It is good to strike a balance when discussing compensation. It is not the only motivator. Spend a little time on the web searching “what motivates employees”. Substantial, professional studies and documentation support the fact that compensation is just one factor. Other factors, for example, include job challenges, promotional opportunities, skilled leaders and managers, recognition, communications, and career development and skills training. That does not diminish the importance that P4P plays in engagement, motivation and retention of talent.
Above all else, the company might have a world-class performance management system in place, but the system is only as effective as the leaders and managers who implement it. A highly respected executive I worked for had a favorite phrase she applied when we had issues with turnover and poor managers, “Join a company…quit a boss”.
What makes performance reviews an effective tool for evaluating performance and establishing a base for compensation:
- Leadership commitment to the process
- A well-defined, well-communicated process (see example graphic below)
- Supervisors/leaders who are skilled in managing the process
- Ongoing recognition for good work – P4P is not a once a year exercise
- Brief discussions were needed improvement is observed
- Pay increases that are commensurate with performance
- Needed improvement is funneled into training and development (T&D) planning
- Appropriate action taken, with due process, for non-performers
- The employee has to own it; the manager administers and manages the process
Managers who do not set objectives…! The employee has the option and needs to generate a set of objectives for the year, publish quarterly updates related to associated progress, and keep the immediate manager updated on progress.
Also see this blogs January 4, 2018 posting for background on compensation structure.
It is important to conduct training and development discussions separate from performance reviews although the later can be a basis for T&D discussions, planning, and action.
***** S&E *****