Pay-for-Performance, the Operative Word is Performance...

The concept of pay-for-performance continues to grow in popularity, specifically with forward looking companies that want to achieve the best return on their payroll investments while striving for better company results and retaining top performers.

All of these outcomes are possible with approaches designed to accurately differentiate levels of performance between employees as a basis for paying the greatest contributors more while developing others to achieve better results.

The success of such an approach is determined by a few basic assumptions however. They are that:

• Company or organizational goals have been clearly communicated
• Job descriptions exist for all jobs
• Specific, cascaded and measurable goals (tied to company objectives / targets) have been established for each employee and clearly communicated in the beginning of the performance period
• Rewards are specifically defined relative to goal attainment, such that employees know what is expected of them and how they will be rewarded if they meet or exceed expectations
• Performance is reviewed throughout the course of the performance period
• This approach is consistently administered across the company

No small task you say - well you are right unless the approach is embraced as the way your business wants to operate, which means everyone buys in and owns their piece of the proposition. That done and an actual performance management strategy introduced, employees clearly understand their jobs, see how their specific level of performance translates to different pay possibilities, and realize what is required to improve that. Communications improve, engagement increases with boosted morale, pay programs are optimized and talent is retained.

So you see the operative word in the strategy truly is "performance". Not only individual job performance, relating to how pay is distributed, but the performance of a number of interactive practices that must work together to achieve the ultimate end game - higher business performance and positive contributions to the bottom line.

It is a strategy definitely worth examining with both short and long term rewards, and there are a number of tools available to help you. The amount of work required to adopt a pay-for-performance approach depends on how much of the process you have in place today.

If you have questions give us a call. We have helped jump start numerous clients in this area and we will be glad to explain how that experience could apply to your needs.

Merit Resource Group, 925-867-4400 / 408-501-8863