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

Compensation isn’t an event. Compensation is an evolution, and your employees track it in the only way they can: by comparison. They will compare their current situation to their coworkers’, to others in their industry and locale, and even to their prior experiences. Research from CEB, a Washington-based best-practice insight and technology company, shows that job-hunting activity jumps 6% on the anniversary of the hire date, 9% on the anniversary of a promotion, 12% after a birthday, and 16% after a high school reunion. When you factor measured performance into your pay strategies, you’re providing favorable comparison points and supporting the evolution of both your employees and your organization.

Join Victoria Hodgkins of BambooHR and Cami DeFoor of PayScale as they explore the important relationship between pay and performance, with five important factors to consider when linking pay to performance.

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

  1. 1. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success Victoria Hodgkins Chief Marketing Officer BambooHR Cami DeFoor Director of Sales Training PayScale
  2. 2. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success 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 “ ”
  3. 3. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
  4. 4. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
  5. 5. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success • Regular Bonus • One-time Bonus • Variable (commission) • Yearly Raises Types of Pay for Performance
  6. 6. Five Main Factors
  7. 7. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success Cost Efficiency1
  8. 8. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success Recruiting & Retention2
  9. 9. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success 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.
  10. 10. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success 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
  11. 11. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success Moral Responsibility3
  12. 12. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success ACulture of Trust4
  13. 13. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success Three Keys to Building Trust 1. Repeat Interactions 2. Win-Win Situations 3. Effective Communication and Execution
  14. 14. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success • 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
  15. 15. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
  16. 16. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success Drives Results5
  17. 17. Compensation and Demographics
  18. 18. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success Age Baby Boomers · 1946 – 1964 Communication About Comp: Mostly Private Average Tenure: 15+ Years Career Mindset: Retirement, Work/Life Balance
  19. 19. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success Generation X & Busters · 1965 – 1983 Communication About Comp: Somewhat Private Average Tenure: 5+ Years Career Mindset: Management, Work/Life Balance Age
  20. 20. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success Gen Y & Millennials · 1984 – 2002 Communication About Comp: Public Average Tenure: 15 mos-2 Years Career Mindset: Go-Getters, Advancement, Flexibility Age
  21. 21. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success AgeBaby Boomers · 1946 – 1964 Communication About Comp: Mostly Private Average Tenure: 15+ Years Career Mindset: Retirement, Work/Life Balance Generation X & Busters · 1965 – 1983 Communication About Comp: Somewhat Private Average Tenure: 5+ Years Career Mindset: Management, Work/Life Balance Gen Y & Millennials · 1984 – 2002 Communication About Comp: Public Average Tenure: 15 mos-2 Years Career Mindset: Go-Getters, Advancement, Flexibility
  22. 22. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success Pay and Performance Management
  23. 23. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success Performance Management Challenges FREQUENCY TIME ACCURACY PURPOSE
  24. 24. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success Performance Management Challenges FREQUENCY
  25. 25. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success Performance Management Challenges TIME
  26. 26. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success Performance Management Challenges ACCURACY
  27. 27. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success Performance Management Challenges PURPOSE
  28. 28. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
  29. 29. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success • Individualized Rewards & Recognition • Variable or Incentive Pay Plan • Base Pay Plan • Company Culture, Compensation Philosophy & Compensation Strategy The Compensation Mix
  30. 30. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success Strategy • Develop Clear Compensation Strategy • Get Reliable Market Data • Develop Clear and Aligned Goals
  31. 31. Action Items
  32. 32. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success Performance Action Items 1. Measure Performance Accurately 2. Continue Clear Communication 3. Develop a Culture of Trust 4. Create Custom Solutions
  33. 33. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success 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
  34. 34. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success “Employees won’t believe there is a link between pay and performance unless they can see it.” —Margaret O’Hanlon, re:Think Consulting
  35. 35. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success 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?
  36. 36. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success Thanks for joining us today. Don’t forget to check out other webinars and eBooks that will help set you free to do great work! MoreGreatContent Managing Employee Turnover Comp Is Culture
  37. 37. bamboohr.com payscale.com Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success Follow BambooHR and PayScale on social media: bamboohr.com/blog | www.payscale.com/compensation-today Thank you!

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