Supervisors Sabotage Merit Pay

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~DW YORK TIMES, Sunday, May 6, 1984
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WhereWeStand

. . byAlbertShanl~.Priz9denr. AmeliCon f~rolionol Teochers
It Does!l't Work ill Business, Says v.P.
SUllervisors Sabotage Merit Pay

"Merit pay systems tend to be divisive. There must be a simpler,.
fairer way." If you think this is the statement of a member of . the education establishment or a teacher union leader, you're wrong .. It's the position of a business executive, Edward Mandt, vice presi-1. dent for personnel at Maccabees Mutual Life Jnsurance Company' (Southfield, Michigan), in an article, "Who Is Superior and Who's Merely Very Good'r in the April issue of across tlae boart~, the
magazine of The Conference Board. .
Mand says, correctly, that the current debate over merit pay for teachers "assumes that business actually has a rational system of paying according to performance. The truth is business merely acts and talks as if it does." . .1
When businesses were relatively small, extra reward-ment . pay-was given (when the company was inakingmoney) on the
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basis of the personal knowledge and judgment of the top managers .. '''As businesses grew and became more complicated," Mandt says, "it' became impossible for top management to make sound decisions' about the worth of subordinates several rungs lower." This resulted in "objective" systems, evaluation manuals, etc., but, "Unfortun•ately, broad-based merit-pay programs simply do not work." .
Mandt cites other authorities who came to the saine conclusion as long as 30 years ago. One said, "Developing and implementing a merit-rating system, and making it work, is not an easy accomplish•ment; the skeletons of many systems that have failed and have been discarded are testimony to the fact that there are many pi1falls that the unwary (or even the wary!) can stumble into in the' process." Another expert reported, "Managers and employees in many com-. panies have come to dislike merit rating. In fact,. this dislike has reached the point in some organizations where'true merit rating has either undergone significant modification or has been completely
abandoned."

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One problem with merit rating is that as many as 80% of em-. ployees believe they are "above average" or higher. Merit rating will tell up to 40% that they are not nearly as good as t~ey think they are. ''To protect their self-esteem," says Mandt, "they will automatically
\ accuse the company, their bosses, and ibe system of bias." Mandt is not saying that everything is subjective, but merit. ratings are mostly opinion. "In any organization it is relatively easy to identify the extremes-what 'some writers have called the 'stars' and 'dogs.' So far as the rest of the organization is concerned, the best we can do is to make some very rough estimates. As a result, We create unnecessary stress and dissatisfaction when w~ try to make . salary adjustments based on imprecise and largely :mbjective evalua•tions, How can any supervisor be confident that the employee who is
• rated:satisfactory' is truly performing slightly below one who is rated 'above average'? And, even if he could, how can the organization be assured, that one supervisor's 'satisfactory' is equal to another's in' a different department? ... There's nothing wrong with my baving an opi(lion that one of my subordinates is doing a satisfactory job and' another performing at a sli!!htly above-average level. Where I'll get into trouble is wh~n I then decide to give one a S percent raise and the other 7 percent." . . '. . .
Mandt's most syrprising point is that merit pay plans don't work because "Nobody has faitl, ;11 them. Supervisors, in particular, ar~ disbelievers, and are continually undermtning the system. Let's face it, the typical competent supervisor is a teain builder and a team leader. He knows the strengths and limitations of his team. He also knows that it's dangerous to highlight any of the weaknesses in a fonnal performance appraisal if these will be reviewed by anyone else in connection with salary decisions." To maintain the support
, and loyalty of their teams, most supervi~ors wilt not follow merit guidelines established at the top level. 'Rather, they will fight for their own people, "negotiate" for them, give them higher ratings than the top brass called for. "What's important to remember," writes Mandt,
-""is that in this process the supervisors and their subordinates regard themselves as being outside the company. In effect, they are atl com•petitors in a game of Monopoly, scheming to .get as much as they can. It's not their money; it's the company's. If they fail, [supervisors) can alwllYs tell their subordinates that they did t~eir best and show the inflated ratings as proof." .
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i When it's all ~ver, if it comes to pass that one supervisor did a better job of delivering merit raises than another-the latter loses
. face. And the system falls into total disrepute when "it further turns out (as also invariably happens) that some of the 'winners' in the . game are not highly regarded by the 'losers.' "
In rejecting merit pay Mandt is not saying that it's atl hopeless and the quest for excellence must be abandoned. On the contrary, he supports setting up "a performance appraisal system that focuses on performance not pay." And, lie says, "it's critical to the plan tbat the company take an uncompromising stand with regard to poor per•formers. Poor performance mllst be quickly upgraded or terminated." Mandt outlines a compensation program which aims to attract com•petent personnel, to provide incentiyes for performance and for individual development and to recognize long service. His proposals deserve serious study, and his demolition of merit pay ought to settle the question once and for all. Of course, it won't-because even though it's unworkable, it's politically popular.
Individual copies of the April issue of across the board are available al $3 per copy from Publications Sales, The Conferend: Hoard, 845 Third Avenue, New York, N.Y. 10022.
CI 1~8. b, Ai~tn SIl,nhr.

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