The End of One Size Fits All?

Get ready for the next wave of pay for performance. In January, Gateway Inc. (GTW ) jettisoned its annual bonus payouts based on performance grades (ranging from 1 to 5). Instead, the struggling computer maker is doling out bonuses quarterly that hinge more directly on individual achievement. At Sysco Corp. (SYY ), incentive pay for managers, drivers, and loaders is tied to whether the right products get delivered at the right time, with no dented cans or torn bags. And at Nationwide Insurance, some bosses will see their bonuses battered if underlings anonymously report that they are 5% less happy working for the company this year than they were last. Think of it as a kind of piece-rate pay, updated for the 21st century.

The new compensation schemes enable companies to transform pay from a fixed to a more flexible cost, blowing the cover off coasters and letting stellar players reap outsize rewards. But dangers loom: In the custom-built workplace, managers can play favorites. Teamwork can implode. And workers subjected to uneven treatment can bristle. What is to keep bosses from increasing demands so that the only way to make the mortgage payment is to work more hours?

What's clear, though, is that the new compensation is slowly erasing the idea of one size fits all. Instead of a relatively collective workplace, a new era is approaching in which people working alongside one another doing the same jobs could have wildly different deals.

By Michelle Conlin in New York

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