It’s generally accepted in HR and management circles that regular and timely feedback on employee performance is good for morale and productivity. And it’s also widely accepted that rewards should be tied to performance. Why is it then that we strive for a continuous feedback culture but dole out rewards only quarterly or once a year?
Good question, and one for which HR visionaries have been seeking a solution. The answer is real-time rewards. But what does that mean and how can you achieve it?
Creating a culture of continuous performance
Continuous Performance Management (CPM) arose from the desire to create and sustain a feedback culture, leading to solutions like Our Tandem, which drives people development through personalized feedback, coaching, and goal setting.
Why is CPM important? HR guru Josh Bersin says that in our current times of uncertainty—with a rough economy, pandemics, war, high employee attrition, and a competitive job market—companies should be in the business of developing, taking care of, and aligning people. “There is one business strategy that works,” says Bersin, “designing your company around the desires, skills, and aspirations of your people.” He calls this creating a company that is “irresistible by design.” Taking good care of the people in your company and giving them the information and tools to solve problems as they arise is your best defense against uncertainty.
Employees like feedback. They want to learn and grow, they want to do meaningful work and make a difference, and they want recognition for their contributions. Feedback and coaching are not only an HR strategy, they are a business strategy. A study by Zenger Folman found that effective coaching produces measurable business outcomes, including improved productivity, employee engagement, retention, employee development, and supervisor performance.
Outdated compensation models will no longer suffice
Yet compensation, a traditional tool for impacting all those same factors, has not been incorporated into the cycle of feedback and coaching. While leading organizations are in fact redefining their human capital strategies around people-centric core principles, traditional compensation cycles are out of sync with today’s employees wanting regular recognition and feedback for smaller achievements.
Companies have another incentive to find innovative ways to create job satisfaction. High inflation and the increasingly global and competitive job market have put tremendous upward pressure on compensation packages for new hires, straining budgets and wreaking havoc on equal pay efforts.
Leaders are looking for ways to give employees a sense of belonging and purpose, to make them feel valued and empowered, but without totally breaking the bank. Success will be achieved not only by attracting new talent; it will come about by inspiring new levels of engagement and motivation in the existing teams.
Bersin talks about the old employment model wherein management defines and assigns tasks, and labor does the work, for which they are duly compensated. But the more appropriate model for today, he says, is one that recognizes that workers are creators and problem solvers. If work and rewards are designed around their needs such that they are empowered and recognized, they will do great things for your business and customers.
The missing link in continuous performance and rewards
CPM is great at giving employees the information and guidance they need to improve and grow. What is lacking in most organizations, however, is an equivalent real-time reward system that delivers continuous rewards aligned to continuous performance.
Annual compensation processes clearly are not up to the task of providing real-time rewards. What prevents companies from moving to a continuous rewards cycle to match continuous performance? The traditional “annual review” mindset, of course, is one factor. But even forward-thinking leaders in HR and management who want to develop a people-centric culture may be baffled by how to design and deliver the appropriate compensation model.
What’s needed is a people-first approach and platform aligned to the employee performance journey that can deliver personalized performance and rewards at the right time, with governance and compliance. Existing HR technology was not designed to do that. That’s where best-of-breed software comes in.
How do real-time rewards work?
Consider a world where you can incentivize your people throughout the year with real-time bonuses and short-term incentives, delivering rewards that differentiate based on contribution. In this scenario, goals are agile and no longer are restricted to structured annual timeframes, they can move across years or be delivered within the quarter. With real-time compensation, managers can deliver bonuses when goals are delivered, providing employees with motivation to deliver results faster.
If an employee goes above and beyond, a manager can deliver a short-term incentive, a real-time experience, or a reward that thanks and appreciates, all within the relevant moment of time. If your contributions are being recognized throughout the year, motivation will be high with less riding on a one-time annual process that will inevitably disappoint.
The technology to enable real-time rewards
To make real-time rewards work requires technology to manage all the processes and data involved, and supply the needed analytics and governance. No, not spreadsheets, a platform that is flexible, transparent, and compliant.
Even with the tough economy, notes Bersin, technology is moving forward rapidly and industries are re-inventing themselves. Continuous Total Rewards technology can play a big role in transforming an organization and creating a culture of inspired engagement.
Interested in achieving a people-centric performance and rewards culture? Download our free white paper, Continuous Performance Meets Continuous Compensation.