Employee Compensation is Communicated via the Performance Evaluation

by on June 19, 2009 · 0 Comment POSTED IN: HR Info Center

Performance Appraisals are the most important communication regarding Employee Compensation

The performance appraisal form is probably the most important communications that an employee receives about employee compensation. There’s a tendency for the performance review process to concentrate too much I think on the past. Eventually employee compensation has to come down to past performance. But you should concentrate a bit more in a performance review process on the future. What are the expectations for the future? Try to get the absolute most that you can from the employee going forward.

Some companies actually use one system or one form for their employees. And there are some companies who actually have more than two. In fact, if you think about it you – the more forms that you have the more, specific you can be about what kinds of things you are measuring for a group of employees, which makes it clearer how employee compensation is managed. However, you have to balance the amount of administration and communications required to do performance appraisal effectively.

Generally, everybody seems to be looking at their performance appraisal system every three to five years. 78% do an evaluation of employees once a year and some companies 16% of them are doing it twice a year. It seems like the period of time in which employee’s performance is being measured is actually shortening up.

Anytime you’re able to encourage a manager and an employee to sit down and talk about performance, future expectations, career development, these kinds of things, is a positive for the company. And there’s some evidence to indicate that those companies who do performance management well actually perform better than those who don’t.

The training for managers has also increased pretty dramatically. There has been a lot of talk about 360 degree appraisals and 15 years ago or thereabouts when 360 degrees became pretty popular, there were even fairly elaborate calculated systems to calculate what the overall performance rating was from various sources.

There is a desire by many companies to gather input from more sources than just the manager. And this can be done maybe not necessarily in a very formal process but any manager, again, who’s well trained will go talk to whoever they need to talk to, to get a fix on employee’s performance.

Additionally, the use of forced rankings has actually decreased pretty dramatically. Many of you who have gone through this forced ranking process before. You find that it’s very difficult – in a small group you can probably do a forced ranking and link it to employee compensation fairly effectively. In a larger group, it becomes much more problematic. And then when you try to compare rankings in different departments or cross-functional lines, it becomes almost meaningless when applying it to employee compensation.

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