In 1998, one of the leading and fastest growing manufacturing companies in Punjab introduced a self-declared attendance system. The directive from top management of the company was clear. It said, don’t bother whether a manager has attended office or not, or how many hours he has spent in his office/ plant. We will pay his salary based on self-certification. We will only bother about his performance, not his presence in the office.
It was a thrilling announcement which made all the employees happy and confused at the same time. Happy at the thought that now they don’t have to carry the burden of the ticking clock in their minds. But the employees were also confused, as the same question was echoing in all of their minds. If time is not punched, then on what grounds will our salary be computed?
The answer was clear when the organisation announced that at least 10 percent of the fixed salary will become variable, and will be paid on the basis of achievement of their KRAs (Key result areas of each one’s job).
Many organisations have started the concept of Variable Pay in varied percentage — 10 percent, 15 percent maximum 25 percent (which is rare).
Still, the concept of paying a fixed salary on the basis of time spent in office is prevalent across the organisations and in all sectors. Why? Because it is the easiest way to monitor and pay or something else.
What about measuring someone’s true performance? Is it difficult? Yes, it is difficult and that is why it is measured annually or half-yearly or at the best quarterly (again rarely).
Measuring performance is more difficult than measuring time but is the exercise worth the effort?
Measuring performance requires true leadership, as you need to set performance goals, provide support in achieving those goals, review, monitor and then reward based on the achievement of those set goals . So a leader has to be part of an individual’s performance, he should always be available to his team members.
This idea seems difficult/revolutionary to the majority of leaders. So they continue to pay based on time spent in office — and to show that they do take care of performance also, they add a little percentage of variable pay. Dil behlane ko Ghalib yeh khayal achchaa hai (The thought is enough to make you feel good).
You can’t bring laurels by continuing the traditional methods of getting the best out of your employees. It is important to review why something was started and whether it is fulfilling the purpose today. And only great leaders can get the best of people.