Is designing a pay-for-performance (PFP) program that worksand works well for the long haulas complex as it seems and beyond the reach of all but the most bold and brave? Not at all; in fact, it comes down to following the best practices of organizations that have already made the successful journey to a 'high-performance workplace' supported by really paying for performance.
It's very straightforward. Everybody agrees that paying for performance is the thing to doit's a very obvious concept. However, there is a huge gap between knowing and doing. However the motivation for HR leaders has never been more than presently because many need to show how they add value to the bottom line of the businessand paying for performance is a proven success formula.
The way to make it work is to pattern the 'how to' after other journeys to create a performance culture through paying for performance followed in the past. It involves some steps and process that are obvious and some that may not be as easy to define. It involves doing what is needed to create a performance culture that is a 'win-win' for both the organization and the workforce based on sharing success and when trouble comes to pass share the responsibility of 'righting the ship' as stakeholders in the future. Lot of great 'words' but the direction is very sound.
Use a PFP plan design team.
Workforce and leadership involvement is a key to acceptance and success. A team to lead the journey to paying for performance should consist of more than HR folks and top executives. You also want to involve line managers and employees. Your leadership team helps design the program but especially if there is a high level of front-line involvement at the company, you should involve employees as well. The more people you get involved in the design process from the start and the more time you spend on that process, the greater acceptance there will be throughout the organization.
If managers and workforce members help design the programs many will become active "goodwill ambassadors for the PFP plan, communicating it to their peers and winning that all-important inputand buy-inat every level of the company. Leaders don't want HR to do all the communicating about the plan. They want managers and employees to communicate. This is clearly the best way to get sponsorship for something that makes practical sense and to communicate effectively the business case for this initiative. .
Establish the objective(s) of your plan.
To get anywhere you must have the leadership team define the objectives of plan of actionwhy are we doing this and where is the benefit. Keep these objectives very clear and simple. For example the goal of PFP can be , improving quality, productivity, or customer satisfaction. You need to ask and answer the basic question, 'What are we trying to accomplish?' The answers are the foundation of the communications strategy to be fashioned and delivered.
The ultimate goal of paying for performance means designing pay systems that reward performance on the basis of overall business goals, Schuster and Zingheim explain. You can focus on one or all or the following goal categories:
Source: Patricia K. Zingheim and Jay R. Schuster, Pay People Right! Breakthrough Reward Strategies to Create Great Companies, Jossey-Bass, 2000.
Identify Key Talent
Leaders must want to identify and reward the "superkeepers, These are the employeesat every level and functional areathey are the highest and most consistent performers with the essential skill and competency and most key to achieving the goals established for the PFP program. Find out who adds the most value and is the most critical to retain, These are the most important people and should have first call on reward dollars.
Defining what a 'superkeeper' is businesses must be as specific as possible so the criteria are clear and transparent to all workforce members. The business needs to get more customers. Or the business needs to build products of higher quality. Which people most influence the goal you are trying to achieve? Which add the most value to this area? Which people do you reward to make a difference? These are the "superkeepers and the focus of creating a performance culture with pay and rewards adding business value.
Here is a question we get asked a lot and answering it is critical. What do we do with everyone else? You need to have the grit to make this work. You may have to withhold bonuses and juicy pay increases from the lowest contributors to make sure you are appropriately rewarding your "superkeepers . Don't focus metrics only on the mechanics of the jobinstead, link them to business results. You want employees to think, 'My job is to add value to the business and help it be successful. I'm trying to improve quality so the company will be a more competitive business and more successful for the long term,'
Whatever competencies and metrics you decide to use to measure performance, make sure they are aligned with and cascade from the overall organization's goals and calibrate performance levels across the organization. If you want to raise the bar on performance, it should be raised across the board, The message you want to communicate through your metrics is, 'When the business wins, you win.' You also want to make sure your customers, shareholders and other stakeholders win as well. The performance measures that will be most effective are the ones employees can directly influence to make the business successful, Zingheim notes.
Educate on Meaning
Educate employees about the measures by which their performance will be assessed as part of the PFP program. This education process should occur in parallel to the PFP design process. It is important that the performance measures don't come to employees out of the blue. Once they know about the performance measures, they will be able to drive them to achieve rewards. Tell them, 'We want to reward you. This is what you need to do to gain the rewards.' Again, it's critical to answer the question that will be on employees' minds: What's in it for me if I help you improve these measures? Track the key performance measures and post them on a regular basis so employees can see progress toward goalsand see where they are falling short.
Since managers and supervisors will be implementing the program, they need to thoroughly understand how to evaluate employee performance and make recommendations for rewards. Once they've been trained, Hold managers accountable for differentiating pay and making a business case for their decisions, The program works when there are meaningful variations in pay, with significant rewards for high performance. Managers and supervisors also need to be trained in helping employees understand how the PFP process works, why it is important for them to help the business be successful, why they have or have not merited a reward. "Pay for performance is a leadership tool, not an HR tool. Make sure employees receive a lot of individual feedback, she advises.
Look at last year's performance results
When considering various reward schemes, consider the performance results your organization attained last year and assess how your proposed PFP plan would have impacted those results. Would you have had the gain in performance are you looking for? If not, you need to adjust your plan.
Only organizations that are successful can afford the best peopleand high performers make businesses a success. Before you roll out your PFP plan to all the employees you would like to include, try it out with a group of employees. See whether the approach you are planning to take yields the desired performance results. Meet with the group of employees and get their feedback. Find out what they felt worked and what fell flat. Incorporate their feedback into your final plan, get final sign-off from the executive team, and roll out the program.
Evaluate PFP Plans
Perform your first evaluation of the PFP program after the first quarter, or three-month period after implementation. In assessing results, you need to askand answerthe following questions:
1) Are we tracking to our goals? For example, has customer service improved, and by the proper increment?
2) Is there a measurable correlation between improved performance and the pay program?
3) Is there a reasonable rewards-results relationship? Are the right employees being rewarded, and are their rewards substantially differentiated from what other employees are receiving?
4) Are managers supporting and communicating the PFP program? Are they engaging employees and keeping the program on track? Are they celebrating successes, building motivation and enthusiasm among their employees?
5) Do employees understand the program? Do they know exactly what they have to do to obtain rewards?
6) Are employees accepting the program? Are they resistant?
7) Do employees feel that they are getting a fair return for their efforts?
Are they motivated by their pay? "You don't want pay to be a slam-dunk entitlement, but you also do not want performance goals to be too hard to reach, Zingheim stresses.
8) Do we need more communication? Are employees confused about the PFP program?
9) Is employee engagement stronger? Are employees more involved and interested in the business? Do they have a better understanding of how they fit into the business?
10) What are the unintended consequences of the PFP program? For example, if you are using team incentives, has infighting stopped because employees are all focused on a common goal and it behooves them to cooperate with one another in order to meet that goal? Or perhaps you intended to improve quality but productivity also improved in the process.
11) Is there less turnover, or are more employees jumping ship?
12) Have barriers between manager and employees broken down?
13) Has the work environment improved? Is morale higher, and is a healthier culture prevailing?
The answers to these questions will help you identify problems in your PFP program and make the necessary improvementsand build on your successes. Conduct a formal, thorough evaluation of the PFP program every year. If it is doing what needs doing changes may not be neededbut agility is critical and goals and priorities need constant updating.
