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The Case for Reforming Performance-Based Pay

It’s that time of year again folks. Performance reviews, (which will be the topic of conversation in many a breakout room) are taking place as we speak across the country. And as many of us will know, arguably the most difficult aspect of a performance review, aside from the bane involved in facilitating the conversation, is the intimate and often callous component of ‘summarisation’.

Summarisation as one mitigating factor for a manager, affords the notion that employee reviews take place only the once inside the space of 12 months, and as such are deemed to be an effective tool in managing engagement in the workplace, this unfortunately is a forlorn fallacy.

The traditional engagement and incentive model for pay reviewing, has admittedly not been very accurate in modeling or indeed, mirroring the value added to the organisation from all employees on all sides. That is also increasingly evident.

It is unfortunately also the case that, including board-level compensation, most of the remuneration processes in the City boil down to contacts and hierachical influence.

How Can Performance Reviews Become More Analytical? 

This is one of the reasons why the major challenge of the modern workplace is to tackle work-based incentives. In the age of summarisation, there should be more emphasis placed on investment in technologies that have the ability to ascertain, in an accurate way, the reporting metrics of often spuriously designed subordinated tasks.

The idea of rewards and compensation should be to incorporate task-based responsibilities, which are an avid and sometimes despised part of corporate work, and convert them into similar metrics to that of a product dashboard.

Who has done the majority of the analysis, reporting, reconciliation or coding? That is the question. This quantified decision making process should be algorithmic and incorporated into remuneration systems.

HR Analytics can help in this vein, but while it has the ability to convert otherwise meaningless amounts of large raw data on employees into summarised bite sized and reasonably inferential pieces of data, in dashboard format, the one drawback is the impact on the employee’s experience.

The debate in the employee experience community therefore needs to revolve more around the engagement incentives that inspire employees to increase their productivity, and by that I mean to say, who did what? How long should it have taken? and how long did they spend doing it? That’s all it boils down to.

There needs to also be an understanding that departmental budgets are not infinite. Talent therefore need to be allocated performance-based remuneration in a zero-sum manner.

Such a remuneration model could easily be integrated into prominent workforce planning platforms to make performance reviews and the act of summerisation more easy for operational managers. These system enhancements could feasibly review performance on behalf of the manager, leaving the manager with their own box ticking task at the end of each month.

The metrics system would allocate in-discretionary marks which only senior management in HR would have access to. A leader-board, thereby avoiding the need for the summarised aspect of achieving a high annual bonus.

Then perhaps maybe the idea of managers docking pay, implementing claw-backs or restrictions for inadequate or over-excessive amounts of compensation, and/or the ineffective checklisting concept of performance monitoring, could be done away with, potentially saving companies who chose to do so millions per year in expenses and costs.