The crucial link between performance and reward

Citation

Hearn, S. (2012), "The crucial link between performance and reward", Strategic HR Review, Vol. 11 No. 1. https://doi.org/10.1108/shr.2012.37211aaa.003

The crucial link between performance and reward

Article Type: e-HR From: Strategic HR Review, Volume 11, Issue 1

How technology is changing the way HR works

Rewarding employees correctly based on how they perform is a tricky area for companies, but if they get it wrong then productivity and motivation levels can nose-dive. Nothing is more demoralizing for people than feeling that their efforts at work are not being adequately recognized, while employers become frustrated if they are not getting the best return possible from their incentive schemes.

Yet often companies only have themselves to blame. The harsh reality is too few organizations effectively link performance and reward. Without this firm connection a business can struggle to attract or retain the best talent and will lose out as confidence returns to the job market over the next few months.

A mismatch of expectation and reality

The Recruitment and Employment Confederation’s April 2011 Jobs Outlook revealed that 23 percent of employers wanted to grow their permanent workforce over the next year. More importantly, they will cast their net wider to catch the talent they need, and organizations with a reputation for recognizing and rewarding people correctly will reel in and retain the best.

The Chartered Institute of Personnel and Development’s (CIPD) 2010 “Employee Attitudes to Pay” survey emphasizes why this is so crucial. It states that 60 percent of staff in the private sector want and expect to be paid according to how well they perform, yet only 24 percent said this was actually happening.

Ultimately, this is all about getting on top of performance management.

Keeping it relevant

Any performance management strategy must not only be affordable, but it must also be fair, which means setting employees appropriate and achievable objectives. Too many companies set poorly-targeted incentives because the system they have in place for assessing and measuring how an individual or a team is performing is shockingly inadequate.

People will not respond positively if their rewards are tied into targets, which they cannot reach on their own. For instance, a team may be promised a group bonus if it raises revenue by a certain percentage, but individual members of that team may not have the power or influence over the management decisions that will determine whether that target is met.

At the same time it must be obvious to the company whether or not someone has met their objectives and earned their reward. An effective performance management system will enable them to do this. Too many employers still rely on paper-based systems with periodically analyzed appraisal reports

Out of the Dark Ages

Employers who continue to use paper systems risk being perceived as outdated and irrelevant by Generation Y – those people born between 1980 and 2000. These employees are highly technology-savvy and expect to be communicated with at work through their media of choice. Ambitious young people want to view their performance and progress with the click of a button, in the same way they access Facebook or search via Google.

In the past, performance management technology has rightly been criticized for being expensive, complicated, time-consuming and difficult to keep up-to-date. Too often HR directors (HRDs) have been blinded by science by suppliers and sold a complex beast of a system that promises advanced features such as 360-degree employee appraisals, but ultimately fails to deliver or impress.

Yet employers do not have to choose a complicated solution. HRDs simply need a system that gives managers easy access to staff performance data and enables every employee to retrieve, review and update their personal progress in his or her own time.

For a major book publisher, making the move from paper-based to online performance management for employee appraisals and objectives has transformed the speed and value of its performance data – most striking of all, the company achieved a 98 percent response in its latest annual review. The publisher now has a much better understanding of the individual training and development needs of its 800-plus employees. We also worked with a major music company to link performance and reward across its global offices and 2,500 staff. The time had come to ditch the paper and choose a simple online web-based system that would allow individual performance ratings to be fed directly into the company’s bonus structure.

Squandering opportunities

Any business’s greatest asset is undoubtedly its people and, accordingly, accurate and comprehensive data on these employees has to be considered to be equally important. A web-based performance management system enables HR teams to capture some powerful intelligence and strengthen the perception of the HR department within the business. Furthermore, companies can track, and issue prompt responses to, employee performance. By analyzing and acting on the information, companies can accurately reward people based on their achievements.

It is crucial that organizations have an efficient strategy to link performance with reward because both have an impact on the bottom line. Yet employers need a modern system for tracking the link between the two or they risk missing out on talented people, and will struggle to meet their critical corporate targets.

Stuart HearnBased at Vaado Software.

About the author

Stuart Hearn is the Commercial Director of Vaado Software and is responsible for the functional design of the software portfolio as well as overseeing client implementations and account management. He is also a board director of plusHR, a specialist HR consulting and outsourcing organization. Stuart is an experienced HR professional, having held senior-level HR roles with global, blue chip companies. He is a chartered member of the CIPD and holds a BA (Hons) in HR Management and a post-graduate diploma in Computing Science. Stuart Hearn can be contacted at: stuart.hearn@vaado.com