The inner loop of job performance is much more complex. Since the interactions between factors at this level are quite interrelated, depicting all of them can become quite difficult to represent graphically. The diagram shown in this article is thus a simplified view of only a subset of these interactions (yet will need to be printed out on large-format paper just to review and understand this subset).

This diagram's purpose is to highlight how several important factors involved in effective performance management can interact over time, yet remain relatively 'invisible' to the outer loop. It also highlights how discretionary investments towards improved capabilities (which was represented on the outer-loop diagram) can be further influenced by these same factors.

When one considers this 'inner loop' of job performance, the importance of the following critical factors become evident: Read more »

Maybe Friedman was right. One of the problems with the American style of business is not that it pursues profit above all else, but that it does not. The traditional style of corporate America is the pursuit of hierarchy above all else, and profit only appears as a necessary side effect. This is much of what I find compelling about lean and ToC: they place sustainable and profitable production as the highest goal, and organization adapts to serve that goal. Corporate America gets this backward: business exists as a franchise to fund social hierarchy and the executive lifestyle, and massive waste is created in the process.

One of the central myths of capitalism is that it rewards merit. It does not, nor should it. The problem with 'merit' is that it is an authoritarian idea. Merit according to who? Free markets substitute prices and profit for merit as a proxy for the collective preferences of their participants, which are otherwise unknowable. Read more »

By now, you've probably picked up that I think performance appraisals are overly emphasized as a motivational tool. So why do them at all? It's really simple - both employers and employees need them. So we better figure out how to improve our approaches so we're doing more of what's useful, and less of what's frustrating. Read more »

Some make the mistake of believing that changes in salary can be used to influence behaviors. Those that believe in this idea usually base their beliefs in behavioral thinking which presumes that individuals and their actions can be influenced by manipulating consequences; this is sometimes called the carrot and stick motivational school, and has been disproven through research, but the idea persists. Under this mental model, an employee's behavior can be directly influenced by the presence or absence of some incentive, like achieving a particular salary level. Read more »