How to Implement Pay for Performance Compensation Strategy
For most companies, maintaining a workforce is the largest expense. However, having a good workforce and a good workplace culture are two powerful tools for attracting, retaining and motivating top talent. A strong compensation strategy also helps retain employees and motivates them to work toward the company's goals. These five steps are important for implementing an effective pay-for-performance compensation plan.
Align Pay To Goal Attainment With Compensation Software
Start by creating a company growth blueprint. Use that to create company goals, and tie those goals to individual employee goals. When employees see their achievements and how vital they are to the company's success, they feel needed and valued. Also, this maximizes each worker's ROI.
Make the Compensation Plan Transparent
If employers communicate their plans clearly, employees understand their own goals. Outlining the benefits of the plan and explaining its elements replaces employees' doubts or misconceptions with a positive view. A well-defined plan also establishes trust with employees.
Add Achievement Rewards To The Compensation Management Plan
When employees achieve major goals, they should be rewarded. Breaking bigger goals into smaller goals or tasks makes it easier for employees to stay focused. Also, this nurtures accountability because they realise their control over outcomes.
Address Performance Assessments Before A Compensation Strategy
To avoid biases or unfair treatment, there must be a standard method for employee assessment. Employers must be careful to maintain consistency when they evaluate employees. Taking differing management opinions and peer averages into account enhances consistency. Implementing a standard method helps identify the top performers and workers who need improvement without creating misconceptions about the program's value.
Use Compensation Management Software To Reward Top Performers
When employers have real-time access to performance ratings with compensation software, they have the information needed to issue rewards or make compensation changes. Also, employees are aware of their performance at all times instead of learning about their strengths and weaknesses only during an annual review.
Workers are far more valuable to a company if they strengthen their performance on an ongoing basis. So as an employee, if you know what approaches are leading to the most success or failures, it is easier to pivot work strategies. Companies can do this by integrating performance data with compensation data. Cornerstone's compensation tool identifies top performers and makes compensation structure modification simple.
Why Use Cornerstone's Compensation Tool?
A pay-for-performance compensation structure maximises human capital. During the past 15 years, businesses analyst paper,Hay Group, has found that the top performing companies in Australia and New Zealand have found success because of their performance-based compensation, clear goal structure and fair reward system.
This pay structure can also dissolve misconceptions about a company's success. In New Zealand, the salaries of CEOs are becoming increasingly larger than staff salaries. This has led workers to question if larger CEO salaries are indicative of increased company success, and that has led them to question the fairness of their salaries. The clear solution to this problem is a fair compensation structure. If workers are not rewarded for major achievements or consistent performance that exceeds expectations, they become less motivated. Over time, if pay for performance strategies are applied to the entire workforce, including C-level employees, appropriate payments will be determined.
Cornerstone's compensation, succession and performance data tools allow companies to easily plan, track and modify their strategies with one convenient interface. These are just a few of the tool's features:
- Employee incentive programs
- Merit reward adjustments
- Compensation planning
- Job role appraisal
- Variable pay management
- Budgeting and reporting
Try a demo of Cornerstone's tool to see how easy it is to build a powerful pay-for-performance compensation strategy.