Pay for performance or reward has been a topic of conversation for some time. While certain industry gurus such as Dan Pink espouse the benefits of recognition alone, rewarding employees for performance still has an important role to play. However, unless planned carefully, issues can arise to create risks within performance and reward programs.
Several key areas should be considered carefully to guarantee success and ensure that the intended performance is being accurately recognised and rewarded. Four main areas to consider are:-
1.Measurements –set your metrics accurately
Metrics are the actions or activities that are being measured. These are the foundation of your performance plan and must represent the measurements of success. If you can’t measure accurately, how do you know if your goals are being met? We often find that successful companies tie these metrics to corporate values with clear outcomes that are easily measured.
2. Goals – aim high
If you set the bar too low you will waste money by paying for performance that is not ‘above and beyond’. Someone meeting their KPI’s gets paid for doing their job. Paying for performance recognises the extra effort. These are the drivers of your plan and must represent your destination.
3. Great Communication – fundamental for success
Clear communications are essential to engaging and motivating your staff. To supplement this, open, transparent and consistent measurement of performance and the communication of such across the organisation will deliver great benefits, and will provide clarity about why an employee has been rewarded for their performance.
4. Human Nature – watch for corner cutting
Human nature is the one thing that you cannot build into your recognition and reward programs, yet it can be the single biggest risk to pay for performance. Results and actions must be in alignment. Many companies create great metrics, goals and communications and still have compensation plans blow up. Why is this so? For programs that demand high-performance, you must also provide strong management and oversight to avoid your staff cutting corners.
Some people’s human nature is to stretch rules as much as possible. Others feel that they are not doing anything wrong as long as they are not told they are. A small minority simply doesn’t care about rules at all. They will do whatever it takes to win today, even if that means losing in the long run. Human nature is as varied as humans themselves.
Your main defence is in knowing that the ends don’t always justify the means. We must put as much effort into managing performance and guiding our staff as we do into the purely compensatory aspects of our work. Compensation plans will never replace good management, but tragic ends will almost always result from poor management.
