Pay for Performance in Practice August 25th, 2009

Heather McCulligh

Last week, Sean discussed pay for performance, including rather interesting executive perks. I wanted to share some of what one of our customers, Pechanga Resort & Casino is doing with pay for performance.

Tony Chartrand, VP of HR spoke with the Institute of Management and Administration (IOMA) for their Best Practices in Communicating Compensation 2009 report. Pechanga’s case study is included in the section of the report on the importance of employee communication when it comes to pay for performance programs. Here’s just a few of the best practices Tony shares in the report:

Employee resistance is common when companies implement changes - especially when those changes impact compensation. If you take the time to communicate before and throughout the transition, however, you’ll minimize resistance and help ensure the success of your new pay program, says Tony Chartrand, vice president of human resources and talent management at Pechanga Resort Casino (www.pechanga.com) in Temecula, California.

When Chartrand joined the organization in 2007, he took note of the rather antiquated step-pay system Pechanga had in place for its 4,500 team members. “It was like a union system,” he explains. “People were paid based largely on their positions and seniority, not on their performance. They knew that every 12 months they could count on getting a specific incremental pay increase regardless of what they were contributing to the organization. The higher the position, the higher the pay increase would be. There was little or no performance feedback.”

The report explains that Pechanga implemented a pay for performance program, supported by a talent management software system.

“This was much more than a change in compensation structure. It involved a culture change for the organization to become more oriented toward talent management,” Chartrand says. “We wanted to differentiate ourselves in the hospitality industry by providing passionate service.” In place for almost a year, the new PFP approach has proven to be quite successful, thanks in large part to excellent communication before, during, and after the implementation process. “We started communicating early and often—almost a year before we actually implemented the new pay approach,” he points out.

The report then outlines the communication steps taken by Chartrand and his team:

• Hold honest discussions with management and employees about performance and pay.
• Provide communication tools through training.
• Identify, document, rate, and communicate competencies.
• Implement technology to facilitate communication, evaluation, and compensation.
• Hold roundtables with employees.
• Communicate competencies throughout the organization.

Chartrand’s communication approach serves to illustrate how organizations require a complete talent management strategy with performance management as the cornerstone, and that there’s no one panacea solution. You need a strategy that includes planning, communication and technology; no single piece can get the job done without the support of the others. Without technology, you can have all the communication you want, but if people can’t easily execute appraisals and pay for performance with solid tools, good luck.

In this piece, Chartrand concludes with offering a few final tips for success:

• Talk early and talk often.
• Give managers the tools they need to have tough conversations with employees.
• Make clear to team members what they’ll be measured on.
• Discuss how PFP will improve the organization’s success.

To read more about Pechanga and Pay for Performance, you can check out the full report here.

Tags: pay for performance, performance management, talent management