Editor’s Note: For Part 1 of this column by Phillip M. Perry, click here.
One more hazard for performance-based pay: Employees left out of the program may resent their inability to earn bonus compensation. That’s why it’s important to include everyone – even those for whom it’s difficult to measure quantifiable workplace results, according to David Dye, president of Let’s Grow Leaders, a management consulting firm in Washington, D.C.
“For people who are solely responsible for their work, and where their activities can be readily quantified, pay for performance plans are more straightforward,” he says. That’s why many organizations begin by measuring easily measurable achievements, such as higher revenues by salespeople, accident reductions by security personnel, and glowing customer reports for service representatives.
Designing an effective program is more difficult for some members of the support staff who do not perform in quantifiable ways. However, it is not impossible, according to Cutting.
“You can make pay for performance work for receptionists, housekeepers, or any kind of support staff, as long as they are given the necessary tools by management,” she says.
The biggest challenge is finding a way to measure support staff performance that is fair and reasonable. One approach is to ask, “what is this person’s job and how well are they doing it?” Perhaps a receptionist answers the phone before three rings or greets customers in a cheerful and professional way. Asking employees how they measure their own performance may offer good ideas that can be translated into a quantifiable system.
Dye, with Let’s Grow Leaders, suggests assuring success by continually expanding a plan’s scope, including more people and developing more refined performance assessment parameters while soliciting feedback from participants.
Vital as it is, performance pay is not the only tool for retaining top employees. Employers also need to cultivate a respectful and supportive work environment.
“It’s important that people understand what the business wants, and that they feel valued when they meet the employer’s expectations,” Cutting says. “The ability to contribute and to feel involved with the success of the organization can be its own motivation.”
Here are some additional factors that keep a company’s best people aboard:
- Autonomy: “High performers do not like to be micro-managed,” says Christina Eanes, a workforce management consultant in Alexandria, Va. “They want the freedom to do their job in a creative way, along with the requisite responsibility and authority.” That serves the organization well. “Innovation happens when smart people find new and better ways to get their jobs done,” she says.
- Frequent feedback: Top performers want to know where they stand, and want feedback more than once a year. A negative December surprise – especially if it affects bonus pay – may well send them packing, Eanes warns. The HBR report highlights the importance of monthly performance reviews.
- Advancement pathways: Top performers expect the employer to help them advance in their fields. “You need to create a culture where people want to work with you because of what they are going to learn and have a real clear-cut career ladder so they see how they can move up,” Cutting says.
Sometimes clearing a path for advancement is easier said than done. In a perfect world, a business would have enough open management positions to accommodate every deserving person. Reality is often much different.
What can employers do?
“You need to create a growth path for top-performing people that keeps them feeling challenged even though they are not advanced into management positions,” says Dye, with Let’s Grow Leaders.
One solution is to feed the craving of top performers for new skills.
“High achievers have an insatiable need for self-development,” Eanes says. “They have an ingrained need to develop themselves, so the more opportunities you can provide them to learn, the more loyal they will be.”
Those opportunities can be offered by thinking laterally, according to Eanes.
“Not every top performer expects that advancement means a higher-level position,” she says. “Millennials, especially, often prefer to move laterally because it provides them with more learning opportunities and more challenges.”
A high-performing individual in sales, for example, might welcome a move to an adjacent position in human resources with the chance to learn a new set of marketable skills, she adds.