HRM on Facebook Follow HRM on Twitter Follow HR Management Guide

Pay for Performance

The high performing organizations always introduce the concept of the pay for performance. It is closely connected with the high performance corporate culture and it is not just a compensation and benefits area. The pay for performance is a complex of different HR Processes aimed to build the environment, which encourages employees and managers to stretch the goals and to pay the best employees more than the others. The “pay for performance” has to be included in the corporate culture and cannot be used as separated HR initiatives and HR processes as the separated usage would miss the main goal - paying the employees for the performance reached.

What is “pay for performance”?

Pay for performance is not just a pure compensation and benefits concept. The pay for performance is a right mix of the HR Processes, which supports the optimal performance of the organization and it pays the most performing employees significantly differently, includes special compensation schemes for the selected groups of employees and gives career opportunities to the best talents in the organization.

Pay for PerformanceThe pay for performance is not just a tool, it is more about the philosophy of the organization to reward the best performing employees and building the suistainable competitive advantage. The high performing organizations differs themselves from the other organizations on the market, they reach higher profitability and they have more satisfied employees, who bring innovative ideas and solutions.

The “pay for performance” concept has to be based on the clever mix of the different HR Processes, the right corporate culture and the managerial behavior as the CEO feel the support for reaching the challenging goals and visions. The “pay for performance” concept cannot be based on the exceptions and poor systems, how to work with the top performers and top talents of the organization.

What HR Processes are included in “pay for performance”?

Human Resources has several important HR Processes to support the pay for the performance concept in the organization. The pay for performance cannot be seen as the isolated activity within Compensation and Benefits and Performance Management.

The “pay for performance” includes many processes from Career Development and the Talent Management as the whole concept is about offering more opportunities than just better salaries and higher bonuses to the key groups of employees.

The training and development is the essential part of the “pay for performance” concept as the high proportion of the training and development budget should be focused on the key groups of employees and developing their managerial and leadership skills and competencies.

The recruitment and staffing processes have to be focused on the early identification of the top talents on the job market and preparing the attractive packages for the top talents to attract them to the organization. The Career Development and Compensation and Benefits are then a key to the successful retention of such the top talents.

How to implement “Pay for Performance”?

The implementation of the pay for performance is not easy and it requests the full commitment of the CEO, HR and the top management. When the pay for performance starts cascading through the organization, the middle management starts to act as it is required by the pay for performance concept.

The CEO has to follow strictly the rules given by the pay for performance and the whole idea will spread in the organization quickly as the managers will follow the positive role play given by the top management.

Pay for Performance Content