There are four primary benefits to linking pay to performance:
- Motivate improved productivity consistent with overall organizational objectives
- Improve communications between supervisors and their employees
- Help facilitate team processes
- Substantiate higher compensation levels
As an employer, you probably assume that paying for performance is something that you should at least try to do.
What is performance? Chances are it means different things to different individuals in your organization. To some, it may mean having the tools to achieve results. To others, it may mean the end results themselves. This is a critical distinction.
The tools are the means of achievement: the enablers, if you will. They include skills, traits, and behavioral competencies. These are the characteristics of the employees that enable them to produce results.
The end results are what happen as a consequence of the individual’s competencies. Results include goal achievement, meeting standards, and other accomplishments that can be objectively measured in terms of quantity, quality, and/or timeliness.
Organizations need to define exactly what they mean by performance if they hope to be able to effectively link pay to performance.
– Shari Dunn, Managing Director
CompTalk 