Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Making Compensation Simpler amid a Changing Performance Management Paradigm

866 views

Published on

Over the last few years the discussion about scaling back the traditional performance management process has been heating up. In a recent Firing Line interview Josh Bersin reveals to Bill Kutik that fewer than 15% of organizations believe that the time they spend on performance management today is worth the amount of time they spend on it.

One of the first line items to get vetoed from traditional performance management is the concept of rating individual employees. This leaves organizations that are eager to embrace this revolution in performance management scrambling to answer one important question: How does the trend toward reducing the emphasis on performance rankings/ratings impact pay for performance?

In the past employee rankings and ratings were used to develop merit matrices to support pay-for-performance. But as organizations operate in a more agile work environment, the traditional models of merit-pay-increases and market-value compensation have the potential to introduce rigidities into rewarding top talent for high performance and retaining high-potential employees for future leadership development.

This webcast will discuss the pros and cons of alternative ways of managing pay-for-performance and present a simpler approach to compensation.

Published in: Recruiting & HR
  • Be the first to comment

  • Be the first to like this

Making Compensation Simpler amid a Changing Performance Management Paradigm

  1. 1. HCI #HCIchat Making Compensation Simpler amid a Changing Performance Management Paradigm
  2. 2. HCI #HCIchat Today’s Moderator @AndyWebcast Andrew Bateman Online Content and Community Director The Human Capital Institute
  3. 3. HCI #HCIchat THANK YOU www.saba.com
  4. 4. HCI #HCIchat CHAT with us - Don’t forget to attach your name to your comment (Like This) REGISTER for our polling application and make your voice heard on the webcast For a PDF copy of the slides used during this webcast – Click the button marked SLIDES
  5. 5. HCI #HCIchat Today’s Featured Guests Stephanie Thomas Research Associate Institute for Compensation Studies, ILR School Cornell University Linda Barrington Executive Director, Institute for Compensation Studies, ILR School Cornell University
  6. 6. Variable Pay and Incentive Plans are Growing 47% of business establishments surveyed had some variable pay plan in 2003 including production-related payments, nonproduction bonuses and wage add-ons. www.bls.gov 32% of U.S. employees reported that some portion of their pay/compensation was dependent upon individual performance or productivity targets in 2013. www.kellyocg.com The percentage of organizations using variable pay grew to 82% in 2012, up from 79% in 2011. www.shrm.org KELLY GLOBAL WORKFORCE INDEX™
  7. 7. Poll Question #1 In the last three years, how has the use of variable pay changed in your organization? • Driven deeper down into lower levels of the organization • Expanded to encompass a greater percentage of employee compensation • More strongly linked to strategic goals • Used less • No Change
  8. 8. Poll Question #2 Within my organization, we track and measure the alignment between performance ratings and compensation decisions. • Agree • Disagree
  9. 9. Performance and Pay Alignment Needs Work Source: Mercer’s Global Performance Management Survey, 2013
  10. 10. Low Potential High Potential High Performance Regularly exceeds expectations Lacks skills for success at higher level Sets standard of excellence in role Model leadership candidate Low Performance Little-to-no aptitude Weak, unsatisfactory performance Above-average aptitude Inconsistent performance High Performers vs High Po’s? Figure 1: Typical traits of performance vs. potential. Assessing Performance vs. Potential Source: “High Potentials vs. High Performers: A Manager’s Guide to Identify, Assess and Develop,” October 26, 2012 by Kyle Lagunas. http://new-talent-times.softwareadvice.com/high-potentials-vs-high-performers-a-managers- guide-to-identify-assess-and-develop-1081012/
  11. 11. 0 10 20 30 40 50 60 year 1 year 2 year 3 year 4 year 5 year 6 Potential Hi-Po Performance Hi-Po Performance Other Paying for Potential is an “investment strategy” where you expect to earn a profitable future return (pay now, gain later) Paying for Potential and Performance? Source: Institute for Compensation Studies, School of Industrial and Labor Relations, Cornell University, 2015
  12. 12. 0 10 20 30 40 50 60 year 1 year 2 year 3 year 4 year 5 year 6 Potential Hi-Po Performance Hi-Po Performance Other Want to pay something now above actual performance, because future potential will “pay back” the current investment Paying for Potential and Performance? Paying for Potential is an “investment strategy” where you expect to earn a profitable future return (pay now, gain later) Additional “profit” made from performance of Hi-Po if paid same as others Source: Institute for Compensation Studies, School of Industrial and Labor Relations, Cornell University, 2015
  13. 13. Organizational Justice Theory Distributive Justice Procedural Justice Interactional Justice Informational Justice
  14. 14. Distributive Justice Perceived fairness of the actual outcome • Did I receive what I should have received? Was the pool of bonus money distributed among the eligible employees equitably, given our policies and procedures?
  15. 15. Procedural Justice Perceived fairness of the policies and procedures used to arrive at the actual outcome • Was what I received determined fairly? Do the policies and procedures we use to distribute the pool of bonus money affect different groups of employees differently?
  16. 16. Interactional Justice Perceived fairness of the treatment received in the application of the actual outcome Was I treated with politeness, dignity and respect?
  17. 17. Informational Justice Perceived fairness or adequacy of the information provided regarding the actual outcome Do I understand how what I received was determined?
  18. 18. Informational Justice Perceived fairness or adequacy of the information provided regarding the actual outcome Do I understand how what I received was determined?
  19. 19. Poll Question #3 Which aspect(s) of organizational justice does your organization do really well? (check all that apply) • Distributive • Procedural • Interactional • Informational
  20. 20. Employee Perceptions of Internal Equity Distributive • Strongly associated with satisfaction regarding an individual’s own outcomes (i.e., pay satisfaction) Procedural • Somewhat associated with satisfaction regarding an individual’s own outcomes • Strongly associated with organizational commitment and trust in supervisorSOURCE: Folger and Konovsky, “Effects of Procedural and Distributive Justice on Reactions to Pay Raise Decisions” Academy of Management Journal, Vol. 32, No. 1 (March 1989), pp. 115-130
  21. 21. Takeaways & Considerations • Pros can be cons and cons can be pros – it depends on the organization and the situation
  22. 22. HCI #HCIchat Questions? Stephanie Thomas Research Associate Institute for Compensation Studies, ILR School Cornell University Linda Barrington Executive Director, Institute for Compensation Studies, ILR School Cornell University
  23. 23. HCI #HCIchat THANK YOU www.hci.org

×