As more HR leaders opt to scrap annual performance appraisals, many find themselves wondering how they will tie pay to performance. A better question might be whether they should link the two at all. As it turns out, assumptions about the correlation between pay and performance could be all wrong.
Let’s look at some common assumptions underlying pay-for-performance policies. Are they supported by evidence?
Assumption 1: Tying pay to performance is fair to workers. This idea seems straightforward enough: If one person provides more value to the organization than another, he or she should reap greater rewards. While that principle sounds easy to apply, in practice it isn’t.
