Paying for Performance: a Critical Tool to Fuel Both Individual and Organizational Success

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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success

Victoria HodgkinsChief Marketing Officer

BambooHR

Cami DeFoorDirector of Sales Training

PayScale



What is Pay for Performance?

Links pay (base and/or variable), in

whole or in part, to individual, group,

and/or organizational performance.

—The World at Work Handbook of Compensation,

Benefits & Total Rewards

“

”



• Regular Bonus

• One-time Bonus

• Variable (commission)

• Yearly Raises

Types of Pay for Performance

Five Main Factors



Cost Efficiency1



Recruiting & Retention2



The Hidden Costs of Turnover

• Administrative Costs: separation pay, exit interviews

• Workload Costs: Extra hours, overtime pay, temp help

• Recruiting Costs: Advertising, referral bonuses, interview time

• Productivity Costs: Covering for missing employees

• Training Costs: Time to contribution, trainer’s hours

Turnover costs are, on average, between six and nine months’ of an employee’s salary.



Epiphany Moments

• 6% increase on the anniversary of a hire date

• 9% increase on the anniversary of a promotion

• 12% increase after birthdays, especially milestone birthdays

• 16% increase after attending a high school reunion

Job-hunting activity jumps when employees make comparisons.

Research from CEB, as reported in Harvard Business Review



Moral Responsibility3



A Culture of Trust4



Three Keys to Building Trust

1. Repeat Interactions

2. Win-Win Situations

3. Effective Communication and Execution



• Two factors: hygiene factors and motivation factors

• Hygiene factors: salary, benefits, safety

• Motivation factors: expression, purpose, friendship

• Decreasing dissatisfaction with hygiene factors is the

foundation for increasing satisfaction through higher motivations

like an effective company culture and a fulfilling career path

Herzberg’s Theory



Drives Results5

Compensation and Demographics



Age

Baby Boomers · 1946 – 1964Communication About Comp: Mostly Private

Average Tenure: 15+ Years

Career Mindset: Retirement, Work/Life Balance



Generation X & Busters · 1965 – 1983Communication About Comp: Somewhat Private


Career Mindset: Management, Work/Life Balance

Age



Gen Y & Millennials · 1984 – 2002Communication About Comp: Public

Average Tenure: 15 mos-2 Years

Career Mindset: Go-Getters, Advancement, Flexibility

Age



AgeBaby Boomers · 1946 – 1964Communication About Comp: Mostly Private


Career Mindset: Retirement, Work/Life Balance

Generation X & Busters · 1965 – 1983Communication About Comp: Somewhat Private


Career Mindset: Management, Work/Life Balance

Gen Y & Millennials · 1984 – 2002Communication About Comp: Public

Average Tenure: 15 mos-2 Years

Career Mindset: Go-Getters, Advancement, Flexibility



Pay and Performance Management



Performance Management Challenges

FREQUENCY TIME ACCURACY PURPOSE




FREQUENCY




TIME




ACCURACY




PURPOSE



• Individualized Rewards & Recognition

• Variable or Incentive Pay Plan

• Base Pay Plan

• Company Culture, Compensation

Philosophy & Compensation Strategy

The Compensation Mix



Strategy

• Develop Clear Compensation Strategy

• Get Reliable Market Data

• Develop Clear and Aligned Goals

Action Items



Performance Action Items

1. Measure Performance Accurately

2. Continue Clear Communication

3. Develop a Culture of Trust

4. Create Custom Solutions



Compensation Action Items

1. Gain Executive Buy-In

2. Align with Organization Goals/Culture

3. Get the Right Systems in Place

4. Train Managers Properly

5. Communicate Clearly Across the Organization



“Employees won’t believe there is a link between pay

and performance unless they can see it.”

—Margaret O’Hanlon, re:Think Consulting



BambooHR

Download our new Definitive Guide to Performance Management

https://www.bamboohr.com/resources/ebooks/definitive-guide-to-performance-management

Get the free whitepaper on Pay and Performance

PayScale

Visit http://www.payscale.com/hr/whitepapers

Questions?

https://www.bamboohr.com/resources/ebooks/definitive-guide-to-performance-management

http://www.payscale.com/hr/whitepapers



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Paying for Performance: a Critical Tool to Fuel Both Individual and Organizational Success

Recruiting & HR

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