Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
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Victoria Hodgkins
Cami DeFoor
Chief Marketing Officer
BambooHR
Director of Sales Training
PayScale
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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
What is Pay for Performance?
“ Links pay (base and/or variable), in
whole or in part, to individual, group,
and/or organizational performance. ”
—The World at Work Handbook of Compensation,
Benefits & Total Rewards
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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
Types of Pay for Performance
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Regular Bonus
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One-time Bonus
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Variable (commission)
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Yearly Raises
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Five Main Factors
Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
1
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Cost Efficiency
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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
2
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Recruiting & Retention
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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
The Hidden Costs of Turnover
Turnover costs are, on average, between six and nine months’ of an employee’s salary.
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Administrative Costs: separation pay, exit interviews
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Workload Costs: Extra hours, overtime pay, temp help
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Recruiting Costs: Advertising, referral bonuses, interview time
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Productivity Costs: Covering for missing employees
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Training Costs: Time to contribution, trainer’s hours
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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
Epiphany Moments
Job-hunting activity jumps when employees make comparisons.
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6% increase on the anniversary of a hire date
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9% increase on the anniversary of a promotion
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12% increase after birthdays, especially milestone birthdays
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16% increase after attending a high school reunion
Research from CEB, as reported in Harvard Business Review
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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
3
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Moral Responsibility
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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
4
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A Culture of Trust
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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
Three Keys to Building Trust
1. Repeat Interactions
2. Win-Win Situations
3. Effective Communication and Execution
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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
Herzberg’s Theory
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Two factors: hygiene factors and motivation factors
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Hygiene factors: salary, benefits, safety
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Motivation factors: expression, purpose, friendship
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Decreasing dissatisfaction with hygiene factors is the
foundation for increasing satisfaction through higher motivations
like an effective company culture and a fulfilling career path
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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
5
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Drives Results
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Compensation and Demographics
Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
Age
Baby Boomers · 1946 – 1964
Communication About Comp: Mostly Private
Average Tenure: 15+ Years
Career Mindset: Retirement, Work/Life Balance
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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
Age
Generation X & Busters · 1965 – 1983
Communication About Comp: Somewhat Private
Average Tenure: 5+ Years
Career Mindset: Management, Work/Life Balance
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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
Age
Gen Y & Millennials · 1984 – 2002
Communication About Comp: Public
Average Tenure: 15 mos-2 Years
Career Mindset: Go-Getters, Advancement, Flexibility
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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
Baby Boomers · 1946 – 1964
Age
Communication About Comp: Mostly Private
Average Tenure: 15+ Years
Career Mindset: Retirement, Work/Life Balance
Generation X & Busters · 1965 – 1983
Communication About Comp: Somewhat Private
Average Tenure: 5+ Years
Career Mindset: Management, Work/Life Balance
Gen Y & Millennials · 1984 – 2002
Communication About Comp: Public
Average Tenure: 15 mos-2 Years
Career Mindset: Go-Getters, Advancement, Flexibility
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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
Pay and Performance Management
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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
Performance Management Challenges
FREQUENCY
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TIME
ACCURACY
PURPOSE
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Paying for Performance: A Critical Tool to Fuel Both Individual and Organizational Success
Performance Management Challenges
FREQUENCY
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