pay for performance

Pay for Performance – Everyone Wants a Piece of the Pie

When hiring new staff salary negotiations can sometimes be tricky, and the same can be said for how to connect pay with performance.

For most organizations, salary negations are done annually and the reward or pay increase is based on meeting or exceeding performance criteria. However, each party has very different goals and intentions when it comes to this type of negotiation. The employee wants to get the best salary possible, and the  manager wants to get the best deal for the organization. In essence, each side is working against the other.

As a people manager acquiring and retaining the best staff should be foremost when negotiating, not making a deal. Here’s why:The most talented, loyal and hardworking employees only ask for one thing in return for doing a job well done, a fair salary with a positive work environment. Organizations should have a very detailed pay for performance design and process for implementation. Here are a few tried and true tips that will help you maneuver a clear path.

Keep pay for performance simple

Whether you are a mid-size or small organization, your pay for performance system should not be complex. Keep it as simple as possible. The program should be based on a simple goal-setting with a rating and ranking process. At the senior management level the program can have additional features to recognize the uniqueness and importance of the role. But overall keep it simple.

Make it fair

The most effective pay for performance systems should result in employees feeling as though they have been evaluated and treated fairly. To achieve this all of your staff should already be paid a fair salary that is within the market range. Create a set of goals with your employees that fit within the organization’s overall plan and company vision. Three goals per quarter are reasonable. When given achievable goals that are clearly understood, it helps to motivate staff.

Have quarterly goal reviews

If goals are created per quarter, then ideally there should be quarterly reviews included as part of the pay for performance program. Sit down with your staff every three months and talk about what employees have done and how everything they do on the job fits in with the company’s  goals. This review will provide a great opportunity to see if goals are still clear and appropriate. It will also help to create an environment where employees can succeed in meeting their performance goals.

The bottom line

Performance goals and pay for performance should always be a collaborative process with input from the employee and manager. The foundation of a successful program is making sure that employees are receiving the market rate for the role and that they are aware of and understand their goals for each quarter. Overall, as part of the pay per performance process, employees should  understand what the range is for their salary, how are they positioned today and what they have to do to improve that position.

Carol Irwin

Carol works with our clients to develop and improve HR policies, procedures, employee programs, and solve difficult people management issues.

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