Degeneration basically refers to the situation when pay and performance link is basically weakened or absent. The reason for this situation is when all the employees (referring to a particular department/ team) gets high rating and high incentive. After some time, that incentive does not motivate employees to give better performance than others because rating is linked to salary and all gets equal salary.
The reason for all the employees getting high rating cause rating drift.
The manager does not want to give low rating to under performers due to emotional connect or some other reason or the company is not performing well. In these situations, all the employees get above average rating.
If the incentive is linked to rating, all the employees will get good incentives. Due to absence of any distinguishing factor between the high performers and low performers’ rating and incentives, the high performers gradually becomes demotivated to perform well. Hence, the incentive or pay based on performance does not drive performance.
One of the major cause of degeneration is the inefficiency of the manager to conduct proper and unbiased performance appraisal.
If the manager is not monitoring performance properly, not monitoring on various parameters, feel uncomfortable during performance evaluation of low performers, depends upon third party, for example, peer review which can lead to screwing each other etc. all these can cause rating drift.
Other reasons for degeneration could be not proper system in place for performance appraisal or incentives are not good enough to generate high performance.
Degeneration could fixed by:
• Training of the managers at all levels to conduct proper performance appraisal
• Systematic linkage of performance and incentive
• Proper performance appraisal mechanism in place
• Rewards and recognition system
Example of Degeneration:
Manager named as Tony is looking after a team of 5 members. He is newly appointed manager of this team. 3 members of the team are good performers and motivated employees. 2 are under performers. The high performers are getting more pay than under performers due to pay-performance linkage system in the company. At the time of the appraisal this year, Tony feel uncomfortable in giving low rating to the 2 under performers and give them above average rating. In order to remove any parity, he gives above average rating to high performers also. Now after the appraisal is over, all are getting equal salary. It demotes the high performers as they see no point of working hard when they are getting same salary as under performers. This is called as Degeneration.
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