Are You Sabotaging Your Pay-for-Performance Programs?

by Cherryll Sevy

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Are You Sabotaging Your Pay-for-Performance Programs?› (PDF, 64KB)

Do you believe in pay-for-performance programs, including incentive plans, bonuses, and annual merit increases? If so, you already understand the many advantages of successfully linking pay to performance, including:

• Top performers are recognized and substantially rewarded.
• Employees know how their performance impacts company results.
• Marginal, low performers are encouraged to improve performance, receive lower pay and increases, or leave the organization.
• Performance-based pay plans are proven to positively affect company business results and employee morale.

Compensation expenses are variable and provide better fiscal management and cost controls. Thriving, successful companies (those who set business objectives, plan and meet those goals) utilize many excellent business practices, one of which is well-designed and implemented incentive plans. However, employers often unknowingly sabotage their plans and undermine the impact these plans could have on the company's overall performance.

Four major ways employers sabotage plans:

• Award year-end discretionary bonuses with no pre-defined criteria or identified results. While pleased with the extra money, employees are surprised as to why they have received what they did.
• Unclear, infrequent communication of company goals and how each employee's role and performance contributes to these goals.
• Pay out bonuses regardless of overall company performance, particularly at the executive level. (Don't think the rank-and-file don't know...they do!)
• Provide little variance in merit increases to top and bottom performers.

Well-designed, clearly articulated performance plans and incentives can significantly and positively affect bottom-line results.

For more information on how you can stop sabatoging your Pay-for-Performance programs, please contact Cherryll Sevy at 408.358.7794 or by email.

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