Pay for Performance
Pay for performance systems establish an explicit link between compensation and work quality or to the realization of specific goals that are agreed upon by the organization and an employee. Pay for performance is a type of employee incentive program and based on the theory that rewards and bonuses motivate employees to do their jobs better. Some statistics suggest that 75 percent of companies in the U.S. connect at least some part of an employee's pay to measures of performance. This is an emerging trend that is being watched closely in the U.S. health care system where private and federal pilot programs are underway.
Important Questions to Ask
As with any change to an employee incentive program, pay for performance poses important questions that should be asked first. These include:
- How will a pay for performance system directly support the organization's goals related to profitability, customer loyalty, and customer satisfaction?
- Will pay for performance enhance or support customer expectations of the company, product, or services?
- Can we establish objective criteria for evaluating pay-for-performance?
- What difficulties, challenges or hardships will a pay for performance system place on the organization?
- Will a pay for performance incentive program alienate other employees in the organization?
More human resources professionals are looking at pay for performance as part of an innovative talent management strategy. To be effective, pay for performance programs must be incorporated into an employee's regular performance appraisal as part of an overall human resource management initiative. This can complicate the performance management process given that a customized or unique performance appraisal will need to be created to capture the data required to objectively assess whether agreed upon goals were achieved.
Web-Based Solutions Simplify
A web-based employee performance review can transform the traditional performance appraisal from a laborious once-a-year task into a simple ongoing process that enables HR and managers to implement, manage, and fairly evaluate pay for performance incentive programs. Web-based solutions work by automating labor intensive steps, streamlining the workflow process and providing an intuitive user interface that makes it easy for managers to create customized evaluation reports based on a pay per performance system that reflects agreed upon goals.
Halogen Software offers a number of industry leading web-based talent management solutions. For more information on our comprehensive, fully supported solutions and how we can help you implement a fair and equitable pay for performance incentive program that is easy to track and evaluate, just contact us.
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