From my experience as participant in these kind of systems, this is what I think:
These systems have the goal to create buy-in from the employee to perform at a certain level. Since you create these goals yourself there are little excuses why you can't reach them. It creates an incentive for the employee to work hard all year long and lessens the burden on the company to continuously check if you're being productive.
I guess another way of saying it is: You define what you're getting paid for year over year. What value you're providing for the company.
These systems have the goal to create buy-in from the employee to perform at a certain level. Since you create these goals yourself there are little excuses why you can't reach them. It creates an incentive for the employee to work hard all year long and lessens the burden on the company to continuously check if you're being productive.
I guess another way of saying it is: You define what you're getting paid for year over year. What value you're providing for the company.