Pay for Performance Doesn’t Work in the Corporate World, and It Won’t Help in Medicine Either

By Michelle Malay Carter on March 10, 2009 

Pay for Performance is a TrapI’ve talked at length about the dangers of pay for performance systems.? They end up driving all sorts of unintended behaviors.? Further,?they can lead to disengagement for your most highly principled employees.? We all know people who did everything right and did not meet their goals due to circumstances beyond their control.? Conversely, we all know people who have? made their numbers by pure luck.? Worse yet, some end up putting the organization in jeopardy in pursuit of making their numbers.

Instead of Measuring Outputs, Let’s Judge Effectiveness
Instead, managers must judge the effectiveness of their employees.??This is?a?huge part of?what we pay managers to do.??Try as we might, we cannot measure effectiveness.? It must be a judgment.? One piece of this judgment?should be?performance, but “performance” never tells the whole story.? One must assess performance in light of circumstances.

Pay for Performance in Medicine Does Not Drive Quality – Ripped from the Headlines
CHICAGO (Reuters) ? “Dangling a financial carrot in front of doctors as a way to improve health quality has changed the way some doctors practice medicine, but has yet to significantly improve quality and may be interfering with doctor-patient relationships, researchers said on Tuesday.”

“Physician groups are responding to pay-for-performance programs by making practice changes and altering how they compensate physicians to reward quality, but health plans and purchasers say that those investments are not yet translating into substantial gains in quality,” said Cheryl Damberg, a senior policy researcher at RAND, whose study appears in the journal Health Affairs.

Do We As Patients Want This?
Within a pay for performance medical system,?we?can all predict that there will be times and places where a physician’s doing the right thing for us as a patient will mean their taking a financial hit.? I hope and pray their personal character will overrule their desire for money, but shame on this system for making them choose!

I’m OK.? You’re OK.? Let’s fix the system.

Filed Under Accountability, Corporate Values, Employee Engagement, Felt Fair Compensation, Managerial Leadership, Organization Design, Requisite Organization, Strategy

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