Linking performance to pay
- 1. Linking Performance to Pay
- 2. • Linking performance to pay band is the most basic way of linking performance to reward. Organisations have a pay band for each category of employees. • Managers will be having a three or four categories based on their experience and competency level required for job. In each of theses band there will be a minimum and a maximum pay. • Example: Level 1 pay band is from 20,000/- to 40,000/- with a gap of Rs 500. i.e., 20,000 – 20,500 – 21,000 – 30,000 etc.
- 3. • One way is to give it every year without any condition. • Another way is to have some performance condition such as “Increment is granted if the performance meets the expectations”. • It is possible to give two or more increments at a time to motivate a person who has exceeded the performance standard. How these increments are given?
- 4. Linking Performance to Total Reward • Every employee works for money. Yet many are not willing to work for some people even if they are willing to pay money. • These tendency is commonly seen among the house maids. So there is something more than mere transaction when we look for reward. This is the concept of Total Reward.
- 5. Components of Total Reward • Compensation • Benefits • Work life • Performance and recognition • Development and career opportunities
- 6. Compensation • This is the pay that is given for the work that one does. Fixed pay and Variable pay • Fixed pay is what is defined and fixed and you will get the same salary which was stated in the letter of salary structure. it is based on organisations pay philosophy and pay structure. • Variable pay depends upon some performance . This could be of the individual, team, organisation or a combination of these. This pay is based on profit created, number of customer complaints etc
- 7. Short term incentive pay and long term incentive pay • Short term incentive pay is a form of variable pay for the performance in one year or usually the performance appraisal period. This is different from the band based increment and is linked to some specific performance. • Long term incentive pay is given for creating long term value to the organisation. E.g.: consistent performance. These can be in the form of holidays, paying for higher education etc
- 8. Benefits • This intends to reduce the financial risk of the employees and his family and is a motivator by making his family also feels a part of the organisation since he spend a lot of time away from the family in the workplace. • Benefits include pay for time not worked such as holidays, leave and vacation, social insurance in the form of compensation when terminated, medical and life insurance etc.
- 9. Work Life • This is an active set of actions by the organisation to provide quality of life or work life balance. • It includes items such as workplace flexibility in terms of time, place, work from home, club memberships, financial support such as car or housing loans, community involvement such as corporate social responsibility projects etc • These rewards have the inherent ability to increase performance of the individual, team and organisation.
- 10. Performance and recognition • Everyone works to prove himself and to do that it is better to give an individual targets for performance and the resources to do it. This includes feedback. • A closely related factor is recognition for the performance formally, publically and through communication. This is an important reward for most employees.
- 11. Development and career opportunities • This is done by giving an individual the opportunity to develop his potential. Learning opportunities, career guidance, mentoring, job rotation, access to technology, paying for education etc falls under this category.
- 12. Challenges of Linking Performance and Reward Performance based pay can be beneficial to both employees and the organisation, but it may also raise new issues in an organisation. Some of the challenges are : • Organisation need to plan carefully the performance appraisal system that will inform merit pay, and the system must ensure that the financial rewards for effective performance are large enough to be desirable to employees.
- 13. • Rating officials and employees must be trained in usage of performance based pay system. • With pay for performance, one needs to re-evaluate the motivation, retention, productivity and organisational objectives continually, with the idea of fine tuning the system to make sure rewards are aligned with desired performance. • Unions generally have disliked performance based pay systems and even go to courts in protests because they believe the structures destroy solidarity and permit arbitrary or gender biased etc.
- 14. • Some unions fear that performance pay will force a return to the spoils system and that employees may be rewarded for partisan or political behaviour. • Supervisors, employees and their representative unions must believe that a pay system is both fair and transparent.
- 15. Ethics in Performance Management • Ethics is the backbone of an organization and all its activities. • Ethics is a process of rational thinking aimed at establishing “What values to hold and when to hold them”. • Ethics has four dimensions. They are o Normative ethics o Social ethics o Professional ethics o Personal ethics
- 16. • Normative ethics is the study of ethical action. It examines standards for the rightness and wrongness of actions. • Social ethics come from someone's collective experience of people and culture. Ethics within society focus more on what may be considered appropriate behaviour for people as a whole, rather than individual behaviour in a social context.
- 17. • Professional ethics are principles that govern the behaviour of a person or group in a business environment. Like values, professional ethics provide rules on how a person should act towards other people and institutions in such an environment. • Personal ethics is what an individual considers as ethics. It is dependent on his upbringing and environment besides the impact of the society but individual in nature.
- 18. Ethics in Organisation • Ethics in Organisation is about good behaviour in various organisational aspects which include its dealing with external agencies including customers and internal agencies including employees. This include: o Uniform Treatment o Social Responsibility o Financial Ethics o Considerations
- 19. Ethics in Performance Management Ethics is a process of rational thinking aimed at establishing “What values to hold and when to hold them” . • Ethical - of or Based on a system of moral beliefs about right and wrong, in accordance with principles of professional Conduct. • Managerial Ethics - Standards and Moral Judgment managers use in their Business
- 20. Ethical Behaviour Higher employee loyalty Encouragement of personal sacrifice Honouring of Organisational policies Reduction in Turnover Satisfied Customers
- 21. Unethical Behaviour • Manufacturing- Use of inferior quality of material • Marketing- Misleading customers about product features or service differentiations. • Distribution- Changing priority of booked orders without informing customers. • Customer Care- Not keeping commitment on Guarantees.
- 22. Objectives and Significance of Ethics in Performance Management • Building a better society • Cultivates high-performance teams • Attracts and retains talent • Maintains legal sanctity • Promotes a strong corporate image
- 23. Ethical Issues and dilemmas in Performance Management • Managerial malpractice • Value Conflict • Corporate goal achievement • Employee engagement • Peer Pressure • Workplace politics • Violation of ethics
- 24. Role of Ethics in Performance Management • Ethics are directly linked to fairness. The ground rules emphasis that the other persons interest should count as much as the individual himself. The role of ethics in PM is to ensure this. • Responsibility is more an individual phenomenon than a collective one and hence the organisation mandates that the individuals are responsible to them self so that PM operates smoothly.
- 25. • The activities that the organisation and people in it perform have a purpose. This purpose connects the organisation to its external environment. Thus ethics in PM has the role to ensure that the people in the organisation connect the organisation to the external environment in an ethical way. • There exist a clear vision and picture of reliability throughout the organisation. The vision is generally owned and put into practise by top management. The reward systems are aligned with this vision and reward is decided throughout PM. Hence ethics in PM has a role to ensure that organisational visions are achieved.
- 26. Realities of Ethics in Performance Management • PM is an objective, rational and systematic attempt on the part of the manager to accurately describe subordinate performance. • In reality managers have a varieties of concerns that are clearly more than simply generating accurate and honest rating. • Managers operate in organisational environment that place a high priority on getting results, on minimising conflicts and ultimately on survival.
- 27. Managers placed a higher priority on personal discretion in their attempts to manage their employees than on organisation’s edict that accuracy be their primary concern. The main reasons for this are: o The belief that accurate ratings would have a damaging effect on the subordinate’s motivation and performance. o The wish to avoid creating a negative permanent record of poor performance that might hound the employee in the future
- 28. o The wish to reward employees displaying great effort even when results are relatively low. o The desire to promote a poor or disliked employee “up and out” of the department o The need to protect good performers whose performance was suffering because of personal problems.
- 29. There are reasons when a manager rates his employee below the actual performance though this does not occur too frequently: • To scare the employees to perform better. • To punish a difficult or rebellious employee. • To encourage a problem employee to quit. • To create a strong record to justify a planned firing. • To minimise the amount of the merit increase a subordinate receives.
- 30. The organisation has the right to demand accuracy in performance appraisal .This can be done by the following measures: • Providing a sound procedure for managers to use in the execution of PM • Training managers in PM. This training should formally address the issues of intentional inaccuracy, and should deal not only with managers ability, but unwillingness and motivation to execute accurate ratings.
- 31. Ensuring Ethics in Performance Management Some of the key issues related to ensure ethics in PM : Define and describe the ethical standard It is necessary to define the ethical standards for internal actions. The PM document should have a chapter containing what is considered ethical and what is not in the PM context, and the consequences of following these or disobeying them.
- 32. Plan the PM well in advance It is unethical to include goals in retrospect. i.e., you should give the goals at least a month prior to its being effective so that the employee has a head start.
- 33. Take collective decisions The decisions made as a group usually produce better quality decisions as this will be inclusive of the diverse interests and perspective. This increases the credibility of the process. This can be achieved by : • Defining the objectives and get it mutually accepted. • Mutually agree on the measures.
- 34. Record critical incidents frequently and let the employee know it: • Decisions of performance are often taken on the basis of critical incidents. While it is desirable to record it as and when it occurs, one must record it at least once in a month. • This would act as an automatic feedback system. Further the employee is not surprised when the annual performance report comes up .
- 35. Ethics during feedback Give objective and focused feedback. The assumption that frank feedback is better avoided in the interest of relationship and future performance raises several ethical issues such as: • Denial of frank feedback and opportunity to improve may come in the way of future promotion and increments. • Giving a frank feedback to one person while denying to another, whatever be the premise, militates against justice. • Not giving a frank feedback
- 36. Automation in Performance Management Automation in Performance Management means automating the process components, which enable the employees to understand their performance better, make the process dynamic and allow the employee to know his performance on a continual basis.
- 37. Benefits Software that automates the employee performance management has several merits. They are : Organisational alignment It allows you to capture organisational, divisional or departmental goals in the tool and make them easily accessible to employees. Bench strength planning Competencies enable a person to do a job well. By listing competencies you can ensure that all your talent management processes such as creating job description etc use the same set of competencies.
- 38. Quality employee feedback • By making it simple and taking care of validation, automated system become smoother, and amenable to interim feedback. • It is possible to include a fixed dictionary for descriptions thus reduce the errors. It include coaching and development tips. Skill Training • By setting clear goals, communicating required competencies and setting standards for high performance, automated employee performance allow supervisors and employees to better identify the gaps.
- 39. Process familiarisation Performance linked reward management Resource optimisation Workflow
- 40. Automation Process The Automation Process includes • Align • Define • Develop • Deliver • Enhance
- 41. Align • Understand the organisational context, business drivers and broader organisational culture. Such knowledge is critical when identifying key design principles and success factors for the project. • Engage key stakeholders to ensure engagement and buy in from the outset.
- 42. Define • Develop the project scope and define the solution, seeking input from stakeholders. • Assemble project team and run definition workshop with representation across the business. • Ensure best fit solution are supplemented by best practise advice drawn from latest research.
- 43. Develop • Ensure all systems and processes are developed in line with the solution specification and incorporate regular project reviews. • The completed design should be validated across the business before signing off. This should include subject matter expert reviews, thorough user acceptance and quality testing.
- 44. Deliver • When introducing the new solution to your business, ensure the associated communications and training are timely, targeted and effective. • Ensure that you are familiar with all elements of the solution and are able to answer questions across the business. • Hold a project review meeting to discuss the project to date and document what has worked well and what improvements may be needed.
- 45. Enhance • Use the reporting from you solution to gain insight into your work force. • Analyse and interpret your results, using the data to inform strategic people focused decision making that delivers tangible business improvements.
- 46. Improving Execution Aspects of Performance Management • Training • Employee Development • Improvement in Feedback • Role of Line Manager
- 47. Training • Training is a decisive aspect that influence the efficiency of a performance evaluation process. • Line managers should be given training in how to measure performance, how to discuss what they evaluate and how to give a feedback to the appraisees. • If managers identify how to communicate their performance throughout the working period, they would be able to grand accurate grades to subordinates.
- 48. Employee Development • Studies have proved that performance evaluation methods that concentrate on individual development, rather than administrative goals are much more efficient. • Managers employ an evaluation system to guide employees with feedback that will assist them in performing better at their respective places.
- 49. • The technique of preparing a feedback form is to design it on the basis of the individual’s key expertise areas: • Split these in to components • Determine each through framed questions • Individuals answer this and give comments with respect to the concerned question. • This can be the transparent system.
- 50. Improvement in Feedback • Feedback is the backbone of PM. It can be improved by making it as frequent as possible and at least twice a year. • Both the employee and the manager should prepare for the feedback exercise. • In matrix organisations, the HR would have to schedule these meetings carefully since a person may be working under many heads and needs to take feedback from more than one person.
- 51. Role of Line Manager • PM is the role of line manager as he is the person who is responsible for performance. HR is only a facilitating agency. • In most organisations, HR plays a dominant role and they also have expertise in its administration because of which the line managers are often sidelined in PM. • If line managers are made the centre stage of PM and if they are trained in giving feedbacks, then PM would be far efficient.
- 52. Thank You