As seen in IOMA: Best Practices for Communicating Compensation 2010-2011.
Employee resistance is common when companies implement changes —especially when those changes involve compensation. Using front-line managers to communicate performance metrics can minimize employee misunderstanding and help ensure the success of your new pay program.
When Pechanga Resort Casino in Temecula, California, set out to implement its performance system, it involved a culture change for the organization. Under the old system, the 4500 team members were paid based largely on their positions and seniority, not on their performance, explains Tony Chartrand, vice president of human resources and talent management. "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." Training front-line managers — before, during, and after the implementation of the new plan — was instrumental to the success of Pechanga’s new pay system. ‘‘We started using managers to communicate early and often — almost a year before we actually implemented the new pay strategy," says Chartrand. Here are the steps that helped Chartrand and his team to achieve their objectives:
Provide managers with communication tools through training
Managers needed training in:
- How to distinguish among the various levels of performers;
- How to communicate about performance; and
- How to make pay decisions.
"We trained managers to differentiate. They were never given permission to do that before. They simply went along with the system, which said that everyone gets a fixed raise annually," says Chartrand. "The system actually promoted mediocrity. Managers could hide behind it and didn’t have to have difficult conversations with their people. We taught them the difference between a real performance-monitoring system and the old step-pay increase system and gave them the training and tools they needed to have difficult conversations with employees." Part of the training involved having managers rate all their team members from the top performers on down. When asked how they felt about ranking their team members in this way, the managers acknowledged that they liked it. When they looked at their performance appraisal forms from past evaluation periods, they were struck by the contrast between the new system and the performance reviews they’d given under the old system. It was a very eye-opening process for the managers, he says. "They really understood that if they were going to tie pay to performance, they’d have to be honest in their performance evaluations."
Hold honest discussions about performance and pay
The team started by getting managers’ and team members’ thoughts about whether they felt it made sense for someone who excels on the job to make more than someone who does not. "We surveyed employees and managers and held group discussions about the connections between performance and pay. We wanted everyone within the organization to recognize that talent makes a huge difference in the quality of our guests’ experiences," he says. For example, the team discussed whether a blackjack dealer with a table that is three or four people deep should be paid more than a dealer with an empty table. "The table’s popularity is a result of the dealer at the first table being very entertaining and providing a great experience for the guests," he says. "The dealer is focusing on making the experience fun, and not everyone is willing to put forth that kind of effort."
Previously, the thinking in the organization (in terms of hiring and managing performance) was not oriented toward paying people commensurately for their talent. "We communicated that now, management would need to have very courageous conversations with their people and change the way they compensated associates. They’d even have to be willing to deny a pay increase to those team members who were not meeting their performance goals," Chartrand says. "These communication efforts built a solid foundation for our pay system."
Identify, document, rate, and communicate competencies that managers need to be rewarding
The next steps were to:
- Get desired competencies written down;
- Determine how to rate the competencies; and
- Communicate them to all team members.
"We worked with a group of managers from across the organization to come up with a list of competencies for each of the 10 major functional areas. Then, out of those, we created a list of competencies that were common across the organization: continuous improvement, customer focus, quality, interpersonal skills, and communication," Chartrand explains. "We determined what the observable behaviors were for each of those competencies. Next, we asked, ‘What does it look like when team members are engaging in the right behaviors and the wrong behaviors?’ We spent a lot of time talking about the core competencies for each area, such as table games, slots, housekeeping, food and beverage, and human resources." The team ultimately decided to go with a five-point rating scale for the core competencies. A lot of dialogue followed around what constitutes each point. It was a laborious but good exercise, he says.
Implement technology to facilitate manager communication, evaluation, and compensation
The old performance-appraisal system was based on employees’ hire-date anniversaries. The problem? There were always quite a few dozen outstanding appraisals at any given time, and many were late because managers were always doing them. "This had to change in the new environment," he says. "We couldn’t say that performance was important but not important enough to get the appraisals done on time."
People needed not only to be appraised, but to get ongoing feedback on their performance. That way, they’d know exactly where they needed to improve and there would be no surprises around annual appraisal time. Says Chartrand, "further, for our performance program to work, we’d have to compare all the team members together to identify the top performers as opposed to spreading out appraisals over the year. That way we could compare everyone simultaneously and distribute the merit increases appropriately."
"To change the culture from step pay to paying for performance would require a huge change, and we needed technology to facilitate this. We have 4500 employees, and it would be impossible to evaluate them all at once. We’d have to shut down the organization! So we decided to appraise one-third of the workforce each month during June, July, and August." To help with the tremendous task of appraising performance — and determining compensation accordingly — Chartrand and his team implemented performance management software from Halogen. Because time was of the essence, they rolled out the new technology in three weeks. "Managers were engaged through the early dialogue, communication, training. They were involved in building the competencies they’d be using to evaluate employee performance," he says.
Hold roundtables with HR, managers, and employees
To communicate the new system to employees, HR and managers held roundtables with them. The roundtables were made up of a couple dozen people, with some employees from each functional area. Managers were encouraged to recommend employees to invite to the roundtables to ensure a mix of people, including some who had the reputation of being negative or vocal.
"At the roundtables, we talked about the connection between performance and pay and asked whether employees felt it was fair to pay according to performance. We reinforced that people would no longer automatically get pay increases just for being present," says Chartrand. "Then we talked about competencies and behaviors. We explained what would drive our pay strategy and what behaviors we would be looking for."
Communicate the specific competencies throughout the organization
Next, HR and managers communicated to all employees throughout the organization what the competencies were. Management discussed specific behaviors, how employees would be ranked and rated, and how they would be compensated for their performance against those ratings. "It was important that everyone clearly understood how they would be rated and compensated," he says, "so they’d know what behaviors they needed to be engaging in on the job."
Perform a survey to keep the communication going
After the implementation, the team followed up by conducting an electronic survey about the new process. Everyone was encouraged to give feedback. The results? On average, 92 percent of respondents "agreed" or "strongly agreed" that the new process was highly beneficial.
Pinpoint places for improvement
The survey revealed what could be done better in implementing and communicating the new process. Some people said the actual implementation of the new system happened too quickly. Chartrand says "we had talked about it for nine months but executed it in three weeks." Some managers and employees were having a hard time understanding the performance-rating scale. They said they needed more standardized guidelines. And while some noted that managers were being more discriminating and making more realistic evaluations of people’s performance, others felt that some of the competencies and behaviors were ill-defined.
"The survey helped us understand what we need to look at and tweak to make our performance process more effective going forward," he says. Pechanga has just entered its third cycle with the program and system, Chartrand reports. "We don’t call it the ‘new’ program any longer because it is now entrenched as to how we do performance management at Pechanga," he says. "Communication continues to be key as well as ongoing management training in coaching, journaling, and providing constructive feedback. Feedback from our team members has been positive and continues to grow."
In summary, Chartrand suggests these tips for success:
Give managers the tools they need to have tough conversations with employees.
"Switching to new pay strategy sometimes requires a major cultural shift. It can be very uncomfortable for people when the ‘rules of engagement’ change. So give managers plenty of training and tools, such as using role-playing to practice what to say to employees in specific situations."
Talk early and talk often.
"That’s how you get buy-in. If you try to ram it down everybody’s throats, you won’t get buy-in. Communication is the key."
Make clear to team members what they will be measured on.
"Make the competencies very clear to employees. You don’t want there to be any confusion about the fact that they will be getting rated on the quality of their work, what they’ll be getting rated on, and how this will affect their compensation."
Discuss how your pay plan will improve the organization’s success.
"Have open dialogue about the impact of excellent performance on your organization’s bottom line. Ask employees, ‘Do you agree that if we focus on engaging in these behaviors and achieving top service quality we will be more competitive and profitable?’ This will help them understand how the business works and how their behaviors really do drive its success." "Be patient, and don’t expect instant acceptance," says Chartrand. "Understand that this is a significant cultural change and it will not change in one cycle. It took years for the old system to get ingrained and it will take a while for the new one to become ingrained as well."