At least here in Germany there has been a recent shift away from personal objectives in compensation. Some very big companies like Daimler, Bosch and Infineon have announced that they will abandon personal objectives in this context and only look at the overall result of the organization. (I am pretty certain that sales is exempt from that, though.) They will, of course, keep personal objectives as a tool for individual and career development, but there will be no more financial impact.
Personally, I think this is a move into the right direction for various reasons and would like to reflect on a few of them (in descending order of importance).
- Local optimization: This is the part of individual, financially relevant objectives that has by far the biggest impact. You have all seen it at work when different parts of the organization seem to fight each other. With the odd exception, they do not do that out of actual dislike but because it is needed for them to achieve their goals. One might think now, that in this case the goals just need to be adjusted. Well, not really. It is a major research topic in the field of systems theory and the boiled-down answer is that for a global optimum it is required that at least some sub-systems run below their local optimum. (For details see e.g. Systems theory and complexity: Part 3 by Kurt A. Richardson.) Besides, who in business would have the time to develop such an elaborate system?
- Employee demotivation: I have yet to meet someone who thinks that personal goals, which impact their salary, are a good and motivating thing. (There is also the fundamental point that motivation is by definition intrinsic, but this is another discussion.) The best you can hope for is a neutral judgement. However, the normal approach is that objectives trickle down through the hierarchy and the manager more or less gives the direct the same goals he or she got. I see two main problems here. First, if I get pretty much the same goal as my boss, how much influence do I still have to really control the result and by that my payment? Second, all of a sudden I have to deal with abstraction levels that are in a different “hemisphere” than my actual work. How does that fit?
- Time spent: If you as a manager are at least somewhat serious about giving your directs proper objectives and balancing your own financial outcome with their needs, you spend an enormous amount of time on this. You have to to be careful how to sell them their goal (which you first had to devise), discuss the details and make adjustments. And the real fun comes with “judgment day”. Be prepared for discussions that likely scar your relationship with the direct. And we also have all the administrative details around this, although I am least concerned about them.
So in total you probably know by now my position on the subject. I consider myself a highly motivated employee and love most of my work. So how can anyone assume that I do not throw all my energy behind what I am doing? And even if I did not do this, would an objective linked to money change anything? No, I would just play the system.
Let’s see if the companies mentioned at the beginning of this post are just the tip of the iceberg.