Nine improvements for your performance management and employee compensation systems

by on June 16, 2009 · 0 Comment POSTED IN: HR Info Center

Make your employee compensation system more effective with these improvements

Here is my list of improvements that virtually I think every company can undertake to make appraisals and employee compensation systems more effective and again, increase your return on investment in this area.

  1. Keep notes of performance and employee compensation during the course of the year and summarize it at year end.
  2. It doesn’t happen very often, but most of the research indicates that’s an important item.

  3. Emphasize mutual problem solving in employee compensation and performance questions.
  4. This is not an adversarial relation. This is more of a team kind of approach.

  5. Try to balance positive and negative feedback.
  6. Generally, the ratio is you need to give about for an average person maybe three positives for every one constructive criticism that you write on a performance appraisal form.Some people have thicker skin. Some have less thick skin so that ratio may change. But on average, it’s got to be at least about a three to one because you really don’t want to hurt at least 99% of your employees in this process. You want to make them feel energized and motivated for the coming year.

  7. Be specific about what the employees should do to improve with your performance and employee compensation reviews
  8. Almost everybody should have things to improve. Be very specific about what you tell them.

  9. Be prepared to talk about it 50% of the time.
  10. Most performance appraisals, the manager spends literally 95% of the time talking. So you want this to be a two-way exchange. Be prepared to talk about the future 50% of the time.

  11. Concentrate on observable behaviors and results and not the person.
  12. Only record what you can see or hear, not – don’t attach any motivational feelings to the person that you haven’t really observed in either the performance review or with the employee compensation.

  13. Emphasize employee’s involvement in problem solving in future actions.
  14. Again, this is a team effort. Ask open-ended questions. It’s an art form for supervisors to get employees to talk. Concentrate on opportunities for growth. It’s the number one thing that comes up on survey after survey. And they’ve been doing this for 30 years. Employees really want from their job a chance to gain new skills and responsibilities.

  15. Get agreement with your employee on new performance and employee compensation objectives.
  16. You want them to buy in to any objectives that they have in the performance appraisal form. And even if you don’t agree on everything that is likely that you won’t agree on everything, there’s no need to argue with it. You’re still the boss.

  17. Design your employee compensation and performance ratings accurately
  18. So, what we’re trying to do is we want all employees and managers to understand what acceptable and exceptional performance consist of. And we want consistency in evaluations between managers. Some managers are hard graders. Some are easy. But we want some consistency. So we want to define these performance ratings the best we can.

    If you have inequitable ratings between departments or between employees, it can cause internal equity problems, which in my opinion are some of the worst problems any company can have.

Remember, I – and emphasize the future more than the past. Most organizations are the direct opposite of that. The past is the past in my opinion. You can’t really change it. Yes, you do need to evaluate people and reward them for their performance on that – well, last 12 months but here, you also have an opportunity to influence future behavior. And I think you should spend more time talking about the future. I think your employees would actually like that too.

Edited remarks from the Rapid Learning Institute webinar: How to Set up Fair and Effective Pay Plans in an Uncertain Economy by Rick Olivieri

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