March 26, 2007
Publix Pays for Performance
Publix is all about performance and that’s why customers love it.
Most of the company’s store-level employees are also quite happy as 77 percent of them were rewarded with raises last month for meeting or exceeding performance goals. Of course, the remaining workers who either stayed at the same rate of pay (19 percent) or had it cut (four percent) may be considerably less than happy.
The Publix system rates employees on a numerical basis in 21 different areas. The rating is then matched up against expected numerical performance numbers based on position. If the employee exceeds the standard of performance, then they receive a raise. Superior performance could lead an hourly employee to receive pay raises two or three times a year with an increase of up to $1/hour when all is said and done.
“We want a customer experience the customer deserves and expects at Publix, so we are rewarding people for hard work while increasing what we pay overall,” Shannon Patten, spokesperson for Publix, told the St. Petersburg Times. “But some associates face a decrease if their performance slips.”
The pay-for-performance system has not always been in effect at Publix and some believe it will ultimately prove counterproductive.
“I’ve never seen a pay-for-performance plan that works because it brings the top-performing lions out to feed on everybody else,” said Terri Kabachnick, a retail human resources consultant and author of I Quit but I Forgot to Tell You. “It’s worse in supermarkets where people don’t control outcomes. Their day is ‘go here, go there, clean up this spill.’ If you don’t get along with the manager, forget it.”
Wal-Mart made news with performance bonuses it handed out to store employees last week. The company said it gave $528.9 million in bonuses to 80 percent of hourly employees working in Wal-Mart and Sam’s locations. While associates receiving raises were pleased with the extra money, there are still a number who remain upset over the company’s decision last summer to place caps on hourly worker wages based on a job pay scale.
Discussion Question: Does pay-for-performance at the store-level create superior results or does it ultimately lead to an atmosphere of conflict within the organization? Is there validity to the claim that pay-for-performance programs are a type of misdirection strategy that is used by companies to reduce the amount of wages paid out?
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Isn’t pay already supposed to be for performance?
Interesting commentary so far. However, most seem to imply that ‘pay-for-performance’ is the only people system in play. Recruiting, selection, training, formal counseling, real-time feedback, scheduling, upward communications vehicles are just a few of the other people factors that can help improve (or detract from) performance. Likewise, giving people the appropriate tools (e.g. responsive merchandising and supply chain systems, facilities and equipment, I/T systems) have meaningful impacts.
My guess (and it is a guess) is that Publix has considered many of these factors in their evaluation of whether or not pay-for-performance makes sense for the individual members of their store teams.
I find Mr O’Connor’s (the Publix bagger who was docked $.25/hr) quote to be interesting. He says he doesn’t know what he can do to improve yet very specific examples of what could improve his performance were apparently provided to him. Maybe that’s an indicator of why he ‘needs improvement.’
Finally, the comments of the HR consultant and the Professor of Retailing seem a tad off the mark. Store Managers and Store Directors in busy high volume stores with hundreds of employees take a real-world PhD in human behavior and motivation every moment they’re in the building (and many moments when they’re not). They deserve better than to be patronized as being not very sophisticated.
Wow! I’ve got to hand it to the “R guys” (Race and Ryan) today on this one. Yes, pay if supposed to be for performance. But the fine point Race puts on it is “what performance?” There’s a reasonable argument that base pay is for what the organization requires you to do and incentive pay is for what you do to improve the company’s performance above and beyond that. But the issue with incentive is, in fact, how much control the employee has over the measure. And it can backfire, even with the right measures identified.
Here’s an example from our own experience. Suppose the organization has incentive pay based 50% on company performance, 30% on small team performance and 20% on individual goals. Inevitably, people will focus on accomplishing their individual goals first, without regard to the effect that might have on the larger portions of their bonus potential, because they perceive the individual goals to be the ones they have the most influence over. And the lower you go into the organization, the greater this tendency as employees’ perception of how much influence they have on the organization diminishes. This makes the issue of “aligning goals” of paramount importance.
“Publix Makes Another Move to Stay in Front” should be what the title reads.
Yes, pay for performance is the right move to make if you want to stay in front of the competition. A willingness to challenge the status quo is always something that Publix has been willing to do and this is what has kept it in front of the competition. You have to remember that Publix not only remains one of the best places to shop in its market but it also ranks as one of the best places to work.
Not only are they willing to pay for performance but they are willing to train and manage to help people preform. In the the long run, their system will attract the kind of people that want to work within the system they have developed and that are the kind of people who will be engaged and deliver the kind of experience Publix wants to deliver.
Remember “If you beat your competition to the best employees, your best employees will help you beat your competition.”
Check out Ms.Kabachnick’s web site. She is a consultant and motivational speaker. I wonder if she still gets paid if she doesn’t work as hard? “It’s worse in supermarkets where people don’t control outcomes.” Really? Ask any retailer how much a rude cashier will cost them. “If you don’t get along with the manager, forget it.” I wonder how many people would hire her as a consultant that she didn’t get along with?
This isn’t a new idea or means to secure the ultimate in performance.
Ralston used it a number of years ago to reward divisions’ management for growth and in turn, the stock split 5 times in 12 years. Then the company was sold and everyone with stock won.
The only way such an incentive goes awry is when the levels of reward are disproportionate–from CEO to middle management.
Hurt what? What built G.E.? What built Toyota? Dedication, smarts and strategic thinking as compared to its competition.
Oh yes, the brands’ equity and ongoing marketing support!
Hmmmmmmmmmmmmm
PFP is a standard in the business world, and should become one in retailing. It is easy to apply, and when combined with a true goal measurement system (along with a 360 degree feedback loop) can mean outstanding performance, clearly defined individual and corporate goals, along with realistic, achievable and measurable goals that each person is evaluated with. This system demands objectives that a clearly communicated up and down the organization, which helps clarify corporate goals and achievements as well. PFP is a strong and powerful individual growth tool, as well as a great corporate communication vehicle. It is time that all retailers start to use this as one of their reward systems throughout their organization.
Bravo to David Livingston and others for seeing what the article so clearly tried to prevent–that this is a rewards system. I’m not sure what “seniority” system the article is talking about, since there is not one at Publix. But that does not seem to matter because clearly the article is poorly researched, and the title says it all. It’s humorous that anyone would think the “High Performers” are the ones getting pay reductions. I doubt those 4% are really the “High Performers.”
It’s pathetic that people read [what] Mr. Albright writes and take it to mean that a company that has been recognized as one of the top 100 in America to work for 10 years in a row is actively seeking to cause detriment to its associates.
I’ve worked with this pay system over one year and I don’t see too many people getting pay reductions. I also don’t look to hire “average” performers.
I’d suggest Mr. Albright write his next article on the glories of associates in a company with a seniority system that nickel and dime their way to top pay and don’t do anything at work. That seems to be what he thinks people should aspire for. Judging from the comments and his article, pay and raises are entitlements, not compensation.
Pay for performance, in theory, is a great idea. If the goals are clearly defined and the employee has control of whether or not he/she achieves the goal; it can be excellent. If the employee can be prevented from attaining the goal by a store manager, then it is doomed. There needs to be both an individual goal and a team or store goal.
Pay for performance must have two aspects to succeed; an individual component and a team component. Having only an individual component may result in counterproductive competition with erosion of camaraderie.
Pay for performance is good for individuals who have the necessary training and qualifications to do the job they are assigned to do. For many, pay for performance becomes discouraging as they can not perform and that leads to poor morale. The management must have willingness and desire to deal with such individuals.
The bottom line is, you can not just have a pay for performance system in place without proper preparations, i.e., (having a square peg in a square hole) and administrative support structure.
It’s not clear that the Wal-Mart and Publix pay for performance raises and bonus are based on objective measures. Certain activities can be measured objectively (scores on mystery shopping, cashier accuracy, sales trends) and some tend to be measured subjectively (courtesy, leadership, initiative).
It certainly motivates employees if they feel their performance is being measured and rewarded. However, the effectiveness of a “Pay For Performance” scheme depends on the goals, structure, and measurement standards.
If the goal is to generate more sales, it may be difficult for store level employees to have a real, measurable impact and be rewarded accordingly. If the goal is to improve the customer shopping experience, the guy who works the loading dock may have difficulty showing an impact.
It sounds like the Publix formula is more of a generalized performance evaluation and not pay based on some specific performance contribution. Therefore, it is subject to the key issue of subjective measurement (i.e., does your boss really like you?).
That said, it would still seem to be an improvement over the traditional employee review that is often judgmental and devoid of specific evaluation.
As is true with any “policy” it is wholly dependent upon the quality of those who “administrate” them.
Pay for performance (PFP) is unarguably a win-win approach to business and one that any results minded person or company wants to see work. Companies largely want to retain and reward their top performers, some of the recent press to the contrary.
Failure in PFP schemes can come about when the interests of individuals (managers) come at the expense of those whom they lead.
All goals should roll up to the next level of management so that failure at one level impacts the next level up. Additionally, a solid HR team who can assist leadership at corporate and store level in the implementation of these goals is critical to keeping the process on track.
A good policy requires good policing to ensure its effectiveness.
Pay for performance works well if, just like anything else, you implement it well and manage the process. Pay for performance has the ability to weed out non-productive people from the get go. If you set the expectations upon hiring, the person that is traditionally the 60% person will tear up their application. People that want to “just get by” and draw a paycheck are not exactly the types of employees that a company wants anyway. Team performance has failed in many areas because companies tend to put a highly productive person with one or more that just want to get by. Frustrated, the highly productive person will usually quit or slow down because they will get tired of doing others’ work. Individual pay for performance is more equitable. If an employee doesn’t like another getting a bonus, the HR person can just say, you can too, just earn it!
Some companies use a different model for pay for performance; this slant is, “get your work done and you work 4 days instead of 5.” Therefore, associates work twice as hard so they get the extra day off.
More companies should use customer-focused metrics to determine pay and performance. That way, the associate’s priority is always on the customer’s experience. Without this focus, associates can get so wrapped up in ordering, stocking, and “running the store” that they can forget it’s all about the customer.
Based on Publix’s consistently high customer satisfaction ratings, they must be doing something right that others can learn from.
I wouldn’t be surprised if there are many respondents today who loudly cheer the idea of pay-for-performance. But I will repeat what I said a few days ago: “If Behaviorism were a religion, business people would be fundamentalists because it is such a widely accepted practice to reward people for what you want them to do and to punish them for what you don’t–bonuses, incentive pay, evaluation, write-ups, and on and on. The failures of this primitive scheme are well documented, yet, not surprisingly, the business world seems to consider challenges to it absurd.”
Obviously, the Publix system will create huge amounts of conflict, as people are punished while others are rewarded–and all for things they don’t really have any control over.
I believe we are under the mis-impression that people control themselves and their work within business organizations. This statement may be another in the category of “Race is nuts.” But please keep an open mind: we have literally thousands of pages of data showing that people in organizations, and the organization itself, are actually controlled by something called the Master System. Here is an example of what I’m talking about: How many of us act at work exactly the way we act at home, or the way we act when we are out with friends? Then how many of us like how we behave at work? And how many of us are able to change that behavior?
I rest my case.
Obviously the Publix pay-for-performance strategy works and works well. Publix totally dominates the Florida market with about 40% share. Their sales per square foot far exceed all of their major competitors. If someone wants to say Publix is doing it all wrong, I’m sure Publix will be amused. I say it works because it brings out the top performing lions to feed on everyone else. It reduces labor costs because the stores are not over-staffed with goof-offs. Go to any Publix store, seek out a 20 year veteran and ask them what they think. You will probably get a 30 minute pro-Publix speech.
For someone to say people who work in a supermarket don’t control the outcome is just naive. What else should be expected from a “human resource” consultant? There used to be a name for people who were against pay-for-performance. I think we called them Communists.
Sounds like a good idea for the most part but fails to be a cure-all as it does create conflict and an atmosphere of entitlement. Good customer service and the desire to perform well overall should be a part of the job description and what everyone should strive for regardless of the compensation aspects with pay for performance. There needs to be two buckets; one is your regular compensation and a bonus or raise that compensates for meeting or exceeding goals. The trick is not creating an atmosphere where employees don’t want to ever do anything above and beyond the minimum unless they are compensated for it. That leads to an unproductive relationship between management and workers and the customer ends up suffering.
It would seem that the author and consultants quoted in this article represent all that is bad with journalism and politics. For goodness sake, don’t take the time to research anything. You must be getting paid by the word. Sooner or later content will triumph over bluster. But stand aside and let this consultant blow!
A pay-for-performance program that is designed and implemented properly will work. However, the plan should be designed to reward the entire store team, not individuals. Employees will apply peer pressure to other employees that are underperforming and limiting their ability to reach the rewards of the program.
Some pay-for-performance programs may be used to reduce the amount of wages paid out, however, the retailer will ultimately pay the price for not taking care of their employees. Some retailers just need to look at Costco’s success with their employees to understand the rewards of taking care of their employees.
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Isn’t pay already supposed to be for performance?
Interesting commentary so far. However, most seem to imply that ‘pay-for-performance’ is the only people system in play. Recruiting, selection, training, formal counseling, real-time feedback, scheduling, upward communications vehicles are just a few of the other people factors that can help improve (or detract from) performance. Likewise, giving people the appropriate tools (e.g. responsive merchandising and supply chain systems, facilities and equipment, I/T systems) have meaningful impacts.
My guess (and it is a guess) is that Publix has considered many of these factors in their evaluation of whether or not pay-for-performance makes sense for the individual members of their store teams.
I find Mr O’Connor’s (the Publix bagger who was docked $.25/hr) quote to be interesting. He says he doesn’t know what he can do to improve yet very specific examples of what could improve his performance were apparently provided to him. Maybe that’s an indicator of why he ‘needs improvement.’
Finally, the comments of the HR consultant and the Professor of Retailing seem a tad off the mark. Store Managers and Store Directors in busy high volume stores with hundreds of employees take a real-world PhD in human behavior and motivation every moment they’re in the building (and many moments when they’re not). They deserve better than to be patronized as being not very sophisticated.
Wow! I’ve got to hand it to the “R guys” (Race and Ryan) today on this one. Yes, pay if supposed to be for performance. But the fine point Race puts on it is “what performance?” There’s a reasonable argument that base pay is for what the organization requires you to do and incentive pay is for what you do to improve the company’s performance above and beyond that. But the issue with incentive is, in fact, how much control the employee has over the measure. And it can backfire, even with the right measures identified.
Here’s an example from our own experience. Suppose the organization has incentive pay based 50% on company performance, 30% on small team performance and 20% on individual goals. Inevitably, people will focus on accomplishing their individual goals first, without regard to the effect that might have on the larger portions of their bonus potential, because they perceive the individual goals to be the ones they have the most influence over. And the lower you go into the organization, the greater this tendency as employees’ perception of how much influence they have on the organization diminishes. This makes the issue of “aligning goals” of paramount importance.
“Publix Makes Another Move to Stay in Front” should be what the title reads.
Yes, pay for performance is the right move to make if you want to stay in front of the competition. A willingness to challenge the status quo is always something that Publix has been willing to do and this is what has kept it in front of the competition. You have to remember that Publix not only remains one of the best places to shop in its market but it also ranks as one of the best places to work.
Not only are they willing to pay for performance but they are willing to train and manage to help people preform. In the the long run, their system will attract the kind of people that want to work within the system they have developed and that are the kind of people who will be engaged and deliver the kind of experience Publix wants to deliver.
Remember “If you beat your competition to the best employees, your best employees will help you beat your competition.”
Check out Ms.Kabachnick’s web site. She is a consultant and motivational speaker. I wonder if she still gets paid if she doesn’t work as hard? “It’s worse in supermarkets where people don’t control outcomes.” Really? Ask any retailer how much a rude cashier will cost them. “If you don’t get along with the manager, forget it.” I wonder how many people would hire her as a consultant that she didn’t get along with?
This isn’t a new idea or means to secure the ultimate in performance.
Ralston used it a number of years ago to reward divisions’ management for growth and in turn, the stock split 5 times in 12 years. Then the company was sold and everyone with stock won.
The only way such an incentive goes awry is when the levels of reward are disproportionate–from CEO to middle management.
Hurt what? What built G.E.? What built Toyota? Dedication, smarts and strategic thinking as compared to its competition.
Oh yes, the brands’ equity and ongoing marketing support!
Hmmmmmmmmmmmmm
PFP is a standard in the business world, and should become one in retailing. It is easy to apply, and when combined with a true goal measurement system (along with a 360 degree feedback loop) can mean outstanding performance, clearly defined individual and corporate goals, along with realistic, achievable and measurable goals that each person is evaluated with. This system demands objectives that a clearly communicated up and down the organization, which helps clarify corporate goals and achievements as well. PFP is a strong and powerful individual growth tool, as well as a great corporate communication vehicle. It is time that all retailers start to use this as one of their reward systems throughout their organization.
Bravo to David Livingston and others for seeing what the article so clearly tried to prevent–that this is a rewards system. I’m not sure what “seniority” system the article is talking about, since there is not one at Publix. But that does not seem to matter because clearly the article is poorly researched, and the title says it all. It’s humorous that anyone would think the “High Performers” are the ones getting pay reductions. I doubt those 4% are really the “High Performers.”
It’s pathetic that people read [what] Mr. Albright writes and take it to mean that a company that has been recognized as one of the top 100 in America to work for 10 years in a row is actively seeking to cause detriment to its associates.
I’ve worked with this pay system over one year and I don’t see too many people getting pay reductions. I also don’t look to hire “average” performers.
I’d suggest Mr. Albright write his next article on the glories of associates in a company with a seniority system that nickel and dime their way to top pay and don’t do anything at work. That seems to be what he thinks people should aspire for. Judging from the comments and his article, pay and raises are entitlements, not compensation.
Pay for performance, in theory, is a great idea. If the goals are clearly defined and the employee has control of whether or not he/she achieves the goal; it can be excellent. If the employee can be prevented from attaining the goal by a store manager, then it is doomed. There needs to be both an individual goal and a team or store goal.
Pay for performance must have two aspects to succeed; an individual component and a team component. Having only an individual component may result in counterproductive competition with erosion of camaraderie.
Pay for performance is good for individuals who have the necessary training and qualifications to do the job they are assigned to do. For many, pay for performance becomes discouraging as they can not perform and that leads to poor morale. The management must have willingness and desire to deal with such individuals.
The bottom line is, you can not just have a pay for performance system in place without proper preparations, i.e., (having a square peg in a square hole) and administrative support structure.
It’s not clear that the Wal-Mart and Publix pay for performance raises and bonus are based on objective measures. Certain activities can be measured objectively (scores on mystery shopping, cashier accuracy, sales trends) and some tend to be measured subjectively (courtesy, leadership, initiative).
It certainly motivates employees if they feel their performance is being measured and rewarded. However, the effectiveness of a “Pay For Performance” scheme depends on the goals, structure, and measurement standards.
If the goal is to generate more sales, it may be difficult for store level employees to have a real, measurable impact and be rewarded accordingly. If the goal is to improve the customer shopping experience, the guy who works the loading dock may have difficulty showing an impact.
It sounds like the Publix formula is more of a generalized performance evaluation and not pay based on some specific performance contribution. Therefore, it is subject to the key issue of subjective measurement (i.e., does your boss really like you?).
That said, it would still seem to be an improvement over the traditional employee review that is often judgmental and devoid of specific evaluation.
As is true with any “policy” it is wholly dependent upon the quality of those who “administrate” them.
Pay for performance (PFP) is unarguably a win-win approach to business and one that any results minded person or company wants to see work. Companies largely want to retain and reward their top performers, some of the recent press to the contrary.
Failure in PFP schemes can come about when the interests of individuals (managers) come at the expense of those whom they lead.
All goals should roll up to the next level of management so that failure at one level impacts the next level up. Additionally, a solid HR team who can assist leadership at corporate and store level in the implementation of these goals is critical to keeping the process on track.
A good policy requires good policing to ensure its effectiveness.
Pay for performance works well if, just like anything else, you implement it well and manage the process. Pay for performance has the ability to weed out non-productive people from the get go. If you set the expectations upon hiring, the person that is traditionally the 60% person will tear up their application. People that want to “just get by” and draw a paycheck are not exactly the types of employees that a company wants anyway. Team performance has failed in many areas because companies tend to put a highly productive person with one or more that just want to get by. Frustrated, the highly productive person will usually quit or slow down because they will get tired of doing others’ work. Individual pay for performance is more equitable. If an employee doesn’t like another getting a bonus, the HR person can just say, you can too, just earn it!
Some companies use a different model for pay for performance; this slant is, “get your work done and you work 4 days instead of 5.” Therefore, associates work twice as hard so they get the extra day off.
More companies should use customer-focused metrics to determine pay and performance. That way, the associate’s priority is always on the customer’s experience. Without this focus, associates can get so wrapped up in ordering, stocking, and “running the store” that they can forget it’s all about the customer.
Based on Publix’s consistently high customer satisfaction ratings, they must be doing something right that others can learn from.
I wouldn’t be surprised if there are many respondents today who loudly cheer the idea of pay-for-performance. But I will repeat what I said a few days ago: “If Behaviorism were a religion, business people would be fundamentalists because it is such a widely accepted practice to reward people for what you want them to do and to punish them for what you don’t–bonuses, incentive pay, evaluation, write-ups, and on and on. The failures of this primitive scheme are well documented, yet, not surprisingly, the business world seems to consider challenges to it absurd.”
Obviously, the Publix system will create huge amounts of conflict, as people are punished while others are rewarded–and all for things they don’t really have any control over.
I believe we are under the mis-impression that people control themselves and their work within business organizations. This statement may be another in the category of “Race is nuts.” But please keep an open mind: we have literally thousands of pages of data showing that people in organizations, and the organization itself, are actually controlled by something called the Master System. Here is an example of what I’m talking about: How many of us act at work exactly the way we act at home, or the way we act when we are out with friends? Then how many of us like how we behave at work? And how many of us are able to change that behavior?
I rest my case.
Obviously the Publix pay-for-performance strategy works and works well. Publix totally dominates the Florida market with about 40% share. Their sales per square foot far exceed all of their major competitors. If someone wants to say Publix is doing it all wrong, I’m sure Publix will be amused. I say it works because it brings out the top performing lions to feed on everyone else. It reduces labor costs because the stores are not over-staffed with goof-offs. Go to any Publix store, seek out a 20 year veteran and ask them what they think. You will probably get a 30 minute pro-Publix speech.
For someone to say people who work in a supermarket don’t control the outcome is just naive. What else should be expected from a “human resource” consultant? There used to be a name for people who were against pay-for-performance. I think we called them Communists.
Sounds like a good idea for the most part but fails to be a cure-all as it does create conflict and an atmosphere of entitlement. Good customer service and the desire to perform well overall should be a part of the job description and what everyone should strive for regardless of the compensation aspects with pay for performance. There needs to be two buckets; one is your regular compensation and a bonus or raise that compensates for meeting or exceeding goals. The trick is not creating an atmosphere where employees don’t want to ever do anything above and beyond the minimum unless they are compensated for it. That leads to an unproductive relationship between management and workers and the customer ends up suffering.
It would seem that the author and consultants quoted in this article represent all that is bad with journalism and politics. For goodness sake, don’t take the time to research anything. You must be getting paid by the word. Sooner or later content will triumph over bluster. But stand aside and let this consultant blow!
A pay-for-performance program that is designed and implemented properly will work. However, the plan should be designed to reward the entire store team, not individuals. Employees will apply peer pressure to other employees that are underperforming and limiting their ability to reach the rewards of the program.
Some pay-for-performance programs may be used to reduce the amount of wages paid out, however, the retailer will ultimately pay the price for not taking care of their employees. Some retailers just need to look at Costco’s success with their employees to understand the rewards of taking care of their employees.