The critical element in any real performance-based system is that rewards must actually be tied to actions within the direct control of individuals. Perhaps the most common example of this is piecework, where individuals are paid an agreed-upon amount for each defined unit of work they produce. This approach is widely used in manufacturing and farming and should be easy to picture, but let me give you a slightly counterintuitive example.

One hotel operating company I’ve looked at experimented with paying chamber-maids by the room, instead of by the hour. The result is a higher rate of hourly compensation and a shorter workday for the maids and a $2 million a year savings to the company. Research on piecework in middle and low-tier jobs demonstrates that productivity increases substantially when pay is directly tied to performance.

Why can’t the same approach be used with professionals? Accountants could be paid per audit (many are). Programmers could be paid per line of code (many are). Writers could be paid by the word (many are). And so on.