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3 Key Pay-For-Performance Strategies

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Chris Wien
on June 09, 2014

You’ve probably heard many pay-for-performance strategies over the years, and maybe even implemented a few. Maybe you had a modicum of success, or not, but like everyone else you’ll be looking for the holy grail of strategies.

While that doesn’t literally exist, here are  three key pay-for-performance strategies that are based on the successful plans of the thousands of organizations we work with:

1. Transparency in Delivery

There’s an old saying: the reason your million-dollar employee left for a competitor wasn’t because of pay or whether they received a fair performance evaluation, but it ran a close second.  

According to recent studies, almost half of talent managers agree that turnover intentions are negatively impacted by organizations that don’t communicate openly in the “delivery” of performance management and compensation. Further, according to the following Pearl Meyer & Partners survey, 54% of responding companies train their managers in communicating total rewards.

Proper delivery requires that your business processes or workflows correlate with schedules and deadlines for integrated performance and compensation cycles and clearly explain the basis for evaluation and rewards decisions.   

2. On-Time Communication

A division caught up in a special project, or a manager unable to focus on reviews will send your painstakingly-crafted schedule off the rails faster than a train conductor asleep at the controls. To combat this, 

  • Automate the event triggers as much as possible;  
  • Create defaults if managers sit on performance reviews. For example, if a manager does not complete an evaluation or provide a performance rating, the default action is no increase or approval to meet with the employee.  

Default workflow movement keeps the process moving for the whole organization, and avoids process delays downstream (payroll deadlines) due to recalcitrant managers.  

3. Accuracy

Many organizations provide, or are planning on providing, Total Pay Statements, and allowing employees access through online HR Self-Service tools. However, validate the data first to win the hearts and minds of your target audience.

HRIS Data Accuracy

Ask: What are the variables in our workforce? How does this impact performance and pay communications?  

  • Segment requirements by employee type and country/region. You may need multiple pay statement formats based on privacy rules or calculation requirements. For example, in Latin American countries, salaries may be based on a 13 month calculation. In the EU, certain compensation elements are not displayed on a statement.
  • Is the Reporting Relationship up-to-date? Confidential data going to the wrong manager means an awkward apology and double-work.
  • Establish partnerships between Compensation, HR Generalists and Managers. Who is accountable for the accuracy of the data? Pick a stakeholder to own each process step. Ask employees & Local or Business Unit HR to verify their data. One person can’t do it all, or else that person will most certainly take the fall.

If perception is reality, our challenge is to foster an environment where our employees perceive that they understand how your pay delivery process works. Embracing pay transparency and investing in training managers allows us to leverage the hard work we’ve done to develop competitive and equitable pay programs. Employees seek trust in these processes. Research shows that higher levels of trust inevitably lead to higher retention and engagement.

Integrating performance and compensation is complex. For best results, keep the doors to communication open to avoid the “revolving door” of employee turnover.  

For more information on optimizing your pay for performance strategy, download our free whitepaper: “The New Era of Pay For Performance: 6 Keys to Success.”

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