The topic of reward and how to do it effectively is a fairly well debated topic. A great deal of research exists on the topic and every few year a new fad or a rinse and repeat of a previously outdated model is dusted off and becomes the new buzz to ensure reward effectively motivates staff. Daniel Pink in his book Drive hits the nail on the head for organisations that operate a reward system that offers pay for performance. The CIPD’s Reward Management Survey published in December 2017 cited that 48% of employers who took part in the survey stated that they operate a performance related pay system. The most common criteria used to manage individual base pay progression was also individual performance,competencies, skills and retaining potential.
What is interesting to me is that many organisations that operate a pay for performance scheme, simply do not have the budget to pay “a meaningful amount”. In fact the sums that are offered at times are so meaningless as to be quite de-motivating for employees who strive for that magical rating. Part of the problem at times with how organisation set up their reward system is akin to keeping up with the Joneses. They fall into the trap of being so in awe with another organisation that they admire that they decide to be just like them, even if there is not a fit with that organisation and the one in which they operate. It is also true that many organisations pay consultants to come in, and propose what their reward structures and strategy should be. Now, I am not saying there is anything wrong with this approach but where it can become an issue is when the proposal is adopted wholesale without much thought of best fit for the organisation.
If your budget is limited pay for performance may not be for you. If you are not able to pay a meaningful sum which makes a difference for performance rather than embark on this route ensure that your base pay offer is fair both internally and in the external market. The budget that you would have used to pay that percentage uplift annually, use it instead to consider paying a bit more than the market offers. Make that your attraction tool. Invest in learning and development opportunities for all staff, not just leaders and ensure that promotion opportunities are offered internally. Look at the non-financial rewards that are on offer. Talk to your staff, what do they value the most from work and can you provide these? Let’s be adult about what we can and cannot offer and. Like a friend likes to tell me when I get too excited and want to buy a particular designer item “stay in your lane, the Joneses are broke”.