Who was it that talked about how to ruin motivation with pay? Frederick S. Hills digs hard into pay-for-performance programs in a striking excavation of the reasons why pay does not motivate performance. He examines the problematic effects of equity in pay (in terms of both internal wage structure and market surveys), the inflation factor, problems with the basic performance model, and the system of administration of merit pay systems in terms of the salaries of two hypothetical supervisors--one a high performer, the other a minimal performer. And while he raises a number of questions, he also leaves us with possible answers--which we can explore for ourselves. One result may well be significant changes in how organizations view their pay systems--and another may be the development of new approaches. One frequently recommended approach Hills espouses is the use of annual merit bonuses rather than annual merit increases. This way merit dollars can be made more effective.
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