Evaluation. In this case, evaluating intrinsic difficulty of a certain task or group of tasks. There's no way to do so systematically, without inside knowledge about the task. Foe example, suppose you want to rank two mathematicians without a clue about the subject matter. One presents short proofs to many problems, while the other presents enormous proofs with great effort. There's no way to tell if the problems are really difficult or not and chose the reward without having knowledgeable peers evaluate the a) hardness, and b) usefulness intrinsic to the problem. In fact, it could be argued that simplicity is a good sign, but it's impossible to tell whether the problem is unimportant/trivial to begin with.
- Why do people think in this way, instead of more systematically?
Without insider knowledge, which management sometimes lacks, you cannot confidently rank as stated above. But there's one trivial thing you can do, which works, but not necessarily efficiently: if the solution works/is found, reward the solver, otherwise punish/look for others (and reward them more). Hard problems skillfully solved will go unrewarded and good performers will gravitate towards fixing crisis instead of doing good ground up engineering as they should. That's the aspect of inefficient, but it is possible with enough money to manage this way.
The answer to both is to look one level up, at the meta question. Both of your answers are still about evaluating individuals. Instead, look to the system both individuals are in.
In this case, the system encompasses the evaluation itself, and the answer is to cease evaluation altogether. You can clearly see the problems it causes.
In an individual manner commensurate with their contribution and market value, as simply and clearly as possible. It is not complicated, and making it complicated is how we end up in cultural negative feedback loops. The standard performance assessment does more harm than good, and we absolutely should not use it.
"The merit rating nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, [and] nourishes rivalry and politics. It leaves people bitter, crushed, bruised, battered, desolate, despondent, dejected, feeling inferior, some even depressed, unfit for work for weeks after receipt of rating, unable to comprehend why they are inferior. It is unfair, as it ascribes to the people in a group differences that may be caused totally by the system that they work in.
The idea of a merit rating is alluring. The sound of the words captivates the imagination: pay for what you get; get what you pay for; motivate people to do their best, for their own good.
The effect is exactly the opposite of what the words promise. Everyone propels himself forward, or tries to, for his own good, on his own life preserver. The organization is the loser. The merit rating rewards people that conform to the system. It does not reward attempts to improve the system."
In short, the method by which you determine fair pay is very much irrelevant — so long as it does not involve the detrimental practice of performance appraisals. The main focus of both you as a manager and your employees should be on the system of work, not on the individual. Deal with the individual's fair compensation simply and clearly, and discard all by-products, as they are unproductive.
-What's the core problem?
Evaluation. In this case, evaluating intrinsic difficulty of a certain task or group of tasks. There's no way to do so systematically, without inside knowledge about the task. Foe example, suppose you want to rank two mathematicians without a clue about the subject matter. One presents short proofs to many problems, while the other presents enormous proofs with great effort. There's no way to tell if the problems are really difficult or not and chose the reward without having knowledgeable peers evaluate the a) hardness, and b) usefulness intrinsic to the problem. In fact, it could be argued that simplicity is a good sign, but it's impossible to tell whether the problem is unimportant/trivial to begin with.
- Why do people think in this way, instead of more systematically?
Without insider knowledge, which management sometimes lacks, you cannot confidently rank as stated above. But there's one trivial thing you can do, which works, but not necessarily efficiently: if the solution works/is found, reward the solver, otherwise punish/look for others (and reward them more). Hard problems skillfully solved will go unrewarded and good performers will gravitate towards fixing crisis instead of doing good ground up engineering as they should. That's the aspect of inefficient, but it is possible with enough money to manage this way.