Performance Compensation is also tied to Potential

by on June 11, 2009 · 0 Comment POSTED IN: HR Info Center

After Budget and Comparatio, performance compensation should consider performance and potential

Now, if you have money and they have room, the next thing that determines your performance compensation is performance. But there’s another part of it; potential. If you have money and you have room to even begin performance compensation for an employee, the next thing that you’ll need to know that will accurately predict somebody’s increase is their performance and their potential.

Think of potential this way. Is an employee silly enough to want more responsibility and good enough to earn it? In other words, some people have enough common sense not to want to take on these additional jobs that don’t really pay that much more.

If you’ve got to always take on more responsibility even though it doesn’t pay that much more, that means you’re going to the end of your rope a lot faster. You’re not going to keep jumping the ladder going to the next step. And when you have a balanced life, you’re going to find whatever your top salary grade is a little bit sooner. And when you find that your performance compensations are going to level off a bit and that’s fine.

Tie Past Performance to Things Other than Performance Compensation
Last year’s performance is not the best predictor of this year’s performance compensation. But last year’s performance does predict some other stuff. For example, if you have a bonus, that’s where it comes from. Last year’s performance is usually tied in to this year’s bonus.

Companies normally decide who they’re going to keep based on performance. If things get dicey, they’re going to unload the lifeboat with people who perform the least. And the best performers are the last to go.

When looking for promotions, you should look for the best performers. And even though you’re giving out assignments or goodies, so that’s the primary criteria for how we do it.

Performance rocks. It’s really important. But don’t kid yourselves and believe that last year’s performance is the best predictor of performance compensation. Budget and comparatio determine the viability of performance compensation first in reality.

Edited Remarks from “How to Drain the Drama from Salary Reviews: A Conversation Roadmap” by Gary Markle

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