Does pay for performance work?

I consult with a lot of employers who say they pay for performance.

And then you look at the merit increases by performance rating and there isn’t much of a difference between the high performers and the employees who need improvement.

Some employers have bonus programs that payout based on performance at the company, business unit, and/or individual employee level. With preestablished metrics and performance defined upfront, it usually aligns well to their pay for performance philosophy. Same with sales incentive plans that have predefined performance metrics and payouts.

The challenge is when managers don’t want to have the difficult conversation that goes with a low incentive payout or merit increase.

You can’t have a true pay for performance philosophy and compensation programs tied to performance without the difficult conversations.

So, if you are updating your pay conversation training materials make sure you acknowledge the tough conversations. Give managers the example talking points to use when they talk to their employees who aren’t performing well.

Doing one thing and saying another isn’t a great way to drive performance or build trust.

#payforperformance #rewards #compensation #hr #difficultconversations