Have you ever wondered whether the college or university you went to pays employees based on their performance? At the recent CUPA-HR conference in San Diego we had the opportunity to ask about paying for performance. We asked the following questions:

Your main reasons for implementing a pay-for-performance program

We also discussed why attendees believed that paying for performance either did not or could not work in their colleges and universities. This interesting discussion was consistent with those often generated from other HR groups about why their organizations feel uncomfortable moving forward on programs like paying for performance even when the business case is conclusive and powerful.

Here is an overview of the informal survey outcomes. Responses to the type of pay-for-performance were:

There were not significant differences between public and private institutions. However, public universities had more bits and pieces of a program, and private institutions either had an operational program or had interest in finding out more. Responses to the second question were about equal between employee satisfaction and productivity focus as the reason for implementing a pay-for-performance program.

The concern was that while some colleges and universities have the written materials and performance management tools of pay for performance, a difference exists between what they say they do and what they actually do. Having policies, procedures, and written programs is not the same as actually paying for performance, skill, and competence. The reasons given for the gap between knowing that paying for performance is the right thing to do and actually doing it were the following:

Lack of Sustained Commitment: All agree that getting strong and honest sponsorship from leadership levels is essential to making pay for performance a success. Changing pay is a “noisy” process and tests leaders’ commitment to provide role models and to support the program. Colleges and universities commonly have numerous HR initiatives—some are successful and some are not. Employees sometimes question commitment and say, ‘This too will pass.” Because changing pay is “hot change” (meaning it gets everyone’s attention quickly), many leaders feel more comfortable with “soft” changes that do not strongly impact the workforce—but are these soft changes real and meaningful positive changes?

Not the Way It Is Done Here: While HR professionals are encouraged about the opportunity to work with new entrants to change to a performance culture, they acknowledge a deeply-engrained entitlement mentality exists in many cases. The culture too often is not to address performance problems and not to align pay growth with skill and competency growth. Rather, the focus is on pay growth based on ever-inflating job description prose. “To get a raise, you write a new job description,” which does not support a performance culture. The question is can a better culture exist so rewarding performance becomes the way it is done here.

Not Enough Resources: While the consistent message is “We don’t have enough money to pay for performance” or “How we spend our pay dollars is governed by others and not for performance,” those who are committed say they find a way to pay for results, skill and competence. Although some acknowledge that the lack of resources is more of an excuse for not changing how pay is delivered, the belief is that there are not enough funds to do anything but distribute pay evenly without concern for individual differences. But, even if only $2.00 is available, should it not be granted to the best performers?

Aversion to Risk: While most feel there is more of a risk to getting and retaining high performers if they don’t pay for performance, skill and competence, all acknowledge college and university leaders may be averse to taking the risk of paying for performance. The universal belief is that the HR professional’s role in the arena of paying for performance is to educate leadership on how paying for results as well as for critical skill and competence is the lifeblood of successful talent management. The challenge is if leadership commitment can be sustained when “noise” from an entitled workforce suggests this change is not consistent with the original “deal” they got when hired.

Studying It to Death: Creating a task force/study group is viewed as a way difficult decisions like paying for performance are addressed in some instances. All agree the solutions should be a product of high involvement, but the case for paying for performance is so strong that any study should focus on how to implement it, not whether to do it (which is a leadership decision at the most senior policy levels). One approach is to hold the study group accountable for design, implementation, communications, and continuous improvement of the solution and have group members serve as advisors to leadership to monitor and maintain the process. The question is where is the line between studying it to death and getting participation so employees and the institution get a timely benefit from paying for performance.

The bottom-line from the session was that paying for performance represents the future for colleges and universities. Although the road may be full of ruts, HR professionals in this session believe that they share accountability with the leadership team for making such programs part of their organization’s future.

The CUPA-HR session on pay in colleges and universities focused on an interactive discussion of where actually paying for performance, skill, and competence was in these institutions. And what, if anything, HR professionals should do about it. Some of the reasons that paying for performance has such a powerful business case are the following realities that are supported by solid research and best practice in not-for-profit and for-profit businesses outside colleges and universities:

Compensation is commonly the largest or second largest opportunity cost of any organization. The business case for paying for performance suggests that aligning this major cost with measures of performance is the best way to manage pay for all stakeholders—employees, leaders, students and outside stakeholders as well.

Organizations that pay for performance are more likely to achieve their goals than are those that don’t. Paying for performance attracts and retains a larger share of the top-performing 20% of the talent pool in terms of skill, competence, and results—the best people and managers want to work where performance is rewarded.

Pay communicates organizational priorities and suggests to everyone “what is important here.” Not paying for performance results in paying for tenure, and pay becomes an entitlement. Paying for other than performance characterizes less-than-excellent-performing organizations.

Research and best practice suggest there is no valid reason to not pay for performance, regardless of the barriers to doing so. Paying for performance characterizes the best high-performance places to work and is the only way to create a performance culture where everyone can thrive to be excellent and add value to the organization.