Performance related pay: hot air or industrial gas?

Abstract

This paper considers the operation of performance related pay (PRP) within two UK divisions of an industrial gases company. The more successful of these PRP schemes was introduced through partnership or ‘joint working’ between the trade union and management. However, even within this ‘forward thinking’ division, the reality of PRP fails to cohere with the rhetoric. This paper contends that the chasm owes to a combination of poor planning and informal local action. The methodology follows a critical case logic, with the inclusion of the exemplar division maximising the prospect that the reward system operates according to plan. From this division two lauded sub-units were selected - the best team from the south of England, and the corresponding highest performer in Scotland. Thus spatial diversity and the differential influence of local management can emerge. Data collection techniques included interviews with management, trade union leadership and employees, and open participant observation. Even in these recommended sites the original PRP rationale became muddied through myopic planning, self-serving action, and external forces. The scheme introduced under the banner of objectivity and openness was informally amended to allow subjectivity and stealth. In addition, front-line managers sought to reclaim local prerogative through the construction of discretionary bonuses. The shortcomings in the operation of PRP are however either obfuscated, or slow to emerge. Strong product markets shroud anomalies. Further, management has eschewed any rigorous evaluation of PRP. Much of the economic buoyancy has been attributed to the effective deployment of PRP. The data suggests that the role of PRP in the creation of value may be overstated