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Perfecting Pay for Performance

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  • 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. 14,000  PosiAons   2500  Customers   40  Million  Salary   Profiles   250  Compensable   Factors   11  Countries   www.payscale.com  
  • 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. What  is     Pay-­‐for-­‐Performance?   www.payscale.com  
  • 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. 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. 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. Why  do     Pay-­‐for-­‐Performance?   www.payscale.com  
  • 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. 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. 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. Linking  Pay  to   Performance   www.payscale.com  
  • 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. 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. 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. Linking  Pay  to  Performance:   Base  Pay  Structure   Merit  Matrix       Manager  Training   o  Performance  Management   o  CommunicaAon   o  Forced  ranking?   www.payscale.com  
  • 17. %  pay  increase  based  on   Performance  Metric     Source:  InsFtute  for  Corporate  ProducFvity   www.payscale.com  
  • 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. Put  it  into  AcAon   www.payscale.com  
  • 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. 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