The master ordered the cat to catch mice in the house. When the cat saw a mouse, it dashed back and forth several times but ultimately failed to catch it. Later, the mouse turned a corner and disappeared. Seeing this, the master mocked, "The big one can't catch the small one." The cat replied, "Don't you know that our 'running' is completely different? I run merely for a meal, while it runs for its life!"
This is a classic performance management problem.
Compensation Design: Gold in Front, Tiger Behind
The master thought the cat had a point, so he devised a way to make the cat strive for its own survival. He bought several more cats and stipulated that any cat that caught a mouse would receive five small fish, while those that failed would go hungry. Initially, the cats resented and struggled to adapt, but over time, they grew accustomed to the system. This approach worked: the cats all strove to catch mice, as no one wanted to see others eating fish while they went without. The master found relief and peace, no longer losing sleep.
After a while, a new problem emerged. The master noticed that although the cats caught five or six mice daily, the mice were getting smaller. Some observant cats realized that large mice ran faster and had more escape experience, while small mice were slower and less experienced, making them easier to catch. The master's reward was based on the number of mice caught.
The master noticed this anomaly and decided to reform the reward system, calculating food based on the weight of the mice caught. This approach quickly proved effective.
This is a typical application of volume-based versus value-based commissions in sales. Corporate headquarters, branch managers, and sales managers have all experienced this evolution from volume-based to value-based commissions. Both systems have effectively motivated mid-level sales staff at different stages and promoted rapid company growth. Neither is inherently good or bad; it's about relative suitability. This is a vertical approach to compensation and performance management.
Of course, compensation and performance management must also be compared horizontally, meaning they must fit within the overall industry environment. Otherwise, it becomes "a camp of iron with flowing soldiers," failing to attract or retain talent.
After some time, the master noticed that his neighbor had the same number of cats but caught far more mice. Curious, he knocked on the neighbor's door. The neighbor explained, "Among my cats, some are strong and some are weak. I have the strong ones help the weak ones, encouraging mutual learning. Additionally, I've organized the cats into groups, each with a division of labor, which has significantly increased the number of mice caught."
The master thought this was an excellent method and replicated it. However, after a trial period, he found it ineffective. The cats showed no enthusiasm for learning, and each group caught fewer mice than when they worked alone.
What was the problem? The master decided to hold a meeting with the cats.
The cats said, "Catching mice is already tiring, and learning takes up our time, so we catch fewer mice. But we still get fish the same way as before. How can you expect us to be willing to learn? Also, do you know how we divide the fish? We often fight over it, so how can we cooperate?"
The master thought the cats had a point and decided to completely reform the fish distribution. Regardless of whether the cats caught mice each day, they would receive a fixed number of fish, with additional rewards for catching mice.
But upon reflection, there were still issues. In each group, some cats chased mice, some flanked, and some patrolled the perimeter to prevent escapes. Each group should be rewarded based on the number of mice caught, but how should the fish be distributed within the group? Should the number of fish remain constant or be adjusted periodically? Should cats with different roles receive the same fixed number of fish? This time, the master was truly stumped!
The "master's" confusion in the story mirrors the challenges many companies have faced or are currently facing. Only by truly solving these problems can performance appraisal avoid becoming a mere formality or even backfiring.
How should a company set its salary system based on industry pay levels? Generally, the lower the company's industry position, the higher its compensation should be relative to the industry average; the higher the position, the lower it can be. However, to attract and retain top talent, compensation must exceed employee expectations.
How can a company build a learning team tailored to its characteristics? Learning is fundamental, teamwork is the support, culture is the core, and atmosphere is the guarantee. The ultimate goal is to generate and enhance productivity.
How can virtual teams and project manager systems function better in companies? The key is to minimize internal communication and transaction costs; otherwise, it backfires, and a group without formal organizational constraints will end up in constant conflict and friction.
How should job responsibilities be defined within a team to both leverage individual heroism and promote team development? In the current state of Chinese enterprises, individual heroes abound. But for long-term development, individual heroes are not necessarily beneficial. Hanging an organization's or department's lifeline on one person is fragile. Only excellent teams led by heroes are the true hope for a company.
In an era of specialization, no single cat can catch a mouse alone, but any cat can determine whether the group fails to catch one. The biggest challenge of specialization is complex management requiring group coordination, making it impossible to reward based on individual "mouse catches." This is precisely the problem that process-oriented appraisal aims to solve.
Things began to take a turn for the worse. The master noticed that the number and weight of mice caught by the cats were declining significantly, especially among the more experienced cats or teams.
The master asked the cats again. They said, "We've devoted our best years to you, master. But as time goes by, we will age. When we can no longer catch mice, will you still give us fish?"
So the master compiled and analyzed the total number and weight of mice caught by all cats and made a decision to reward based on merit: if a cat caught more than a certain number and weight of mice, it would receive a generous pension upon aging, and each meal in old age would include a corresponding amount of fish.
The cats were delighted. Everyone strove forward, working day and night to meet the master's targets. After some time, some cats finally achieved the required numbers and weights.
But then, one cat said, "We work so hard for just a few fish, yet we catch far more mice than those fish. Why don't we start our own business and catch mice for ourselves?"
So some cats left the master to start their own ventures. If effective performance appraisal and a biological chain can form a company's opportunity competitiveness, then an effective corporate culture and mechanism can form its core competitiveness.
For a company, sustainable operation is essential. For individuals, energy and physical strength are limited. If they give their golden years to the company but have no security in their later years, they cannot work with peace of mind. Consequently, the company cannot build sustained competitiveness. As in the story, if the master hadn't addressed the cats' concerns, how could they have kept striving? Once their worries were resolved, they fought for their own futures.
If a company's marketing system fails to consider employees' long-term welfare, employees will either earn money during their prime years and leave, or find ways to take from under the table. Both are fatal to building sustained and core competitiveness.
A company is like a family; only through continuous growth and reproduction can it remain stable and prosperous. An employee is like a family member; only by managing their position as if it were their own family can the corporate family thrive. When family members reach the age to start their own families, parents do everything to provide convenience. But what about our companies? They often obstruct employees who want to start their own businesses. Why not foster an internal entrepreneurship mechanism within the company? This would provide a platform for those seeking independence, strengthen the company's competitiveness, and reduce potential competitors.
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