As HR pros we are a breath away from the end of the year. A time filled with holiday parties, white elephant gift exchanges, and ugly sweater contests. It’s also when many start reassessing employee’s total compensation.
For many who haven’t shifted away from the traditional review, it can add even more complexity to an otherwise lengthy process.
Why Pay and Performance Don’t Mix
There is a general frustration among employees when it comes to performance management. Implementing modern practices certainly help, but they can’t fix a broken system. Let’s be serious – very rarely do performance reviews perfectly align with the pay increase you receive.
Employees are not happy about receiving a meaningless rating. Managers don’t want to give them. Now add pay conversations on top! Differing compensation in a world where the increase is 3-4% per year will not accomplish the main goal: rewarding employees. Moreover, managers are irritated they cannot have discretion to reward their top performers.
Employees immediately click on tunnel vision to their new pay increase. They know a raise is coming. They want to react to it. During the entire performance conversation employees are waiting for that shoe to drop. The moment when they get their .09% increase and can be disappointed again. As managers, we lose the opportunity to be forward looking. We miss our ability to take learnings from the previous year and act upon them.
Master of None
Managers sense the tunnel vision feeling. They can feel it. In response, they turn to over-emphasizing performance. They can give examples and offer praise in that area. If they shouldn’t be offering praise, the small increase softens the impact of their assessment.
Some managers are simply uncomfortable talking about performance and jump to pay. Others simply skim the pay conversation. Pay and performance compete for their time in the lime light and it leads the business into a “master of none” situation.
If an employee is not performing, and we are taking the time to speak to this during a review, how contradictory is it to give an increase?
Often managers take the easy way out and give the low performer an increase to appease them. It may be okay if there were more dollars to pass around. Instead, we rob Peter to pay Paul and high performers receive less than they deserve. The market is hot right now. A smaller increase to a high performer could be the push they need to look at a competitor’s offer.
Tips to Separate the Conversations
The change management process is the biggest key to success, a clear strategy for the separation of pay and performance must be decided and communicated far ahead of time. HR Pros get to be change agents yet again.
Indentify Stakeholders in Each Process
Be inclusive of all parties including leadership from the business, HR, and stakeholders so the design of the pay practice is clear and concise. Ensuring this step creates the necessary buy-in to be successful.
Have a Plan
Set clear processes for both pay and performance conversations. Plan how increases will be awarded, and don’t forget to build in a process to handle promotions.
Have the pay conversations be within a few months of a when a performance conversation occurred so employees could draw a line between their performance and pay if needed.