6 Questions For Linking Employee Compensation and Performance Appraisal

by on June 15, 2009 · 0 Comment POSTED IN: HR Info Center

Make Performance Appraisal Justify Employee Compensation

Everyone is searching for the holy grail of performance appraisal. And no one has found it yet. That’s why you never see the same appraisal form in two different organizations. Everyone is different. But every organization has to answer these questions if they want to link employee compensation and performance. And they all answer them differently.

  1. How many forms shall I have? I’ve seen as many as ten different forms in an organization and as few as one. Two is generally a good number. One for supervisors, one for non-supervisors.
  2. How many performance levels should we have? I’ve seen what I call three up and one down which is one negative and three positive performance ratings. But I’ve seen as many as ten performance ratings, which does more harm than good to employee compensation.
  3. How many performance or competency categories should I have? These are things like teamwork, initiative, quantity of work, quality of work — these kinds of things. If you have more than ten, you’re overlapping. And by that, I mean you’re measuring the same kinds of things. You should be able to boil all that down and write good standard descriptions in each area. So everybody is consistent on what they’re evaluating, which means you’re employee compensation will have more ground to stand on.
  4. What are the important performance competency categories? This is a measurement tool. What you measure is what you get over time. So make sure that you’re measuring the right kinds of things. It’s not a bad idea to take the mission or value statement down from the wall and actually try to work in into the appraisal document.
  5. Are you going to do self reviews? Lots of organizations are doing that these days. Push it up one step further. Are you going to do 360? How about 180? So you have to make these kinds of decisions.
  6. And what is the expected performance rating distribution? Even if you tell people that we expect pure outstanding rated individuals than meets expectations individuals, that in itself will essentially, it will seek that level over time just by communicating what the expected distribution is on a company wide basis.

Edited Remarks from “The Seven Deadly Sins of Employee Compensation Plans (and How to Fix Them)” by Rick Olivieri

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