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How do we move forward with pay and reward in 2021?

How do we move forward with pay and reward in 2021v1 2 blog page

Nobody will be shocked to hear that the Covid-19 pan­dem­ic has had a huge effect on organ­i­sa­tions across the world. For many this has includ­ed their pay and reward process. A lot of com­pa­nies have oper­at­ed using a bonus scheme, e.g. if you reach your allo­cat­ed tar­gets through­out the year, we’ll give you a bonus. How­ev­er last year changed things, many organ­i­sa­tions had to shift their pri­or­i­ties, mean­ing rank­ing and reward­ing employ­ees took a back seat to ensur­ing well­be­ing and pro­duc­tiv­i­ty whilst remote work­ing. But if all goes as planned, in 2021 organ­i­sa­tions will start return­ing to some form of nor­mal­i­ty and employ­ees will expect that their pay and reward scheme will be re-instated.

But before you sim­ply put back in place the exact same pay and reward sys­tem you were using before the pan­dem­ic, it might be a great oppor­tu­ni­ty for your com­pa­ny to make some much need­ed improve­ments. In the recent 2021 Per­for­mance Man­age­ment Report com­mis­sion by Clear Review, 0% of HR direc­tors said pay and rat­ings should be a main focus of per­for­mance man­age­ment, while 46% said pro­duc­tiv­i­ty and engage­ment should be the focus (read the report to find out more). So how do you shift the focus away from rat­ings and pay and onto pro­duc­tiv­i­ty and engage­ment while still reward­ing high per­form­ers? In this blog we will explore this while look­ing at sim­pli­fi­ca­tion, fair­ness and recognition. 

Sim­pli­fy­ing per­for­mance strat­e­gy
Since the Covid-19 pan­dem­ic we’ve been approached more than ever by organ­i­sa­tions who are look­ing to sim­pli­fy the way they make pay and reward deci­sions. These organ­i­sa­tions can see how Clear Review’s per­for­mance man­age­ment soft­ware is being used to build a clear and full view of an employee’s per­for­mance over a stretch of time. Mean­ing when it comes time to eval­u­ate an employ­ee at the end of the year and decide if they are on track or not, the infor­ma­tion man­agers need is already there in front of them. 

Our sug­ges­tion is to keep it sim­ple. Rather than the tra­di­tion­al 5 point rat­ing scale which man­agers strug­gle to use con­sis­tent­ly and accu­rate­ly, we sug­gest using a sim­pler 3 point scale with clear, unam­bigu­ous descrip­tions. We rec­om­mend on track’, off track’ and excep­tion­al’. Those on track get the stan­dard bonus or pay award, those off track get less or none at all, and those who are excep­tion­al receive more than those on track. Most employ­ees will fall into the on track’ cat­e­go­ry which makes things a lot sim­pler when it comes to things like cal­i­bra­tion, but this approach still enables under-per­for­mance and excep­tion­al per­for­mance to be dif­fer­en­ti­at­ed and recognised. 

To decide which cat­e­go­ry each employ­ee falls into man­agers can use the Clear Review plat­form, which will present them with an auto­mat­ed sum­ma­ry of their team mem­bers’ per­for­mance and devel­op­ment data which has been con­tin­u­ous­ly col­lect­ed through­out the year from check-ins, feed­back and objec­tives. Then the sys­tem asks the man­ag­er a few tar­get­ed ques­tions to help frame their think­ing and make the appro­pri­ate deci­sion based on the data. We call this a per­for­mance snap­shot’. The advan­tage of a per­for­mance snap­shot over a tra­di­tion­al per­for­mance review is that it takes min­utes to com­plete, rather than hours, and min­imis­es bias because reward deci­sions are based on fact rather than opinion. 

Recon­sid­er­ing fit­ness for pur­pose and fair­ness
Dur­ing the pan­dem­ic organ­i­sa­tions have had a chance to pause, reval­u­ate their pay and reward sys­tem, and decide if it is fair to all employ­ees. A recent sur­vey by the Cog­nizant Cen­ter found that of the 4000 C‑suite and senior exec­u­tives that took part 58% want to val­ue and pay essen­tial work­ers more, and 43% want to cut high exec­u­tive salaries, read more here.

What we now have is an oppor­tu­ni­ty to look at how to reward those who deserve it more fair­ly, and stop over reward­ing those who don’t. So those who achieve excep­tion­al’ sta­tus should ide­al­ly be a small mar­gin, like the top 10%.

Recog­ni­tion, not just reward
Dur­ing the last year many organ­i­sa­tions have been strug­gling against the unsta­ble eco­nom­ic envi­ron­ment, many have cut back on reward­ing staff with mon­ey, but still want to let them know their work is appre­ci­at­ed. We all want to know our hard work is being seen, and enjoy that feel­ing of pride when we get con­grat­u­lat­ed on a job well done. Accord­ing to research by Deloitte, employ­ee engage­ment, pro­duc­tiv­i­ty and per­for­mance are 14% high­er in orga­ni­za­tions that proac­tive­ly fos­ter recognition. 

Stud­ies show that the moti­va­tion­al effect of an extrin­sic reward such as pay does not last long, and that only 15% of the effect of a salary increase sur­vives longer term. There­fore you would need to fre­quent­ly reward staff with spot’ bonus­es in order to con­tin­ue to have an effect. How­ev­er this then brings up argu­ments about con­sis­ten­cy in these rewards being award­ed, fair­ness in who gets them etc. So a bet­ter way to moti­vate your staff is by show­ing their achieve­ments have been recog­nised by the organ­i­sa­tion. This could be praise from their man­ag­er, a pub­lic shout out on a team call or awards giv­en to top achiev­ers each month or quar­ter. This way employ­ees know their good work is not going unno­ticed, with­out the need to keep reward­ing them with bonus­es or pay increases. 

Time for a re-think?
It is key to remem­ber that there are no hard and fast rules here, these are strange times and no one solu­tion will fit for every organ­i­sa­tion! But if you feel your old incen­tive struc­ture isn’t work­ing for your organ­i­sa­tion or staff mem­bers, it’s time for a re-think. Just remem­ber, when changes are made, to keep your staff in the loop as soon as pos­si­ble. Some peo­ple may be resis­tant to change, but if you are clear and trans­par­ent about the changes and explain why you are imple­ment­ing them it will be eas­i­er to get staff on-board. Make sure man­agers are hav­ing reg­u­lar con­ver­sa­tions with their employ­ees around per­for­mance, progress and pay. It is impor­tant staff know their organ­i­sa­tion is being hon­est with them, cre­at­ing a trust­ing envi­ron­ment. You can down­load our eBook on Max­i­miz­ing pro­duc­tiv­i­ty in the new nor­mal’, and How to man­age pay with Con­tin­u­ous Per­for­mance Man­age­ment’ for a more in-depth look at some of the sub­jects cov­ered in this blog, and to receive updates on new con­tent around per­for­mance man­age­ment please reg­is­ter here.

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