Performance Management
Overview:
The core of any organization is its staff. How effectively an organization maintains a quality team of employees is linked to its ability to manage its staff and recognize the contributions of each player. Effective performance management systems enable an organization to objectively and systematically rate employee performance, while providing the tools necessary to take that performance level and equate it to compensation actions.
Employees have always expressed the desire for open feedback regarding their performance. More and more companies are embracing the pay for performance concept and its tie to compensation. A well-executed performance management plan enables an organization to achieve critical goals:
- Recognize the efforts and contributions of current staff
- Reward staff with compensation directly linked to performance
- Motivate staff to improve performance
- Orient staff towards goal achievement
- Retain key employees through the use of competitive compensation programs
- Attract quality employees with an effective performance management system
The key elements of a Performance Management System include the following:
- A Formal Compensation Philosophy Statement
- Salary Administration Program
Services
Case Studies
Case Study #1: Not-For-Profit Organization
Issues:
- All employees received across-the-board increases.
- Organization recently experienced two years of salary freezes increases not tied to performance; often tied to length of service.
- Funding issues made it difficult to provide suitable increases.
- Inconsistent use of incentives in different divisions.
- Lack of formal technical salary administration procedures.
- Reassign all employees based on a market driven approach. Provide increases to qualified employees directly tied to performance.
- Reward "high achievers" with a greater increase than average performers.
- Provide "high achievers" with an additional lump sum increase.
- Award incentives to qualified employees based on department performance.
Case Study #2: Computer Services Company
Issues:
- Limited incentives for management population.
- Incentive awards not tied to results.
- Incentive payouts the same to all managers, regardless of performance or job level.
- No minimum performance requirement to earn rewards.
- Awards based on departmental efforts; individual contributions not factored in.
- No motivation to exceed departmental goals.
- Provide incentives tied to results that exceed stated goals.
- Objectives structured to drive business plan objectives.
- Target incentive awards will vary based on job level and individual performance.
- Maximum award levels established to provide additional incentive.
- Awards determined by combination of department and individual performance.
- Individual's job performance must be satisfactory in order to be eligible.
- Job levels established based on competency statements.
Case Study #3: Telecommunications Company
Issues:
- Management compensation package not tied to performance.
- Pay for Performance not actively used to determine increases and bonuses.
- Desire to provide above market incentives as retention tool.
- Need for incentives that drive short-term performance and long-term growth.
- Adopt a Compensation Philosophy as baseline for salary administration.
- Design salary structure to cover management positions.
- Develop annual incentive plan tied to company performance.
Case Study #4: Wall Street Securities Firm
Issues:
- Morale compromised based on perceived internal pay inequities.
- Desire to evaluate market to determine competitiveness of current pay system.
- Enhance ability to attract and retain qualified employees inconsistent application of salary administration processes.
- No formal method of determining staff bonus.
- Develop Compensation Philosophy for staff.
- Compensate employees at the competitive market level.
- Prepare job summaries based on market analysis.
- Develop salary ranges for all employee groups.
- Develop Salary Administration Policy to ensure consistency.
- Develop Bonus Program to enhance overall compensation package.
Case Study #5: Toiletries Manufacturing Company
Issues:
- Management compensation not in line with competitive market.
- No incentives for management employees to contribute to company growth.
- Bonus plans not tied to team efforts or company performance.
- Separate plans desired to reward management and staff.
- Desire to create team environment among factory employees.
- Inconsistent and discretionary approach to past bonus payouts.
- Limited communication lines among entire organization.
- Increase management salaries to reflect market analysis.
- Develop two separate incentive plans covering management and remaining staff.
- Staff eligible for gainsharing/group incentives based on company financial achievement.
- Management eligible for annual awards based on corporate and individual goals.
- Communication tools implemented to improve overall morale.
