1. Strengthening
the
Link
Between
Pay
&
Performance
Mykkah
Herner,
MA,
CCP
Manager
of
Professional
Services
PayScale,
Inc.
Karaka
Leslie
Partnership
Manager
PayScale,
Inc.
www.payscale.com

2. 14,000
PosiAons
2500
Customers
40
Million
Salary
Profiles
250
Compensable
Factors
11
Countries
www.payscale.com

3. Agenda
o What
is
Pay-­‐for-­‐Performance?
o Trends
o Why
do
Pay-­‐for-­‐Performance?
o Barriers
to
Success
o Keys
to
Success
o Linking
Pay
to
Performance
o Strategy
o Base
Pay
o Variable
Pay
o Immediate
AcAon
www.payscale.com

4. What
is
Pay-­‐for-­‐Performance?
www.payscale.com

5. Pay-­‐for-­‐Performance
(P4P)
Links
pay
(base
and/or
variable),
in
whole
or
in
part,
to
individual,
group,
and/or
organizaAonal
performance.
The
World
at
Work
Handbook
of
Compensa5on,
Benefits
&
Total
Rewards
by
WorldatWork
www.payscale.com

6. Market
Trend:
Ongoing
Shi;
Toward
P4P
When
craing
next
years
budget
vs.
this
year
the
use
of
Across
the
board
increases
down
by
50%
Use
of
Variable
Pay
has
increased
300%
Source:
HewiW
Survey
–
U.S.
Salary
Increases
2009/2010
and
Impact
on
Org
Spend
for
2010
www.payscale.com

7. 2013
P4P
PracAces
• Performance
based
pay
increases
are
the
#1
driver
for
pay
raises
in
2013
• 56%
of
companies
say
Performance
is
the
main
reason
for
pay
raises
• 71%
give
variable
pay
incenAves
Source:
2013
PayScale
CompensaFon
Best
PracFces
Report
www.payscale.com

8. Why
do
Pay-­‐for-­‐Performance?
www.payscale.com

9. Why
Pay-­‐for-­‐Performance?
The
principle
of
it:
o Employees
who
perform
beWer
should
get
paid
beWer
Drives
results:
o Aligns
employee
performance
to
organizaAonal
goals
MoAvates:
o Employees
work
harder
towards
a
common
goal
Cost-­‐effecAve:
o P4P
allocates
labor
dollars
well,
when
company
performance
is
good
www.payscale.com

10. Barriers
to
Success
Three
main
impediments
to
success
o Lack
of
execuAve
support
o Lack
of
manager
training
o Perceived
budget
restricAons
Performance
management
doesn’t
ensure
Pay-­‐
for-­‐Performance
www.payscale.com

11. Main
Avenues
to
Success
o ExecuAve
buy-­‐in
o Good
P4P
program
design;
fit
with
organizaAonal
goals
&
culture
o Right
systems
in
place
o Manager
training
o Clear
communicaAon
across
the
organizaAon
www.payscale.com

12. Linking
Pay
to
Performance
www.payscale.com

13. “Employees
won’t
believe
there
is
a
link
between
pay
and
performance
unless
they
can
see
it.”
Margaret
O’Hanlon
re:Think
ConsulFng

14. Linking
Pay
to
Performance:
Gelng
the
right
mix
Complexity
of
the
mix…
Individualized
Rewards
&
RecogniFon
Variable
or
IncenFve
Pay
Structure
Base
Pay
Structure
Company
Culture,
CompensaFon
Philosophy,
&
CompensaFon
Strategy
www.payscale.com

15. Linking
Pay
to
Performance:
Strategy
Develop
clear
compensaAon
strategy
o Define
your
market(s)
o Determine
your
level
of
compeAAveness
o Decide
to
reward
performance
in
base
and
variable
pay
Get
reliable
market
data
Develop
clear
and
aligned
goals
o Company
or
organizaAonal
level
o Department
or
team
level
o Individual
level
www.payscale.com

16. Linking
Pay
to
Performance:
Base
Pay
Structure
Merit
Matrix
Manager
Training
o Performance
Management
o CommunicaAon
o Forced
ranking?
www.payscale.com

17. %
pay
increase
based
on
Performance
Metric
Source:
InsFtute
for
Corporate
ProducFvity
www.payscale.com

18. Linking
Pay
to
Performance:
Variable
Pay
Plan
Keep
it
Simple
o Be
able
to
explain
your
variable
pay
plan
in
a
short
paragraph
Ensure
sound
plan
design
o Make
sure
what
you’re
rewarding
ulAmate
moves
the
business
forward
o Clarify
who
is
eligible
for
the
plan
o IdenAfy
performance
measurements
o Determine
threshold
of
organizaAonal
and/or
individual
success
o Establish
your
pay-­‐out
strategy
www.payscale.com

19. Put
it
into
AcAon
www.payscale.com

20. Immediate
AcAon
Elementary
•
Work
with
senior
leaders
to
define
compensaFon
strategy
•
Build
a
compensaFon
plan
with
reliable
data
•
Define
SMART
goals
for
employees
Intermediate
•
Build
cascading
goals
linking
employee
goals
to
corporate
strategy
•
Invest
in
hiring
and
training
good
managers
•
Re-­‐visit
your
comp
budgeFng
process
–
P4P
vs
COLA
Advanced
•
Find
new
and
creaFve
ways
to
incorporate
variable
pay
•
Develop
strong
performance
management
system
•
Build
great
differenFaFon
between
low
and
high
performers
www.payscale.com

21. PayScale
Delivers
Where
Other
CompensaAon
Providers
Fall
Short
PayScale
leads
the
world
in
compensaFon
knowledge
with
the
freshest
and
most
detailed
data
from
over
36
million
salary
profiles.
More
than
2500
organizaFons
use
PayScale’s
so;ware
and
intelligence
to
get
the
greatest
return
on
their
talent.
Smart
businesses
use
PayScale
Insight
to
recruit,
retain
and
moFvate
their
people.
Visit
our
blog:
www.payscale.com/compensaFon-­‐today
Join
our
Group
on
LinkedIN:
CompensaFon
Today:
HR
Best
PracFces
Mykkah
Herner,
MA,
CCP
Manager
of
Professional
Services
PayScale,
Inc.
Karaka
Leslie
Partnership
Manager
PayScale,
Inc.
www.payscale.com