A New Model for Pay and Performance Management

In a previous blog, we looked at the major roadblocks to performance and how we need new approaches to performance management if we want to overcome those obstacles. As we continue our series on building a high-performance organization, we look at how to create a more people-centric culture based on continuous feedback and timely rewards.

In line with Josh Bersin’s concept of Irresistible by Design, redesigning performance and rewards processes around the needs of employees can help companies adapt to challenging new market conditions and still achieve top performance.

A better, people-centric approach

Many companies now are refocusing HR processes on the employee, moving away from processes designed only to benefit the organization. Of course, the end result will benefit the organization, but it’s a shift in focus. Empower the employee and the company will benefit.

Be irresistible. HR guru Josh Bersin calls this making the company Irresistible by Design. The idea is to design the company around employees, making productivity, well-being, energy, skills, and culture core to the company.   

Incremental changes aren’t enough. The old model of compensation was based on “Pay and Rewards.” With that model, you would survey the employees, ask why they’re leaving, then incrementally add benefits, programs, and solutions to improve the “employee deal.” This approach is incremental and always behind.

Design around people. The new way, according to the tenets of Irresistible by Design, recognizes that employers are facing “a shortage of labor, high levels of turnover, inflationary expectations in wages, and a set of industry transformations that just won’t stop.” So, they are seeking ways to build a people-centric culture and processes that attract, support, engage, and empower employees. If done right, the result can be a next-level high-performance culture.

High-performance culture feeds off of continuous feedback

Research shows there’s a strong correlation between a high-performance culture and a more continuous approach to performance management, based on regular feedback and coaching. Employees who get continuous feedback are 15% more productive (Willis Towers Watson) and twice as likely to outperform peers (McKinsey). Engaged employees are four times more likely to give discretionary effort (Gallup).

The concept isn’t new. Continuous Performance Management (CPM) has become a well-established and accepted practice in most organizations. This led the Forbes Human Resources Council to rank it as one of the top 3 performance management trends for 2022.

A more continuous performance management system can also mean more empowered managers, more agile goal setting, actionable feedback on behaviors, improved coaching, and greater employee loyalty and ownership. Many companies are making CPM an integral part of the design of the company culture. 

Surely our role in Rewards is to promote and reinforce such a culture. How can we do that?

Can rewards also be continuous? 

If employees are rewarded for performance, and performance is managed in a continuous manner, can rewards also be delivered continuously? Some HR thought leaders believe so. Historically, trends in reward practices have followed performance practices. If a CPM strategy can create and reinforce a high-performing culture, how best can rewards support and enhance it?

Ask a psychology major. One argument for Continuous Total Rewards is that rewards are most effective when delivered immediately after the desired behavior. Just ask the many mice who have received a snack after pushing a lever. Is that what we traditionally do with our variable rewards? No, we wait till the end of the quarter or year, list out all the accomplishments during that period, and then give a lump sum bonus based on a composite assessment of performance against goals. If you give mice their cheese a month later, will they know why they got it?

A revolutionary idea. What if an employee received part of their targeted bonus amount immediately upon achieving one of their goals? Wouldn’t that provide an incentive to accomplish goals sooner? And wouldn’t employees be happy to get some of their money now versus later? In inflationary times when employees are worried about paying bills, that could be really appreciated and dare we say, a competitive differentiator for your employer brand, without breaking the bank.

Creative approaches to rewards

Having the right technology for managing compensation and performance can support you in implementing a new employee-centric model to deliver performance results. In future blogs, we will explore new, creative approaches to rewarding employees and ways to get ROI by streamlining performance and rewards.

For more about how you can use technology to design a new model for performance and pay, continue to follow our blog and download our free guide, Rewarding the Moments that Matter: How to Build a High-Performance Culture.