It's time to rethink what is recognised and rewarded in pay reviews, a management academic argues
Pay is one of the most sensitive topics in the workplace – often a point of tension in performance reviews or new hire negotiations. While recent data indicates that Australian employers are exceeding expectations with salary increases, there needs to be a major rethink of what is being measured and rewarded, a management academic argues.
Dr Joseph Carpini, senior lecturer in Management and Organisations at the University of Western Australia, believes it's time for a comprehensive review of how pay decisions are made – and it starts with redefining performance.
"People can deliver projects on time, they can deliver them at the right quality level – but getting a client to sign on the dotted line and decide to take up work with them, that’s a different story," Carpini told HRD. "Are we rewarding this person based on what they can control or are we looking at the things that we can’t guarantee to materialise?"
Traditional metrics that tie rewards to business outcomes can be misleading, Carpini argues. Evaluating employees based on results that depend on external factors – such as client decisions – can lead to unfair assessments.
Assessing staff on these uncertain outcomes is “very demotivating,” he explained. “Employees are being recognised for ‘probability of chance materialisation’ instead of the work behind the scenes – meaning performance shouldn’t be confused with business outcomes.”
Research from ELMO Software supports this disconnect. One-third of employees (34%) believe individual performance is the key factor in pay decisions, yet only 22% say their organisations prioritise it. Instead, 27% of businesses place greater emphasis on profitability.
The findings also show pay rise expectations by workers sit at around 4%, with the planned amount for renumeration sitting at 5% - meaning employers are effectively rewarding staff with what is expected. This, Carpini noted, is positive, but doesn't tell the whole story.
In modern, team-oriented work environments, collaboration and interpersonal dynamics are increasingly central to organisational success. Yet, they’re still rarely factored into pay reviews.
“We want to unlock the potential of our teams and that’s done through collaboration,” Carpini told HRD, “yet we’re still rewarding staff on an individual level – we’re ignoring the soft things that actually lubricate the organisation’s ability mechanisms.”
This view is echoed in academic research that finds that whilst collaboration can have a positive relation to performance evaluations and rewards, there isn’t much inclusion of a measure of a task or in-role behaviour.
“Task behaviour is much more important in determining lagged outcomes because ‘doing your job’ is what is most important and closest to the organization’s mission, whereas organisational…behaviour may not be as strongly coupled to such outcomes,” the research shows.
This, Carpini said, makes people more “self-centred,” especially if businesses only reward staff based on business outcomes – and not what they’re doing day-to-day.
“Workers are less helpful, and unfortunately, the people who are helpful get left behind. So, if your organization values collaboration, cooperation, and all these wonderful things that we like to talk about, then we need to make sure that your HR policy practices and systems, including your reward system, are aligned with this,” Carpini emphasised.
It was noted that the most important factor to consider for people managers is an organisation’s overall culture. It’s feeling comfortable, Carpini said, that makes conversations less of a taboo.
“Discussions about money can be quite confronting, but if you’re in an environment that is supportive these difficult conversations become easier. They also need to be completely separate from development discussions.”
“Sometimes HR leaders can squeeze both together – where you go from talking about wanting a raise to how you can professionally develop, that’s quite jarring. To unlock the potential of these conversations we need to educate ourselves on what’s reasonable,” Carpini added.
