In response to a member request for information about pay for performance, I have attempted to round up a collection of relevant resources.

First and foremost – before pay for performance is implemented – all aspects of the performance management process must be working smoothly. Employees need to feel that they are evaluated fairly before they can be comfortable with the idea of pay for performance.

Secondly, employees must be clear about what is expected of them and how compensation will be tied to their performance, a point that Shari Cooper explains in Canadian Business Online. Cooper also provides a list of “dos and don’ts” in her article.

For further reading:

The book Rewarding Excellence by Edward Lawler is a "must read".

If you missed David Creelman’s recent webcast on the topic – you can still listen to the archive.

Kevin Dobbs gives advice about using a technology based compensation management system in Talent Management Magazine.

The PricewaterhouseCoopers report Paying for Performance studies the use of pay for performance in US and UK healthcare systems.

To read about the pitfalls from the perspective of a physician, see The New York Times article by Sandeep Jauharb.

A common thread in many of the publications is the need for good metrics.

For information on how to identify metrics, see the Schuster and Zingheim article Measuring and Rewarding Customer Satisfaction, Innovation and Workforce Engagement. The book summary for High-Performance Pay also contains many practical suggestions. Both are available at Schuster and Zingheim Associates Inc.

The Mercer report Executive Remuneration Perspective: The Seven Deadly Sins of Performance Measurement warns of what to avoid when selecting performance measures and defines “the seven virtues of performance measurement.”

WorldatWork shares a Total Rewards Inventory; a helpful checklist.

And for a discussion about including human capital in financial measurement, read the article by Lowell Bryan and Claudia Joyce in the University of Toronto’s Rotman Magazine.

One thing that is clear, pay for performance requires an investment of resources up front to get it right.

References:

Bryan, Lowell and Claudia Joyce. “Financial Performance Measurement for the 21st Century.” Rotman Magazine, Fall 2008, pp. 15-19.

Cooper, Shari. “A better bonus structure.” Canadian Business Online [www.canadianbusiness.com]. May 16, 2007.

Dobbs, Kevin. “Strategic Compensation: Pay for Performance.” Talent Management Magazine [www.talentmgt.com]. May, 2006.

Ferguson, Will. Executive Remuneration Perspective. US: Mercer LLC, 2008.

Jauharb, Sandeep. “The Pitfalls of Linking Doctors’ Pay to Performance.” The New York Times, September 8, 2008.

PricewaterhouseCoopers. “Paying for Performance” [www.pwc.com]. 2008.

WorldatWork. Total Rewards Inventory. Scottsdale, AZ: WorldatWork, 2007.

Zingheim, Patricia K. and Jay R. Schuster. “Measuring and Rewarding Customer Satisfaction, Innovation and Workforce Engagement.” WorldatWork Journal, Fourth Quarter 2007, Volume 16, No. 4, PP. 8-22.

Zingheim, Patricia K. and Jay R. Schuster, WorldatWork. “High-Performance Pay.” BusinessSummaries.com [www.schuster-zingheim.com]. 2007.