The Folly Of Merit Pay

The following is from an email being circulated within the negotiation committee.
Regarding merit pay, it should be noted that many management experts
completely discount the value of both merit pay and performance
reviews, some going so far as to say they are counterproductive to
the enterprise. Here are a couple of pieces that may be of interest:

Professor Channels W. Edwards Deming and Writes “Get Rid of the
Annual Review”
Manufacturing Business Technology
October 23, 2008

Excerpt: A UCLA professor, Samuel A. Culbert, has written a
monumental commentary in the Wall Street Journal. The subheadline
says it all succinctly: It destroys morale, kills teamwork and hurts
the bottom line. And that’s just for starters.

Performance without Appraisal
Part I: Pay, Promotion, and Improvement
by Esther Derby
4 Jun 2007

Excerpt: W. Edwards Deming identified performance appraisal as one of
the Seven Deadly Diseases of Management. Deming is clear and concise
in stating the negative effects of performance appraisals and merit
ratings: “It nourishes short-term performance, annihilates long-term
planning, builds fear, demolishes teamwork, nourishes rivalry and

Deming’s Point #12 as Applied to the Insurance Industry
January 2007

Excerpt: Here is a partial list of such barriers described by Dr.
Deming [Bracketed comments are mine]: […] Merit rating is a farce.
[Many organizations have abolished performance reviews because such
systems ultimately prove to be counterproductive with negative
outcomes. More on this below.]

The Folly of Merit Pay
By Alfie Kohn
Education Week
September 17, 2003

Mainly discusses teachers, but some good reading in the second half,
under “So why are pay-for-performance plans so reliably unsuccessful,
if not counterproductive?”

If management insists that the University proceed with performance
reviews and merit pay, they are clearly doing so for political, not
practical reasons. Since they are the highest paid people on campus
and represent the University’s face to the world, it stands to reason
that theirs are the most political positions. It therefore makes
sense for us to evaluate them as much as it does for them to evaluate
us. This could be done using some different review techniques,
including 360 degree feedback: