Rethinking Your Pay for PerformanceFebruary 28th, 2008 |
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I picked up on this article on the Know HR blog about how Comcast’s founder says he will work for $1/year, and other executives are accepting lower cash bonuses. This is a good story about executives taking positive steps, as all too often, employees are the ones whose bonuses will be reduced or even cut in a downturn. This is a great message on many levels: for Comcast employee and investors, for HR and the market as a whole.
With the popularity of pay for performance programs, organizations are increasingly tying employee performance to cash or other incentives. The reality is that for these programs to truly work, there must be a consistent application of rules at all levels in the organization. When the board of an organization approves large bonus packages for its executives, there needs to be an eye on the trickle down impact of this action. While executives are getting bigger bonuses, if the organization then turns around and cuts back a mid-level manager’s pay for performance program resulting in a smaller bonus in a given year, that manager isn’t going to see as much value in this program. If employees and managers don’t buy into pay-for-performance, the program is failing to meet its true goal — employees investing at a personal level and being rewarded for their achievements.
In rolling out and managing a pay for performance program, organizations need to ensure they have the right solution in place and a long-term strategy to manage the program as a whole. Ask the following questions:
- How do you see the program growing or changing over the next two, three or even five years?
- How will you ensure consistency in the application and measurement of the program at the individual level, and organization-wide?
- How are you going to manage changes in the business’ performance?
Without a solid plan that uses technology as an enabler in an overall pay for performance strategy, the program has the potential to backfire, making employees unmotivated by the program instead of inspiring them to perform at a higher level and drive the organization’s success.
Pay for performance is a proven and powerful way to motivate and retain employees, but like all HR programs, it needs to be part of a bigger picture strategy. Pay for performance must connect with all other talent management programs to ensure that they are accurate and complete, and managed the same way across the organization. The power of pay for performance programs to motivate and drive engagement is based on these factors, otherwise, it become just another bonus structure, which isn’t going to retain employees in the long term.
Tags: HR, pay for performance, talent managementRelated posts
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