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Creating job standards for a merit pay plan.

Creating job standards for a merit pay plan

In the spring of 1984, the personnel department at our 670-bed university hospital told the laboratory technical and management staff that they would go on a merit-based pay system in three months' time. This announcement met with so many questions and so much concern from employees that the starting date was postponed a year.

In the meantime, the laboratory tackled the principal cause of concern. We developed the job or performance standards that would lay a rational foundation for the new pay system.

An initial draft was drawn mainly from the slender literature on standards. That underwent many transformations in successive drafts circulated for consideration by management, staff, and a review committee. For a major change to work, particularly one affecting salaries, the entire laboratory must participate in its development and implementation.

Creating the documents from scratch was a laborious, sometimes frustrating, task. But at least we eliminated some of the major problems seen in other departments that implemented merit pay without job standards. The pay system, by the way, is still being introduced by different departments at different university locations in the state.

In the first year, fewer than 10 of the approximately 300 laboratory employees evaluated on the performance standards were very displeased with their ratings and salary increases. One positive change: a tremendous improvement in cooperation during the second year. Attitude and interpersonal skills are emphasized in several of the standards.

The standards provide an objective basis--definitions of acceptable and outstanding levels of performance--for promotions and merit pay increases. By the same token, they describe work levels that are inadequate: a sound basis for firing unsatisfactory employees. And when conveyed with a list of duties, performance standards facilitate orientation of new employees.

Evaluations and supervisor-employee feedback are also made easier. Standards are no substitute for a supervisor's judgment of employee performance. But with standards, that judgment can be based on solid facts, not vague impressions and irrelevancies. Even the act of preparing standards is beneficial. The supervisor becomes better aware of employee duties and responsibilities.

Employees with well written performance standards generally need less coaching. If they realize they are not meeting the standards, however, they are more likely to consult their supervisor.

Finally, performance standards, if they are not too low or too high, present challenges that can improve morale and motivation.

Do you write a separate set of standards for a chemistry technologist versus a hematology technologist or can you use the same set of standards for all technologists? There are pros and cons to each approach. Standards prepared for individual job descriptions may be more specific and thus more objective. On the other hand, a group set of criteria can promote consistency, provided supervisors administer the standards in the same way. Our laboratory chose the latter approach, not only out of a desire for consistency but also because many on our alrge staff handle different functions--it would be too time-consuming to prepare individualized standards.

Whichever you choose, the steps in the writing process are the same. First, review the job description to make sure it is current, accurate, and complete. Then list all significant duties in the description and rank them by order of importance. This helps management and staff determine whether the description is still appropriate for the job; some duties may have changed or dwindled into insignificance.

Next, group related duties into four to six areas of responsibility. The categories we use are work quality, job knowledge, productivity, dependability/initiative/adaptability, attitude/interpersonal skills, and compliance with departmental/university policy.

The first three categories are technical and fairly concrete; the last three are more subjective. Standards dealing with attitude and interpersonal skills may be especially controversial because of subjectivity. But they address important work-related issues and can be very effective if carefully prepared, as demonstrated by the improved cooperation in our laboratory.

The final step is to develop performance standards for the key duties within the categories. Figure I, showing a slightly shortened version of the standards for technologists in our laboratory, has levels of acceptable, unacceptable, and outstanding performance for every duty. In the work quality category, for example, if the technologist nearly always produces accurate results, the evaluation rating is "meets standard"; if there are more than two documented instances of non-clerical errors (or some other reasonable number set by each laboratory division), the rating is "does not meet standard"; and if the technologist always produces accurate results or frequently helps prevent errors by others, the rating is "exceeds standard."

It would be simpler to define a minimum standard separating satisfactory from unsatisfactory performance. This pass/fail arrangement is of limited value in merit pay systems, however, because it does not indicate the upper range of performance.

Each standard must be defined in measurable terms. One way to differentiate between levels of performance uses percentage of time as a measurement. In other words, something may be acceptable if it is done 75 per cent of the time. Alternatively, ratings can be based on documented instances of compliance or noncompliance. The first approach requires a lot of monitoring by management. We chose the second, which depends on spot checking. Most laboratories engage in this supervisory Russian roulette; employees understand the rules of the game and know their risks are minimal if they perform well.

Whaths the test of a good standard? Here are the criteria we use:

* A good standard is linked to an important and specific responsibility. If failure to perform a function does not affect an employee's overall performance, the function probably does not warrant a standard. Moreover, the standard should deal with performance over which the employee has control; authority should match responsibility for the task.

* As noted, the standard should be objective and observable or measurable. It should define performance quality in terms of dollars, hours, task completions, etc.

* It must be based on expected results. Often a standard indicates how fast something must be done in terms of deadlines or turnaround time, and how well it must be done in terms of precision or accuracy.

* It should be challenging yet realistic, in order to provide motivation without damaging morale. If the standard will be applied to a large group, such as all technologists, it will probably cover new employees as well as 20-year veterans. Depending on the standard, it may be better to find a happy medium than to base expectations on Supertech.

* It must be understood and agreed upon by both employee and supervisor.

Documentation is vital when we apply the standards. Any rating of "does not meet standard" or "exceeds standard" must carry supporting evidence.

In this regard, anecdotal notes about a conversation between an employee and a supervisor, kept in the supervisor's file, are perfectly acceptable. An employee can ask to meet with the supervisor and review such notes.

Other forms of documentation include memos and letters sent to an employee with copies placed in his or her personnel file. These may be commendations or discussions of performance problems (counseling memos, for example).

The bottom line in our annual evaluations is a point score. An individual who exceeds a performance standard automatically gets 10 points for "meets standard" plus 5, 10, 15, or more points in the "exceeds" column. We often give employees several ways to exceed since different people have strengths in different areas.

Finally, the total amount of money budgeted for raises is distributed among employees according to how well they scored (points obtained as a percentage of points possible). The pot is divided up by computer. However, anyone who has received two or more counseling memos on the same issue or a warning letter during the evaluation period is not eligible for a raise that year.

We could build in a hedge against inflation by making cost of living adjustments across the board and then adding on merit bonuses. But this weakens a merit system's punch. The larger the spread of raises based on performance, the greater the motivation. This also assumes that funding for raises, including upper-range increases for top performers, will be available each year.

Usually the evaluations are conducted within a six-week period. The short time frae helps us be consistent and fair, but the stress level relted to completion of paperwork may be very high. Spreading the evaluations throughout the year (as in an anniversary date system) would relieve this tension--but make it harder to keep evaluations consistent. This approach may also require very careful budgeting to make sure enough money is left for end-of-the-year raises.

Even the best set of standards will need a yearly overhaul. We rely heavily on input from everyone in the laboratory for the revision. Not only does this contribute to the development of fair and realistic standards, but it also provides an opportunity for change and improvement.

Although developing and implementing performance standards are not easy tasks, they are well rewarded by the payoff in employee motivation. The example provided in this article may prove helpful, but each laboratory must in the final analysis develop its own standards.

More than 50 per cent of a lab's budget is salaries and benefits--people are your most important resource. Standards can maximize this resource to the benefit of both the lab and the employees.
COPYRIGHT 1986 Nelson Publishing
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Copyright 1986 Gale, Cengage Learning. All rights reserved.

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Author:Garcia, Lynne S.
Publication:Medical Laboratory Observer
Date:Oct 1, 1986
Words:1549
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