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CAUT Bulletin Archives

March 2002

Merit Pay - A Bonus for the Employer?

Paul Handford
The notion of merit pay seems, at first glance, unassailable as a right and proper thing - a just recognition of imagination, skill and industry. This is the picture of merit systems that will make sense to many faculty, and the one which is usually pointed to by administrations seeking to justify them, usually couched in a framework of the "pursuit of excellence." But management will also be likely to see merit systems as pay-for-performance - providing a handy tool to boost productivity and penalize "poor" performance, allowing far-reaching control of the employee population and of the entire enterprise.

Evidence and reasoning suggest that in the end the balance of costs and benefits of merit pay systems can readily favour the management that administers "merit" more than it does the performers who display it in varying degrees. This seems especially likely to be true in organizations in which trust and co-operation are important factors in the proper functioning of the system, as is undoubtedly the case in academic institutions.

Does productivity need boosting? Is there a significant performance problem in universities? I am unaware of any empirical argument that even suggests, still less demonstrates, that universities have ever given anything but good value for money, whether in terms of research, of teaching, or of general contribution to the culture and economy, especially in the long view.

The need for an "output boost" is therefore a suspect rationale for merit pay schemes. Perhaps, then, enthusiasm for merit systems stems from some other source. This conclusion refers to universities in general, of course, and does not preclude variation among institutions, still less among individuals. But, of course, any population will inevitably show variation in anything measurable - it is not necessarily something to be wondered at or agonized over.

Still, it might be argued that the "productivity" of universities could be enhanced somehow so as to secure for society a still better dividend. Those persuaded of the "common sense" approach to the analysis of society might wish to apply accounting and reward systems to the academe so as to reap the benefits claimed to follow elsewhere. It could further be argued that inequities in productivity among and within institutions are important and should be addressed. This would represent a claim that merit pay systems might perhaps provide a necessary stimulus to urge less-productive institutions and individuals into greater productivity, thus elevating the aggregate output at the same time as discouraging or penalizing "free-riders."

This leads us to consider why people do the work they do - specifically, does the promise of extra remuneration offer a prospect of a more active and effective academic community? Do either or both of the quality and quantity of teaching or research correlate positively with moderate differences in rates of pay, independently of other factors? It may come as a surprise to learn that several students have concluded that the answer is, quite simply and clearly, no. As an example, Kohn1 reports: "according to numerous studies in laboratories, work places, classrooms and other settings, rewards typically undermine the very process they are intended to enhance. Individuals pursue their work because it is satisfying, joyful, and important. To the extent that a job is not fulfilling, additional incentives will not help ... In general, the more cognitive sophistication and open thinking that was required, the worse people performed when working for a reward."

The economic models that underlie performance-based pay schemes portray work as hard and aversive - implying that good performance can only be achieved by a system of sanctions and rewards. This picture of work should be utterly alien to all academics that see themselves as professionals following a calling, whose motivations lie in the joys of discovery and the satisfactions of scholarship.

Michael Skolnik2 offers this perspective from the U of T: "Merit pay's chief rationale is to provide an incentive to employees to work hard and produce, but there is room for doubt as to the applicability of this rationale in academe. Professors are strongly motivated by non-pecuniary factors - intrinsic satisfaction, recognition from peers, responsibility to students, etc. If these sources of motivation are very strong, then so long as a professor's salary is perceived to be approximately appropriate, he or she will expend considerable effort. If this is true, then so far as the incentive argument goes, the principal effect of merit pay is probably negative."

None of this is exactly encouraging for proponents of merit systems; it suggests their theoretical basis is questionable, particularly in so far as academic work is concerned.

But regardless of theoretical clarity, is there any empirical evidence that merit systems nevertheless do have a positive impact on output? Even in the world of business there is astonishingly little evidence that they are effective. Jeffrey Pfeffer,3 in a review of pay incentive schemes, notes that the evidence largely contradicts the "common sense" expectation that pay incentives boost output.

Overall, the impression from such surveys is that there is no good basis, either theoretical or empirical, for any expectation that levels of academic output will be positively related to levels of pay-differentials. Others have noted that performance-based pay plans generally share two attributes: they absorb vast amounts of time and resources, and they make almost everyone unhappy.

But it may be objected that such productivity stimuli are far from the primary point: merit schemes are, or should be, designed simply to give just recognition to outstanding contributions. This naturally sounds more sensible. But the question remains: Do merit systems actually work? Do they have a beneficial - or at least a neutral - effect on output? And do they have the effect of making employees content with their lot? To answer this, we must inquire into the costs and consequences of the implementation of a merit system.

Merit systems require assessment and accounting which absorb a lot of time and effort both on the part of faculty and administrators. A very clear message coming from faculty on many campuses concerns the irritation and dismay over the reporting load associated with performance assessment. This is compounded by the demoralization felt by many over the lack of trust implied by merit scrutiny. Academics generally are not primarily motivated by concern for monetary gain - accordingly, many resent their profession being degraded into "wage labour" by what feels like near-continuous assessment.

The merit dynamic will inevitably lead to ratcheting up expectations for - no matter how good we are - within our own units about half of us are inevitably, and always, below average. Since excellence is arbitrarily defined as a rarity in the calculus of most merit systems, regardless of any "absolute" value of accomplishment, many individuals will feel that their entirely creditable activities go unacknowledged or penalized as below average.

This naturally leads to disappointment and frustration, to add to the irritation at the time taken away from academic duties. The erosion of collegial relationships based in trust and respect can have insidious impacts on the professoriate as a whole, sapping energy, loosening dedication and solidarity of purpose, and taking away the simple joy of the academic life. There are ironies attendant on all this of course: while administrations laud the virtues of co-operative and interdisciplinary research initiatives, merit systems eat away at the collegial solidarity out of which such co-operation may grow.

Many are concerned that merit assessment systems will have a pernicious effect on the kind of research undertaken on university campuses, through favouring both quantity over quality and projects which attract big money support. Thus, the academic agenda can become driven by non-academic values and concerns. The other side of this coin is that merit and performance indices can be used to attack departments, faculties, and individuals which have been "exposed" as "substandard" in this spurious fashion. Such worries are of course exacerbated on a campus that enters extensively into involvement with the private sector.

Such are the sorts of immediate costs levied in the academic realm itself. But, as we have noted, merit systems generate monetary costs across the campus. Joy Calkin is reported to have said, when vice-president (academic) at the University of Calgary, that the entire cost in staff hours needed each year for the whole merit system was the equivalent of the salary of 12 mid-level full professors.

Despite all the foregoing, which should serve to temper at least the wilder enthusiasms for merit pay as an obvious, common sense, solution to a much oversold set of problems, we might reasonably return to ask: Shouldn't we still reward outstanding achievement?

Outstanding achievement should indeed be rewarded, though it is not immediately obvious what constitutes an appropriate nature of rewards or a suitable manner of their application. However it seems clear that most merit systems force a disparity in putative merit which is simply not reflective of a comparable disparity in performance. Most of us are much the same, when all is considered, with rather few of us standing clearly apart from the mass in any direction. To stretch us all across the broad rack of some global merit-assessment scheme is to risk all the negative consequences that merit systems have been shown capable of and gain few benefits, if any.

It is more reflective of reality to recognize outstanding performance in some sort of prize system. It is conventional that such prizes be represented by cash awards - though there is room for some imagination here. But it seems right and fair that such prizes only be applied topically, as and when deserved. By this I mean that special achievements made in any given period should be associated with that period alone and not automatically compounded in all years that follow. In other words, the proper way to acknowledge and reward special achievement is through stipends. It is easy to demonstrate that, where merit pay is built into base salary, professors who differ in nothing more than the timing of their notably meritorious performances may differ substantially in their lifetime earnings and pension; this completely unjustifiable inequity is removed by the use of prizes or stipends.

If the number of such prizes properly reflects the rarity of significantly outstanding contribution then their value could be really substantial, without compromising the fair remuneration of the majority of us who, pretty much every year, do the same good job. Such a scheme would serve a simple and clearly-definable purpose - the reward of undeniably exceptional contributions - making no claims about affording solutions to much more complex matters, such as recruitment or retention, as merit-pay is often purported to provide.

Rather than wasting time and resources on such doubtfully-effective and potentially costly exercises, university administrations would be better employed labouring to remove real constraints on our activities. Merit systems represent a prescriptive approach to the academic enterprise. But a university is more like an organism than a machine: it grows and changes in ways much closer to biological than to physical systems - by mutation and natural selection rather than by abstract analysis and prescription.

The functioning of real universities is as messy as life itself. As many ecologists have been realising, the very notion of management of such systems is often illusory, for the system is not even remotely deterministic in structure. There simply isn't just one description of a "good" professor, still less of a good campus mix. Most merit systems derive from, and are expressive of, the idea that there is only one way to be an academic. This notion should be resisted strenuously by any who care about diversity of ideas and practice in the academe.

Paul Handford is a professor of zoology at the University of Western Ontario and vice-president of the UWO Faculty Association.

1 Kohn, A. Why incentive plans cannot work! Harvard Educational Review 9/10 (1993): 45-63.

2 Skolnik, M. Merit by numbers. U of T Bulletin.

3 Pfeffer, J. Six dangerous myths about pay. Harvard Business Review (1998) v76, no.3, 109-111.

The views expressed are those of the author and not necessarily those of CAUT.