What is the distinction between meritocracy and pay for performance? 

By Daniel Parrillo

In its simplest terms, meritocracy means providing employees with better compensation and opportunities to advance as they do more for the company. Typically, meritocracy is referred to as pay for performance. Unfortunately, this misses the mark a bit, although there are very few resources for true meritocracies, other than case studies.

Setting goals and communicating them is a key to any successful organization, but the two most important components in true meritocracy are company culture and the efforts made to manage and recognize performance.

The company's culture is essential, since it is impractical to list every small goal. It is even more impractical to list the "extra" contributions a truly great staff member can make.

If a company has a culture of rewarding a job well done, its employees naturally will be more highly motivated. "Meritocratic" organizations most highly value those things that might never have been documented, but that trigger a revolution in how the company does what it does.

It is expected that people will to their jobs well. It is the "more than well done" effort that enables a company to truly fly. The highest performers at the highest-performing companies carry a sense of responsibility for moving their organizations forward. They hold themselves accountable for projects they start.

As for performance management, it doesn't matter whether you are running a fast-food restaurant, a professional baseball team or a high-tech firm. Attention to the small details, quick rewards for jobs well done, ability to be flexible when a staff member shows they are a star, and consultative discussions when they are doing poorly—these staples of performance management work in every environment. Most of your managers should be managing their people, not their businesses. If they have the right people and tools, the business will be managed fine by the staff.

A meritocracy is more than pay for performance. It is an understanding between the staff and management that high performance and the rewards for it are a foregone conclusion. This requires a great deal of communication and sincere dedication to the concept by management. It only works if you watch over it carefully like a flame in a breeze.

SOURCE: Dan Walter, Performensation Consulting, San Francisco, September 19, 2007.

LEARN MORE: Please read a Workforce Management article that explores the role merit recognition plays in recruiting and retaining top performers.

 Reference: University of Phoenix Online Class.  Instructor: Brenda VanderMeulen