Rubino, who is founder and president of Rubino Consulting Services in Pound Ridge, New York, offered his suggestions at the 64th SHRM Annual Conference and Exhibition, going on this week in Atlanta, Georgia.
Rubino asked his audience of HR managers if they had merit increase base salary systems. Most hands went up. How many are thrilled with the results? He asked. No hands went up.
Of course, Rubino says, cash isn't the only motivator, but it's the basis of your total rewards program. Many companies are only pretending to pay for performance, Rubino says. With a 2% or 3% budget for merit increases, you're not motivating anyone except the CFO.
To make matters worse, you are pitting employees against each other, and you're suffering from the compounding effects of base pay increases. You are telling a good employee that he or she did great work, you're offering a 3% increase, over 25 bi-weekly payments, that's heavily taxed. Not very motivating, he says.
Better approach? Pay for performance with larger, lumpsum payments. Here are Rubino's ten criteria for success with Pay for Performance.
1. A Successful Plan Is Aligned With Organizational Culture/Values
2. A Successful Plan Is Fair to Employees
3. A Successful Plan Is Fair to the Organization
4. A Successful Plan Sets Total Compensation Integrated With Total Rewards
5. A Successful Plan Yields Financial Returns to Employees
6. A Successful Plan Yields Financial Returns to the Company
7. A Successful Plan Involves Employees and Managers
8. A Successful Plan Uses Internal and External Data
9. A Successful Plan Sets Forth Clear Performance Goals
Performance criteria in successful programs are:
Aligning rewards to performance requires the following:
10. A Successful Plan Achieves Clarity Through Communication
Even the most elegantly-designed variable program will not achieve the desired results unless employees and managers understand and, ultimately, buy into the program, Rubino concludes.
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