Should You Tie Pay To Performance Reviews?

Cincinnati, OH | Posted: 12/27/2015 | Author: April Koenig

Should You Tie Pay To Performance Reviews?

One size doesn’t fit all, just as one business model doesn’t fit all companies when it comes to tying compensation to performance reviews. Sure, there are plenty of companies that make pay raises dependent on reviews, and find success in the process. However, you need to make sure you’ve looked at all the angles, and answered the following questions.

Is Your Process At All Confusing? – If so, then clarify it. In a pay/performance scenario, the parameters need to be crystal clear. Is it goal oriented? Competency oriented? If an employee is expected to achieve goals throughout the year, they need to know compensation will be commensurately given. If the waters are at all muddied or mixed signals are given, then your employees will be disappointed, angry, and probably on the lookout for a new job. If you’re going the pay for performance route, make sure the metrics are concrete and trackable.

Does It Make The Rest Of The Review Forgettable? -  You’ve just had a productive performance review, filled with constructive feedback and clearly defined goals to go forward upon. Then it all goes out the window when they learn how much or little of a pay increase they’ve received. Tying increases to performance reviews can be tricky in this instance, which is one reason to possible separate the two by a few months. You want the guidance and feedback of a performance review to take root, not be forgotten in a fit of anger. 

Does It Make Your Job Easier? – Tying pay to performance should make it easier for HR, staff, and managers to update and integrate changes into employee systems and data. It also should ease in employee motivation and focus, as they know their production is objectively reviewed. However, problems may arise when workers are needed in a collaborative role. They may get competitive, which can be counterproductive. This can mean extra headaches for you.

Is It Working? – That’s the million dollar question. Are employees happy with your procedure? Are you attracting the best talent? Does the team regularly achieve goals? If so, then keep up the good work. If not, then maybe switching up performance review parameters might be prudent. You must decide the best course of action in getting the most out of your employees.

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