This issue of Focus examines the changing shape of individual performance pay and the challenges it faces. Organisations are rethinking their approaches, but not abandoning the principle. Performance pay is as much about communication as about motivation, but the evidence suggests that employees are not receiving clear messages. There are also issues over how discretion is used in practice by managers, and the outcomes it produces, that go to the very heart of individualised performance rewards. In part that's because the labour market changes, and in part because organisations are evolving their schemes.
New approaches are in evidence, but many lessons from the past still apply.
If performance pay were itself to be subjected to appraisal, the rating would have probably declined from 'good' to 'less than satisfactory'. At any rate that is the impression that most commentators have given us over the past three or four years. It is not so long since there was talk of the complete individualisation of employment relationships with everyone on a personal contract and merit pay. Now there is a widespread view that individual performance pay has been tried and found wanting. In fact both these impressions are wide of the mark.