Overcoming Barriers to Pay for Performance with Technology

Normally when we look at HR technology, we look at how it helps the HR department. Enterprise compensation software certainly does that, but what we also need to look at how it helps managers. Managers can make or break a pay-for-performance system, and if technology can help them, it can transform the effectiveness of the system. There are three common barriers that organizations face when it comes to pay for performance:

• Decisions Need Data: Managers need more information when it comes to making pay decisions, such as: salary history, employee performance history, and how the employee’s pay compares to that of other people in the group. Often, managers do not have this information and are basing their decisions on a limited data set.
• Paper is a Pain: Making pay decisions can be hard on managers. They have to worry about how their staff will react, and they have to fit the time spent on making and communicating pay decisions into an already packed schedule. If the process feels like a chore, employees are apt not to do as good a job as they probably would with easy-to-use tools. Furthermore, if they are spending too much time on administrative tasks, they have less time to spend on the “soft side” of communicating pay decisions.
• Day-to-Day Disconnect: The great weakness of many pay for performance programs is that there is little connection between the day-to-day work and the pay for performance program. The only way to bridge that gap is to have a clear link between performance and pay, as well as established performance goals where progress on achieving goals is reviewed on a regular basis. Having the ability to track progress does not guarantee that people will do so, that’s a matter for the manager and employee. However, this ability opens up a new terrain for pay for performance; it creates the conditions where the employee can constantly be thinking “Am I doing the right things? Am I making progress?” and be confident that they will be rewarded for attaining high performance.

One other area where pay for performance often falls short, is in getting the implementation to match the policy. A lack of adherence to policy can not only undermine business objectives, it can also lead to unfairness. Technology enables transparency and can in some instances enforce policy. It also allows senior managers and HR to see how managers are implementing pay for performance and ensure they are implementing it the way it should be.

Any technology solution should free HR to do more than administration. Pay for performance systems should make a difference to the organization because they allow HR to spend their time on making their pay for performance and talent management strategies work better overall. The end result of automating the process should be consistency and clarity – meaning managers are free to focus on the human side of pay for performance, which ultimately contributes to talent management, retention strategies, and overall organizational performance.