Lots of experimentation going on in performance management -- and that's good. The movement to non-scored performance conversations is a thing now, embraced for the right reasons (forward looking; emphasizing coaching, improvement and development) and some of the wrong ones (absolving managers from the sometimes difficult responsibility of communicating directly and honestly with employees about performance improvement needs).
My Café colleague Derek Irvine started a wonderful conversation with his recent post about the tough questions that some of these new performance management directions raise for compensation. Probably-not-coincidentally, I've been having interesting conversations about the same question myself over the past week with a few colleagues.
Some thoughts in that regard...
You Can't Rethink Performance Without Rethinking Performance Pay
I continue to get questions about how to do merit pay in the wake of a move to a ratingless performance process. To be honest, I'm not sure you really can. I'm not sure you should. Oh there are workarounds, of course. But what I'm seeing in my own work suggests that, for many organizations, merit increases decoupled from an appraisal score are tough to sustain. The realities of this particular combination raise the bar for disciplined, careful, honest communication with employees in a way that many managers -- many organizations -- cannot meet. Differentiated pay which is based on judgments or conclusions that are not explained clearly is neither motivating nor rewarding.
And so, when you find it necessary to rethink how you are managing and communicating about performance, you must also rethink (or at least revisit) how, where and even whether you should do performance-based pay.
And this is a good thing. The winds of progress are tossing us up against a changing reality. How many of us would deny that the performance rating/merit increase combo is delivering little value in most organizations? We can blame the lack of managerial courage and candor, we can lament the stagnation in merit increase budgets, but our time is probably better spent figuring out what can and will work better for the organizations we serve.
Design Insights/The Right Plan is the One Your Managers Will Embrace and Use
Let's accept that its time to rethink and potentially redesign. To step out, imagine and try out some new things. Many of us are going to get the opportunity to redo rewards in our shops; some of us are going to have that opportunity forced upon us. Maybe sooner than later. With that in mind, let's finish with some design insights -- wisdom from one of the great thinkers at design firm GoKart Labs. In the selections I've lifted/adapted from Jason Scherschligt's article and shared below, there are some great insights for those of us in the rewards field to take to heart.
Make small things first. Get them into use quickly. Measure relentlessly and listen intently. Adapt based on what you learn.
You'll recognize that doneness happens constantly and never.
You'll celebrate the value you've made -- not the program you've delivered. More importantly, you'll shift your goals from inward to outward, from the success of your program to the satisfaction and delight of your users.
You'll edit your tale so that they, not you, are the heroes.
Get that? Managers are the heroes of our reward programs. Not us. Design with this insight in mind and you will create programs that will be used and will generate results. Because ultimately, the right plan - the one that delivers pay effectively in whatever paradigm you are facing is the one that your managers will embrace and use.
That's my thinking. How about the rest of you?
Still trying to get your head around the people part of compensation? First thing you have to know is that Everything You Do (in Compensation) is Communication. Ann Bares collaborated with Margaret O'Hanlon and Dan Walter on the ebook; find it at www.everythingiscommunication.com. Ann is the Founder and Editor of the Compensation Café, Author of Compensation Force, and Managing Partner of Altura Consulting Group LLC. Ann also serves as past President of the Twin Cities Compensation Network (the most awesome local reward network on the planet) and is a member of the Advisory Board of the Compensation & Benefits Review. She earned her M.B.A. at Northwestern University’s Kellogg School, is a foodie and bookhound in her spare time. Follow her on Twitter at @annbares.
Image "Time For A Rethink Meaning Change Strategy" courtesy of Stuart Miles / FreeDigitalPhotos.net