Special from Atlanta–SHRM Annual Conference and Exhibition
Yesterday’s Advisor featured consultant John Rubino’s plea for employers to eliminate merit base pay increases and replace them with lumpsum pay-for-performance awards. Today, more of his tips, plus an introduction to a new, reasonably priced, total training resource.
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, held recently in Atlanta, Georgia.
Here are the rest of Rubino’s tips:
[Go here for tips 1, 2, and 3.]
4. A Successful Plan Sets Total Compensation Integrated With Total Rewards
- Compensation policy must be aligned with total rewards and strategic objectives
- Incentive pay should be directly tied to performance criteria achievement: direct line-of-sight
- Consider re-defining what is meant by a base salary increase
5. A Successful Plan Yields Financial Returns to Employees
- Incentive opportunities must be perceived as “substantial” enough to motivate performance
- Timing of incentive payments should be as close as possible to the qualifying event
- If designed properly, payouts to employees will yield “slices from an expanding financial pie”
6. A Successful Plan Yields Financial Returns to the Company
- A well-designed and executed incentive compensation program can improve the organization’s bottom line.
- Measurable benefits can include improved:
- Morale – On-time Performance
- Productivity – Work Methods
- Quality
- Customer Service
7. A Successful Plan Involves Employees and Managers
- Middle managers will make or break the incentive compensation program
- Must get buy-in from employees
- Should involve employees and managers in the plan design, including identification of performance criteria
- Must build trust!
8. A Successful Plan Uses Internal and External Data
- Collect and analyze accurate and valid competitive data
- Build the incentive program from a “rational” base pay foundation
- Base salary serves as the anchor in total compensation/rewards planning
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9. A Successful Plan Sets Forth Clear Performance Goals
Performance criteria in successful programs are:
- A combination of quantitative and qualitative measures
- Simple to understand
- Supported by valid data
- Monitored through strong controls
Aligning rewards to performance requires the following:
- A clear (and clearly-perceived) relationship between pay and performance
- Predictable measures of performance
- Visible benefits to the employees and the organization
- Regular formal and informal performance feedback
10. A Successful Plan Achieves Clarity Through Communication
Communication mega-objectives may include:
- Ensure understanding
- Change perceptions (get buy-in)
- Motivate behavior
Even the most elegantly-designed variable program will not achieve the desired results unless employees and managers are trained to understand how it works, says Rubino.
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These tips are very helpful, but it’s worth remembering that study after study shows that compensation is not the primary motivational factor for employees.