Quantity vs. Quality Questions in using Quotas
There has been a long discussion about what does an organization, product or effort need to keep in focus: quantity versus quality. This all-baffling duality brings animosities, because it reflects different reasons, or rather, different facets of the same reason: how to get the maximum output in exchange for a certain input.
For economic reasons, the best equation that can be drawn suggests a maximum effect should be attained with as less input as necessary. This is the profit maximization axiom that governs all endeavors related to any form of trade, be it production or service.
At an individual level, productivity roughly translates into getting more accomplished, with an optimal amount of effort. Adepts of the fairness concept reward this optimal amount of effort, and their according goals, through various bonuses or incentive plans.
Ideally, this prompts performance to focus towards, and beyond goals, but as research shows, this can also be a hindrance. There are many undeniable positive effects, assigned to using rewards, bonuses, quotas and incentives for performance. For example skill-based pay has been found to determine quantitative increases in work effort, skill development, and motivation boosts at all organizational levels.
Albeit their utility for merit reward, performance measurement and motivation, the stimulating effect of quotas and their respective remuneration may differ and shift to an unfortunate negative. For example, Sarah Bonner, Reid Hastie, Geoffrey Sprinkle, and Mark Young posit, in their 2000 article, the type of task and the type of incentive scheme employed can change the efficacy of incentives.
This article does not refute the importance of performance-related incentives, or using quotas as a means of stimulating performance, but is more rather oriented towards raising awareness to the importance of employing them to get the maximum positive effect.
A recent debate about the newly instituted productivity quotas, at The Oregonian, brings forth some powerful, yet contrary, arguments to this discussion. For example, in a 2014 article, issued by Wharton, pros and cons for using quotas are being considered, with an emphasis on the possible negative outcomes, which entail: forfeiting quality, in order to achieve targets; the short-lived positive effect of using quotas; how they can have a ceiling effect on employee effort; and the “ratchet effect”, or how employees limit their effort after attaining an assigned goal. Among other negative effects, mark of misemploying compensation methods, we have the anchoring effect, according to a 2010 article, by Mason and Watts. As pointed out by Virginie Forest, in a 2009 article, negative effects of performance-related pay schemes persist within the public sector as well.
In their own right, a great means for stimulating performance, quotas become dangerous and debilitating, when miss-employed.
Applying quotas, compensation schemes and incentives, like any other measure, needs consideration and attention, given to variables that may affect their relevance and influence on the overall performance.
- Bonner, S. E., Hastie, R., Sprinkle, G. B. and\ Young, S. M. (2000), A review of the effects of financial incentives on performance in laboratory tasks: Implications for management accounting, Journal of Management Accounting Research, 12(1): 19-64
- Mason, W. and Watts, D. J. (2010), Financial incentives and the performance of crowds, ACM SigKDD Explorations Newsletter, 11(2): 100-108
- Forest, V. (2008), Performance-related pay and work motivation: Theoretical and empirical perspectives for the French civil service, International review of administrative sciences, 74(2):, 325-339
- Dierdorff, E. C. and Surface, E. A. (2008), If you pay for skills, will they learn? Skill change and maintenance under a skill-based pay system, Journal of Management, 34(4): 721-743
- Tosi, H. L., Werner, S., Katz, J. P. and Gomez-Mejia, L. R. (2000), How much does performance matter? A meta-analysis of CEO pay studies, Journal of Management, 26(2): 301-339
- Knowledge@Wharton, (2014), Productivity quotas: ‘You get what you pay for’