Strengthening	
  the	
  Link	
  
Between	
  Pay	
  &	
  
Performance	
  
Mykkah	
  Herner,	
  MA,	
  CCP	
  
Manager	
  of...
14,000	
  PosiAons	
  
2500	
  Customers	
  
40	
  Million	
  Salary	
  
Profiles	
  
250	
  Compensable	
  
Factors	
  
11...
Agenda	
  
o  What	
  is	
  Pay-­‐for-­‐Performance?	
  
o  Trends	
  

o  Why	
  do	
  Pay-­‐for-­‐Performance?	
  
o  Ba...
What	
  is	
  	
  
Pay-­‐for-­‐Performance?	
  

www.payscale.com	
  
Pay-­‐for-­‐Performance	
  (P4P)	
  
Links	
  pay	
  (base	
  and/or	
  variable),	
  in	
  whole	
  or	
  
in	
  part,	
 ...
Market	
  
Trend:	
  
Ongoing	
  
Shi;	
  Toward	
  
P4P	
  

When	
  craing	
  next	
  years	
  budget	
  vs.	
  this	
  ...
2013	
  P4P	
  PracAces	
  
•  Performance	
  based	
  pay	
  increases	
  are	
  the	
  #1	
  
driver	
  for	
  pay	
  ra...
Why	
  do	
  	
  
Pay-­‐for-­‐Performance?	
  

www.payscale.com	
  
Why	
  Pay-­‐for-­‐Performance?	
  
The	
  principle	
  of	
  it:	
  	
  
o  Employees	
  who	
  perform	
  beWer	
  shoul...
Barriers	
  to	
  Success	
  
Three	
  main	
  impediments	
  to	
  success	
  
o  Lack	
  of	
  execuAve	
  support	
  
o...
Main	
  Avenues	
  to	
  Success	
  
o  ExecuAve	
  buy-­‐in	
  
o  Good	
  P4P	
  program	
  design;	
  fit	
  with	
  
or...
Linking	
  Pay	
  to	
  
Performance	
  

www.payscale.com	
  
“Employees	
  won’t	
  believe	
  there	
  is	
  a	
  
link	
  between	
  pay	
  and	
  performance	
  
unless	
  they	
  ...
Linking	
  Pay	
  to	
  Performance:	
  
Gelng	
  the	
  right	
  mix	
  
Complexity	
  of	
  the	
  mix…	
  

Individuali...
Linking	
  Pay	
  to	
  Performance:	
  
Strategy	
  
Develop	
  clear	
  compensaAon	
  strategy	
  
o  Define	
  your	
  ...
Linking	
  Pay	
  to	
  Performance:	
  
Base	
  Pay	
  Structure	
  
Merit	
  Matrix	
  
	
  
	
  
Manager	
  Training	
 ...
%	
  pay	
  increase	
  based	
  on	
  
Performance	
  Metric	
  	
  

Source:	
  InsFtute	
  for	
  Corporate	
  ProducFv...
Linking	
  Pay	
  to	
  Performance:	
  
Variable	
  Pay	
  Plan	
  
Keep	
  it	
  Simple	
  
o  Be	
  able	
  to	
  expla...
Put	
  it	
  into	
  AcAon	
  

www.payscale.com	
  
Immediate	
  AcAon	
  
Elementary	
  
• 

Work	
  with	
  senior	
  leaders	
  to	
  define	
  compensaFon	
  strategy	
  
...
PayScale	
  Delivers	
  Where	
  Other	
  CompensaAon	
  Providers	
  Fall	
  Short	
  
PayScale	
  leads	
  the	
  world	...
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Perfecting Pay for Performance

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Perfecting Pay for Performance

  1. 1. 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    
  2. 2. 14,000  PosiAons   2500  Customers   40  Million  Salary   Profiles   250  Compensable   Factors   11  Countries   www.payscale.com  
  3. 3. 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  
  4. 4. What  is     Pay-­‐for-­‐Performance?   www.payscale.com  
  5. 5. 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   www.payscale.com  
  6. 6. Market   Trend:   Ongoing   Shi;  Toward   P4P   When  craing  next  years  budget  vs.  this  year  the  use  of     Across  the  board  increases  down  by  50%   Use  of  Variable  Pay  has  increased  300%   Source:    HewiW  Survey  –  U.S.  Salary  Increases  2009/2010  and  Impact  on  Org  Spend  for  2010   www.payscale.com  
  7. 7. 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  
  8. 8. Why  do     Pay-­‐for-­‐Performance?   www.payscale.com  
  9. 9. 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     www.payscale.com  
  10. 10. 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   www.payscale.com  
  11. 11. 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   www.payscale.com  
  12. 12. Linking  Pay  to   Performance   www.payscale.com  
  13. 13. “Employees  won’t  believe  there  is  a   link  between  pay  and  performance   unless  they  can  see  it.”     Margaret  O’Hanlon   re:Think  ConsulFng  
  14. 14. Linking  Pay  to  Performance:   Gelng  the  right  mix   Complexity  of  the  mix…   Individualized  Rewards  &  RecogniFon   Variable  or  IncenFve  Pay  Structure   Base  Pay  Structure   Company  Culture,  CompensaFon   Philosophy,  &  CompensaFon  Strategy   www.payscale.com  
  15. 15. 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   www.payscale.com  
  16. 16. Linking  Pay  to  Performance:   Base  Pay  Structure   Merit  Matrix       Manager  Training   o  Performance  Management   o  CommunicaAon   o  Forced  ranking?   www.payscale.com  
  17. 17. %  pay  increase  based  on   Performance  Metric     Source:  InsFtute  for  Corporate  ProducFvity   www.payscale.com  
  18. 18. 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   www.payscale.com  
  19. 19. Put  it  into  AcAon   www.payscale.com  
  20. 20. Immediate  AcAon   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   www.payscale.com  
  21. 21. 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    
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