Article by David Bratton from http://hr-info.com <link updated to site home>
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Linking Pay to Performance
by David A. Bratton
Most Human Resource professionals are familiar with the concept of strategy. There is much more concentration and focus today on the strategic outcomes of human resource activity than ever before. The area of compensation is no exception.
Pay for performance systems are becoming more and more popular as senior managers reach beyond the use of compensation systems to deliver pay. There is far more interest in more closely linking the reward mechanisms to the achievement of corporate objectives. Motivation for superior performance is the goal. The subject of my article is - linking pay and performance through the use of financial incentives as a strategic, motivational tool.
In my experience, most organizations will profess to a "pay-for-performance" philosophy as a keystone of their compensation system. Such a system requires solid grounding in a clear and documented link between performance and salary increases. Unfortunately, the link between individual performance and pay is frequently nonexistent - "merit" pay is a hollow concept in this regard.
Why is this the case? Well, a merit system demands that managers be willing to make distinctions in merit increases based on performance. However, several factors get in the way of this happening.
First, the annual salary change is usually a small percentage. Giving the better performer 2% more than the cost of living has little motivation or recognition attached to it. Similarly giving the poor performers 2% less than the cost of living increase isn't that much of a penalty. So many managers don't make that distinction - it's too much hassle. So everybody gets the same increase.
PROGRESS ENTERPRISE
<link outdated-removed>
From Australia, Ballarat
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Linking Pay to Performance
by David A. Bratton
Most Human Resource professionals are familiar with the concept of strategy. There is much more concentration and focus today on the strategic outcomes of human resource activity than ever before. The area of compensation is no exception.
Pay for performance systems are becoming more and more popular as senior managers reach beyond the use of compensation systems to deliver pay. There is far more interest in more closely linking the reward mechanisms to the achievement of corporate objectives. Motivation for superior performance is the goal. The subject of my article is - linking pay and performance through the use of financial incentives as a strategic, motivational tool.
In my experience, most organizations will profess to a "pay-for-performance" philosophy as a keystone of their compensation system. Such a system requires solid grounding in a clear and documented link between performance and salary increases. Unfortunately, the link between individual performance and pay is frequently nonexistent - "merit" pay is a hollow concept in this regard.
Why is this the case? Well, a merit system demands that managers be willing to make distinctions in merit increases based on performance. However, several factors get in the way of this happening.
First, the annual salary change is usually a small percentage. Giving the better performer 2% more than the cost of living has little motivation or recognition attached to it. Similarly giving the poor performers 2% less than the cost of living increase isn't that much of a penalty. So many managers don't make that distinction - it's too much hassle. So everybody gets the same increase.
PROGRESS ENTERPRISE
<link outdated-removed>
From Australia, Ballarat
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