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Strengthening the Link Between Pay & Performance Mykkah Herner, MA, CCP Manager of Professional Services PayScale, Inc. Karaka Leslie Partnership Manager PayScale, Inc. www.payscale.com
| Date post: | 05-Dec-2014 |
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Strengthening the Link Between Pay & Performance
Mykkah Herner, MA, CCP Manager of Professional Services PayScale, Inc. Karaka Leslie Partnership Manager PayScale, Inc.
www.payscale.com
www.payscale.com
14,000 PosiAons
2500 Customers
40 Million Salary Profiles
250 Compensable Factors
11 Countries
www.payscale.com
Agenda o What is Pay-‐for-‐Performance?
o Trends
o Why do Pay-‐for-‐Performance? o Barriers to Success
o Keys to Success
o Linking Pay to Performance o Strategy
o Base Pay
o Variable Pay
o Immediate AcAon
www.payscale.com
What is Pay-‐for-‐Performance?
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Pay-‐for-‐Performance (P4P)
Links pay (base and/or variable), in whole or
in part, to individual, group, and/or
organizaAonal performance. The World at Work Handbook of Compensa5on, Benefits & Total Rewards
by WorldatWork
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Market Trend: Ongoing Shi; Toward P4P
Source: HewiW Survey – U.S. Salary Increases 2009/2010 and Impact on Org Spend for 2010
When cra\ing next years budget vs. this year the use of Across the board increases down by 50% Use of Variable Pay has increased 300%
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2013 P4P PracAces
• Performance based pay increases are the #1 driver for pay raises in 2013
• 56% of companies say Performance is the
main reason for pay raises
• 71% give variable pay incenAves Source: 2013 PayScale CompensaFon Best PracFces Report
www.payscale.com
Why do Pay-‐for-‐Performance?
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Why Pay-‐for-‐Performance? The principle of it: o Employees who perform beWer should get paid beWer
Drives results: o Aligns employee performance to organizaAonal goals
MoAvates: o Employees work harder towards a common goal
Cost-‐effecAve: o P4P allocates labor dollars well, when company performance is good
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Barriers to Success
Three main impediments to success
o Lack of execuAve support o Lack of manager training
o Perceived budget restricAons
Performance management doesn’t ensure Pay-‐for-‐Performance
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Main Avenues to Success
o ExecuAve buy-‐in o Good P4P program design; fit with organizaAonal goals & culture
o Right systems in place
o Manager training
o Clear communicaAon across the organizaAon
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Linking Pay to Performance
“Employees won’t believe there is a link between pay and performance unless they can see it.”
Margaret O’Hanlon re:Think ConsulFng
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Linking Pay to Performance: Gelng the right mix Complexity of the mix…
Company Culture, CompensaFon Philosophy, & CompensaFon Strategy
Base Pay Structure
Variable or IncenFve Pay Structure
Individualized Rewards & RecogniFon
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Linking Pay to Performance: Strategy Develop clear compensaAon strategy o Define your market(s)
o Determine your level of compeAAveness
o Decide to reward performance in base and variable pay
Get reliable market data
Develop clear and aligned goals o Company or organizaAonal level
o Department or team level
o Individual level
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Linking Pay to Performance: Base Pay Structure
Merit Matrix
Manager Training
o Performance Management
o CommunicaAon
o Forced ranking?
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% pay increase based on Performance Metric
Source: InsFtute for Corporate ProducFvity
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Linking Pay to Performance: Variable Pay Plan Keep it Simple o Be able to explain your variable pay plan in a short paragraph
Ensure sound plan design o Make sure what you’re rewarding ulAmate moves the business forward
o Clarify who is eligible for the plan
o IdenAfy performance measurements
o Determine threshold of organizaAonal and/or individual success
o Establish your pay-‐out strategy
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Put it into AcAon
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Elementary • Work with senior leaders to define compensaFon strategy
• Build a compensaFon plan with reliable data
• Define SMART goals for employees
Intermediate • Build cascading goals linking employee goals to corporate strategy
• Invest in hiring and training good managers
• Re-‐visit your comp budgeFng process – P4P vs COLA
Advanced
• Find new and creaFve ways to incorporate variable pay
• Develop strong performance management system
• Build great differenFaFon between low and high performers
Immediate AcAon
PayScale Delivers Where Other CompensaAon Providers Fall Short PayScale leads the world in compensaFon knowledge with the freshest and most detailed data from over 36 million salary profiles. More than 2500 organizaFons use PayScale’s so;ware and intelligence to get the greatest return on their talent. Smart businesses use PayScale Insight to recruit, retain and moFvate their people. Visit our blog: www.payscale.com/compensaFon-‐today Join our Group on LinkedIN: CompensaFon Today: HR Best PracFces
Mykkah Herner, MA, CCP Manager of Professional Services PayScale, Inc. Karaka Leslie Partnership Manager PayScale, Inc.
www.payscale.com
