Pay for Performance March 8th, 2007

David

As I’m doing my own professional goal-setting for 2007, I’ve been thinking…

Implementing an employee pay for performance (PFP) program seems like a no-brainer. But actually, they often end up failing and doing more harm than good to employee morale.

Why? Some common mistakes include:

• All employees essentially receive the same increase regardless of their achievements. This produces a sense of entitlement and undermines the whole purpose.
• Employees don’t have a clear understanding of the relationship between their performance and their potential reward. They view increases as being based on something that’s out of their control.
• Compensation and rewards are not received in a timely manner and are not based on corporate policies that are flexible enough to allow for discretionary adjustments made by managers.
• It’s just seen as an HR make-work project because it isn’t integrated into the organization’s business planning and goal-setting at the top level.

If companies are really going to do PFP they need to do a better job of getting executives involved in communicating it to employees, and giving rewards that actually match personal contributions. It may be worth it to look at your automated employee performance and talent management system, which might include components that perform employee performance reviews and calculate compensation suggestions.

Now, back to my personal goal-setting…

Tags: employee performance appraisal, HR, pay for performance, talent management