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Link pay to performance. Like…seriously this time!

Crystal Spraggins, SPHRWhen PayScale asked more than 5,500 business leaders the main reason their companies adjusted pay in 2015, 52 percent answered "employee performance."

When PayScale asked more than 5,500 business leaders the main reason their companies adjusted pay in 2015, 52 percent answered “employee performance.” Yet, many employers struggle to link pay to performance in a consistently meaningful way that actually drives performance. 

According to a 2014 survey by CEB, a talent management solutions firm:

• 90 percent of HR professionals don’t believe their companies’ performance review systems provide accurate information.
• 65 percent of employees say reviews aren’t relevant to their jobs.
• 95 percent of managers are dissatisfied with their companies’ performance man-agement process.

This survey (and there are many more like it), make it plain that employers need real help developing pay-for-performance processes that work.

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Compensation Roadblocks: Linking pay to performance is a lot harder than it sounds

One reason employers have a difficult time creating strategic pay-for-performance plans is that it’s hard to do.

In Strengthen the Link Between Pay and Performance, a PayScale whitepaper, employers are advised to begin developing a plan only AFTER conducting a readiness audit during which employers will answer themselves these nine questions:

1. What do we want to reward in our organization?
2. Why is pay for performance right for our organization?
3. How will we get buy in for this change?
4. What will a successful plan look like?
5. How will we respond to employees who perceive the change as threatening to their financial well-being or disrespectful of their tenure?
6. Who will be involved in driving and implementing the change?
7. Do we have the right managers in place to reach successful outcomes?
8. Can we afford this?
9. What could go wrong, and what outcomes are we unprepared to deal with?

Further, a successful pay-for-performance program is:

1. Fully supported by executive leadership
2. Aligned with the organization’s goals and culture
3. Supported by the right tools and systems
4. Supported by trained managers
5. Communicated clearly across the organization

That’s a lot; we admit it. But really, what’s the alternative?

Pay for performance is cost efficient, motivating, and drives results. What other compensation strategy does all that?

Playing at pay for performance

Unfortunately, too many companies play at pay for performance, never really addressing:

• Uneven and inconsistent performance management systems
• Overpaid poor performers
• Managers untrained in the art of feedback and systems that don’t hold managers accountable for developing others
• Languishing high performers
• Nonexistent company goals and strategy (employees do what they THINK is needed without being certain it IS needed)

As a result:

• Some goals will get met, but others won’t;
• Some high performers or high potentials will receive proper attention, but others won’t;
• Some poor performers will be weeded out, but those who are likable, highly political, or skilled at living under the radar won’t;

…and so on.

Doing pay for performance right

Again, doing pay for performance right isn’t easy, but PayScale has your back. PayScale’s compensation experts and state-of-the-art software can help you build, implement, and manage a strategic compensation plan that’ll serve as the cornerstone for an intelligent, effective pay-for-performance plan that’ll enhance productivity, creativity, and employee morale.

Serious about getting pay for performance right…finally? Request a demo of Pay-Scale’s compensation software TODAY!

Crystal Spraggins
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