Paying for Contribution

1. Paying for Contribution

2. Rewarding Contribution
• What do we really mean by Contribution related pay and how is it
different from PRP?
• What are the key building blocks?
• What do you have to do to get this right?

3. What Do We Mean By Contribution Related
Pay?
• ‘a new concept in contingent pay design which links pay both to
performance, as measured by results, and competence’

4. How Much Of It Is There About? (2)
‘Paying for contribution will be the most popular method of rewarding managers
and staff. Such an approach reflects a general dissatisfaction with flat rate market
rises ……. but it also reflects problems experienced with pay progression linked
solely to individual performance (outputs) with no appreciation of how they are
achieved, and with progression exclusively linked to skills or competencies
(inputs) with no recognition of results.’
CIPD Reward Management Survey 2004

5. A New Direction?
• People as costs
• Tends to focus on individual
• One Dimensional results focus
• Rewards immediate past performance
• Little recognition of motivation
research
• Or the key role of line managers
• Simplistic
• Tends to be controlled by HR
• Pay links usually a fixed formula
• Discretionary effort-people as assets
• Focus on team and individual
• Investment in skills/behaviours for the
future
• Results matter too – but look at
interdependencies
• Draws on commitment/
engagement/motivation research
• Capability is crucial
• Tends to be owned by users
• Variety of reward methods
FROM
Pay for performance
TO
Pay for Contribution

6. Key Elements
• Constructive focus
• Clear rules of the game on personal and pay progression
• Based on:
• an agreement on deliverables/results
• and
• acquisition and use of competences required for current role e.g. IT skills
• behaviours acknowledged as key to success (e.g. customer orientation, respect for others,
partnership working, developing others)
• base pay progression and variable pay – best fit for level/role
• Performance management as the key vehicle for continuing dialogue on delivery
and development

7. • Establishing individual/team objectives
• Describing job expectations
• Describing competencies and planning
improvements
• Describing tasks
• Training and development planning
• Agreeing performance standards
• Coaching
• Counselling
• Feedback and day-to-day planning
meetings
• Self monitoring
• Monitoring training & development
activities
• Formal review of performance
• Performance measurement
• Formal team feedback sessions
• Individual self-review
• Peer group and upwards appraisal
• 360 degree
• Praise
• Promotion/Job enrichment
• Links to individual and/or team pay
• Prizes
• Special Awards
• Other forms of recognition
Managing
Performance
Reviewing
Performance
Planning
Performance
Rewarding
Performance
A
‘Virtuous Cycle’
A Reminder About Performance Management

8. High
High
Impact on the
Organisation
Low
An ongoing
Management Process
(2)
Competency Based
(‘Mixed Model’)
(3)
Organisation/Culture
Change Process
(5)
Level of Intervention
Degree of integration with other
HR and related processes/
Management Capability
‘A once a Year
Event
(1)
Holistic
Process
(4)
The Impact of Performance Management
AIMS
Feature
of PM
Process
‘We want to
improve our skills
in objective
setting/appraising’
‘Once a year event’
• Not integrated
• Little managing
of performance
‘We want to
improve our
appraisal scheme’
‘We want to
integrate
competencies and/or
skills in our appraisal
process’
‘We want to ink up our
PM process to other
initiatives/ processes
e.g. Investors in People,
Business Process Re-
design, Business
Planning, EFQM
‘We want to transform
how we operate’
Business Process Re-
engineering
‘An integrated
management process
covering four phases –
Planning, Managing,
Reviewing and
Rewarding
A competency-based
integrated PM
process
A holistic process with
explicit links to other
initiatives/ processes
360 feedback usually
involved
PM process part of an
integrated HR project –
Pay, Work Definition,
Organisation Change,
Benefits Management

9. And The Impact On Pay ….
Not
Relevant
Manage
Exceptions
Only
Decisions
on Rating
Rating
and Pay
Total
Ownership
Fixed
Increments
Flexible
Increments
Pay
matrix
Flexible
Guidelines
Line Management
held Budget
Strength
of Message
Management
Capability
HIGH
HIGH Pay Progression Mechanism
LOW

10. Making Contribution related pay work
requires:
• Clarity about organisational strategy and plans and requirements they will make
on:
• Departments, teams and individuals
• Values that recognise that ‘how’ can be as or more important as ‘what’
• Skill/competence frameworks that support delivery and are well understood
• Learning and development resources
• Sound performance management processes
• Clear pay progression rules linked to roles/levels (often in job families)
• Capable managers who praise achievement and confront contribution shortfalls

11. Getting The Detail Right (1)
• Are your skill/competence/competency frameworks good enough?
i.e.
• specific to role/job or career family
• linked to skills/behaviours associated with high quality delivery
• designed and used to support learning and development, recruitment
AND assessment of contribution
• supportive of your organisation’s change and transformation agenda
• Clearly communicated and understood

12. Competencies – A Reminder
Social Role
How I see my job
Self Image
What I value in myself
My Traits
My non-conscious patterns of behaviour
My Motives
Where my excitement comes from
Expert
Best in field
Aloof
Achievement
Helps people get better
Healer
Sitting by bed
Power
Outcomes
More re-admissions Earlier discharge
Dr Sharpe Dr Hart
2.2/8
Same
Same
Skills
What I can do
Knowledge
What I know
Social Role
How I see my job
Self Image
What I value in myself
My Traits
My non-conscious patterns of behaviour
My Motives
Where my excitement comes from
Expert
Best in field
Aloof
Achievement
Helps people get better
Healer
Caring
Power
Outcomes
More re-admissions
More re-admissions Earlier discharge
Earlier discharge
Dr Sharpe Dr Hart
Dr Sharpe Dr Hart
Same
Same
Skills
What I can do
Knowledge
What I know

13. Getting The Detail Right (2)
• Performance Management
• ‘Just in time’ Training/Communication, Competence – Confidence – Trust – Engagement.
• Focus on coaching/regular feedback.
• Appreciative enquiry –’what would be happening if this area of contribution was going well –
what would you/others be doing to create success?
• Focus on raising rather than rating contribution (a besetting sin of PRP).
• Recognition that managers and their people raise contribution levels – pay systems and
performance management forms/systems cannot do this.
• It is the quality of dialogue not the elegance of the paperwork that matters.
• Reward should support this.

14. Contribution Rating
• Rating is only important where contribution level is directly linked to pay decisions.
• The approach to “rating” depends on the purpose and emphasis of the performance
management process:-
Organisational
Contribution
Individual Development
Quantitative Judgments
Qualitative Indicators
Individual Remuneration
A 1 + 2 Outstanding Exceptional contribution
B 2 + 1 Superior Consistently high level of contribution
C 3 0 Fully Acceptable A good year’s work
D 4 - 1 Incomplete Acceptable contribution, some shortcomings
E 5 - 2 Marginal/Not Proven Contribution less than acceptable/learner/ achiever
• Where rating is judged essential, a 5-point scale is often used. This may be expressed in
numbers, letters and descriptors e.g.
• Words and psychology matter a lot!

15. Pulling It All Together
• Capability building will be key especially for line managers.
• Decide how this approach fits with the current culture, strategy and
existing processes.
• Start paying for personal contribution as soon as this makes sense.
• Consult, involve and put ‘L plates’ on what you do – everyone stands
to learn.
• Communicate early and often.
• Top team clarity & commitment is crucial.