Let’s start off with a quiz. Are the following statements true or false?
When pay must be reduced or frozen, there is little a company can do or say to reduce employee dissatisfaction and dysfunctional behaviors. (T/F?)
Most employees prefer to be paid on the basis of individual performance rather than on team or organizational performance. (T/F?)
Merit pay systems cause so many problems that companies without them tend to have higher performance than companies with them. (T/F?)
According to a review of the academic evidence by Rynes et al the answers are False, True, False.
What is interesting about all three questions is that even if you know the correct answer, you can probably make a pretty good argument for the other side. Evidence-based management tries to get us beyond the point where we are making good arguments based on our own opinions and instead base our discussions on the available data.
Weighing the value of the different types of evidence
Organizations are sufficiently complex that it’s rare for academic evidence, or any other kind, to be black and white. For example, if you were to ask employees the same questions posed at the outset, you will surely find some who prefer pay based on team rather than individual performance. The answers will vary depending on the nature of the work and how their corporate culture rewards performance.
The approach embraced by the evidence-based management community is to look at all the available evidence and then use that to make an informed judgement. So, of course, academic evidence is one factor to consider, however you will also consider data your own company has on employee attitudes toward reward, and the insights from your own experienced managers. Decisions are ultimately based on judgement; judgement should be informed by data.
Speaking of evidence, I’ll share a personal experience. One large retailer in my evidence-based management community of practice has done extensive studies on individual and team rewards. It found that in their environment individual rewards undermined store performance. This in-house evidence that specifically reflected what was happening in their company, outweighed the more general academic evidence leading the company to conclude that, in their business, team rewards were the way to go.
Considering evidence-based practices
One problem HR people confront is that managers have strong personal opinions about pay for performance. It is easy to fall into arguments on how to design a pay for performance plan where the argument just becomes one person’s opinion versus another’s—hardly a sound basis for HR policy. To the extent HR can marshal evidence from academic studies or their own in-house analytics on the effectiveness of different plan designs, they can turn an argument based on opinion, to a discussion based on facts.
Consider the first question again: When pay must be reduced or frozen, there is little a company can do or say to reduce employee dissatisfaction and dysfunctional behaviors. It is easy to imagine a manager believing this is true and acting accordingly. They may not be convinced by your exhortations that they talk to employees to explain the reasons. But, if you can show evidence that this type of communication actually works then they may be more willing to try.