraisals don't work, but the question is always what to do instead. The purpose of this series is to explore the “scrap appraisals” point of view and the potential alternatives..."

Part 2 Scrap Performance Appraisals (Lisa Haneberg)

"...This whole performance appraisal thing is a sad farce (and hellaciously damaging). HR managers feel like pushers, managers can get so scared or passive aggressive they become tyrannical or wimpy (I have actually seen one person be both), employees tune out most of the conversation and do and say whatever it takes to GET THE CONVERSATION DONE AND OVER WITH..."

Part 3 Scrap Performance Appraisals (Lisa Haneberg)

"...If you have a system that is damaging and everyone hates, why do you need a replacement? Why not just stop? Surely stopping the appraisal process would be helpful and a huge relief. I don’t think we need an alternative to appraisals to discontinue their use..."

Part 4 Scrap Performance Appraisals (Lisa Haneberg)

"...Ahhh, yes, what to do about pay. Many people use this inadequate system to determine pay increases (merit, rankings, ratings, forced curves, and other schemes). Some of you have already separated pay from performance appraisals, and congratulations if you have..."

Part 5 Scrap Performance Appraisals (Lisa Haneberg)

'...Bottom line: Pay well and based on the job. Save the money you would use for incentives and rewards and hire and train better managers and leaders who will create an environment in which people want to work and grow...'

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Fred Nickols

Yeap, here's another US based management consultant and another person writing for managers rather than workers. Fred Nickols interests include performance, productivity and work systems.

Don't Redesign Your Company's Performance Appraisal System, Scrap It! (Fred Nickols)

"...If you’re a change-minded senior executive looking for ways to improve performance, cut costs, or free up resources ... you might give serious thought to scrapping your company’s performance appraisal system. It devours staggering amounts of time and energy, it depresses and demotivates people, it destroys trust and teamwork and, adding insult to injury, it delivers little demonstrable value at great cost..."

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Campaign resources to help end target pay

Westpac 'I will not be the target of targets' 2005 poster (large pdf 909kb)
Research shows BNZ targets cause dangerous levels of workplace stress
BNZ Danger Zone poster for tearooms (jpeg 180kb)
A4 poster on stress and targets in the BNZ (jpeg 190kb)
Submission to BNZ showing targets cause workplace stress

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