You say you have a pay-for-performance philosophy, but have you defined what great performance looks like across the jobs in your organization? Do managers throughout the company measure performance and allocate rewards consistently? Establishing a job-based information architecture across your people processes is the only way to consistently measure performance and lay the foundation for a true pay-for-performance program. Beyond simply writing job descriptions, defining what “good” and “great” look like and providing a framework that the organization understands and can evangelize is a challenge. But consistency and rigorous application are the only ways to meaningfully connect what you need people to do, how they do it, how to get them to do it better and what that’s worth, not just in pay, but in sales, customer satisfaction and employee engagement.
This webinar will discuss:
The information challenges of pay for performance.
How job-specific competency models set the foundation for defining and assessing performance.
Some best practices to establishing a job-based taxonomy.
Pay for Performance: Building the Foundation Through Job Competencies
1. You can listen to today’s webinar using your computer’s
speakers or you may dial into the teleconference.
If you would like to join the teleconference,
please dial 1.650.479.3208 and enter access code: 922 286 403 #.
You will be on hold until the seminar begins.
#TMwebinar
2. Speakers: Gordon Ritchie
Director, Competency Solutions
Kenexa, an IBM Company
Moderator: Kellye Whitney
Managing Editor
Talent Management magazine
#TMwebinar
8. Copyright Kenexa®, 2013 8
AGENDA
1. Kenexa, IBM and The “Smarter Workforce”
2. What is pay for performance
3. Why do we care about pay for performance
4. What does the workforce want?
5. How do we link Job Performance and Pay using
competencies?
6. Q & A
9. Copyright Kenexa®, 2013 9
IBM
SMARTER WORKFORCE
Leaders and employees transforming organizations for business advantage in three significant ways
Attract
Attract and recruit top talent and
source the best people for your
culture and business needs.
Land the perfect job:
Employee strengths, career
aspirations, and personality are
matched to the role and company
culture.
Empower
Empower employees to hit the ground running and
to continually learn and develop their skills so that
they can make the greatest impact.
Hit the ground running:
Employees are empowered with the right tools and
easily connect to expertise across the organization
to grow their skills and start contributing
immediately.
Motivate
Build a workforce of innovative leaders
and teams that solve problems
together—resulting in stronger
engagement, increased productivity
and higher profit.
Make an impact:
Employees are motivated to
outperform, using tools to measure
their progress, and transform the
organization and their careers.
A Smarter Workforce has
employees who are:
Motivated, Committed, Loyal,
Productive, Creative, Proactive,
and High Value
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POLL:
Does your organization have a “Pay for
Performance” philosophy? Yes/No
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• People are our biggest asset
• Biggest single expense = salary
• Critical competency ‐ Teamwork
• Individual results and reward
• What is pay? Salary/Benefits/?
• What is performance, good bad or otherwise?
• Proficiency does not equal performance
• Careers becoming assignments, that are shorter in
time than the performance cycle.
• HR Big Data; begets Big Data
13. Copyright Kenexa®, 2013 13
WHAT IS PAY FOR PERFORMANCE?
With your 3.0% increase budget … a
couple of questions
How can you give your average
performers a 3.0% increase while at
the same time differentially rewarding
your top performers AND still only
spend 3.0%?
What does your average performing
employee expect to get as an
increase?
14. Copyright Kenexa®, 2013 14
PAY FOR PERFORMANCE
• 3.0% increase budget
• 2 employees each “doing their job”
• They each get a 3.0% increase
15. Copyright Kenexa®, 2013 15
Apart from that Mrs Lincoln,
how was the Performance?
• What does good look like?
• What numbers are on your performance
form? How are they defined?
• Do you, your manager and your manager’s
manager agree on what the explicit difference
between a 3 and 4, or a 2 and a 3?
– Is that the same as your Compensation team?
– Is that the same as your Org Dev team who built
the performance process?
16. Copyright Kenexa®, 2013 16
PAY FOR PERFORMANCE
• A compensation philosophy that asserts that an
individuals pay is a function of their performance
• Performance demonstrated consistently over an
extended period of time
• Pay is achieved over time, not overnight
• Performance is something that can change.
• An organization:
• must define its clear consistent expectations of performance levels for
each job role
• cannot avoid its responsibility to define what it expects, through individual
empowerment
PAY FOR PERFORMANCE
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Cost Reducing Measures
Which cost reducing measurements did organizations take as a result of the economic downturn?
20. Copyright Kenexa®, 2013 20
• Increase budgets in the U.S. bottomed out in 2009 and the rebound is
yielding increased budgets but still below the pre-recession levels
“For the first time since 1980, the U.S. rate of inflation is higher
than the average total salary budget increase”
WorldatWork – August 2011
PAY BUDGETS: Whats the
first thing to change?
2008 2009 2010 2011 2012 2013
Kenexa Compensation 3.0% 3.0% 3.0%
IPAS 3.9% 1.1% 2.5% 3.2% 3.2% 3.0%
Aon/Hewitt 3.7% 1.8% 2.4% 2.7% 2.9% 3.0%
Buck 2.9% 2.9% 2.7% 2.8% 3.0%
Conference Board ‐ ‐ 2.5% 2.5% 3.0% 3.0%
Culpepper 3.9% 1.7% 2.7% 2.9% 2.8% 3.0%
Hay 3.0% 3.0%
Mercer ‐ ‐ 2.7% 2.9% 2.9% 2.9%
Towers Watson 3.4% 1.7% 2.8% 2.7% 2.8% 2.9%
WorldatWork 3.8% 1.9% 2.8% 2.9% 3.0% 3.0%
21. Copyright Kenexa®, 2013 21
• Certain HOT Jobs continue to outpace the market exceeding the
overall market average of 9% in the 5 years between 2007 and 2012
Under or Over Paying: How do you
know it’s the same as your job?
Job Title Change
Long Term Care Executive 27.1%
Certified Occupational Therapist Asst 25.7%
Hardware Engineer III 20.3%
Chemical Engineer III 19.4%
Staff Nurse ‐ Surgical First Assistant 17.4%
Nurse Practitioner 17.2%
Certified Nursing Assistant 16.4%
Network Administrator 15.1%
Software Engineer III 14.7%
• Others jobs aren’t so lucky significantly lagging the 9% average over
the last 5 years
• Differences between HOT jobs NOT so HOT jobs underscores all the
more the need for good data
Job Title Change
Accounts Receivable Manager 2.9%
Administrative Services Supervisor 1.5%
Communications Representative III 2.1%
Facilities Manager 2.3%
Financial Analyst II 4.7%
Mainframe Programmer II 2.9%
PC Maintenance Technician II ‐6.5%
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In the US, my pay is directly related to how well I perform.
Source: 2011 Kenexa High Performance Institute WorkTrends survey
52% DO NOT
see a link
19% uncertain
29% DO see a
link
THE LINK
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36%
17%
0%
10%
20%
30%
40%
50%
60%
70%
Pay Unrelated to
Performance
Pay Related to Performance
Worldwide
Worldwide the percent of employees who are
seriously considering leaving their organization
THE LINK: WHY WE SHOULD CARE
Source: 2011 Kenexa High Performance Institute WorkTrends survey
24. Copyright Kenexa®, 2013 24
What does it cost? **
• Evaluating
Talent
• Retaining
Talent
• Engaging
Talent
• Acquiring
Talent
Cost of a poor
hire:
$300K-$500K
Operational
efficiency rate
due to poor
employee
engagement:
30%
Cost of losing a
talented
employee:
$250K-$500K
Value of a top
performer: 2-4X
performance of
average
employees
** From Human Capital Institute
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Reliance on “The Event”:
• Once-a-year
• Minimal communication
• Reliance on manager’s memory
• Little training
• Employee empowerment
SO WHAT HAPPENED
TO THE LINK?
Assessment Forms Became:
• Too long
• Too complex
• Often designed to measure the
wrong things
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WHAT ARE ANALYSTS SAYING…
“Best‐In‐Class organizations are more than twice as
likely to identify competency data for each employee.”
“If we can apply science to improving the selection,
management, and alignment of people, the returns can be
tremendous.” Forbes Leadership Article February 2013
“… companies realize they cannot solve their skills shortages
externally. To achieve competitive advantage, they must
commit to developing the right skills internally” Corporate
Learning Factbook 2012
SHRM recognized in their 2012 Employee survey, being
recognized in using your skills is now the #1 employee job
satisfaction issue, above pay, benefits etc.
28. Copyright Kenexa®, 2013 28
GLOBAL RESULTS: WHAT
EMPLOYEES REALLY WANT
R
E
S
P
E
C
T
10%
Truth
20%
Recognition 7%
Exciting
Work
18%
Security
25%
Pay
9%
Education
and Career
Growth
11%
Conditions
Source: Kenexa High Performance Institute
29. Copyright Kenexa®, 2013 29
RECOGNITION
A pat on the back from managers and the
organization at‐large
20%
Recognition
I want to be
respected and
recognized as a
valuable team
member
Recognition when we do a
good job - right now it is all
about getting chewed
out when we mess up
More respect
from senior
management
Source: Kenexa High Performance Institute
30. Copyright Kenexa®, 2013 30
PAY
Fair compensation for a day’s work
25%
Pay
Compensation
that is fair and
respect(ful)
Good pay for a
good day’s work
Unfreeze pay
Source: Kenexa High Performance Institute
31. Copyright Kenexa®, 2013 31
Executive
Senior Management
Management; Senior Level Consultant
First Line Management; Senior Professional
Team Leadership; Technical Professional
Functions: Finance, Sales, HR, Marketing, Operations, Etc.
Competency Impact
Core and Leadership :
high impact,
low frequency,
indirect
Technical: Tactical
impact with high
frequency, direct
Individual Contributor; Technician; Trainee
Make many operational decisions that impact direct product/service/customer facing actions.
Frequency * Value can mean big numbers depending on either multiplier i.e.
1000 Customer Reps, directed with poor operational management can be as impactful as one core or
leadership competency.
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WHATS A DESCRIBING A JOB WORTH?
$5, $50 OR $5,000
Attracting wrong applicants = wasted time and cost for selection,
assessment and processing.
How many people do you interview and not hire?
Improved onboarding effectiveness = Achieve initial goals quicker
Sales = more sales sooner/few losses
Quality = shorter role familiarization time = increased
performance
Focused activity = greater productivity
More accurate marketing pricing = optimized salary budgets.
Make it a tool that is used, and reused.
33. Copyright Kenexa®, 2013 33
CHALLENGES DEFINING
COMPETENCIES
Copyright Kenexa®, 2012
Source: Competencies, Compensation and
Technology Luncheons.- 2012
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
Manual
process
Budget
Constraints
Too difficult to
define
competencies
Too many
jobs
Lack of
executive
support
What prevents you from implementing
competencies (or extending the competencies you
have) in your organization?
34. Copyright Kenexa®, 2013 34
POLL:
How many of you rate (as in 1=Bad, 5= Good) these types of
competencies in your annual performance and compensation planning
process?
1. Core/Foundational (same for everyone)
2. Functional, aligned to the job family
3. Technical job role specific
36. Copyright Kenexa®, 2013 36
Internal jobs and External Sources
You need to analyse your benchmark jobs
– Similar/Common job title
– Job Description
– Type/Level: IC, Lead, Manager, Professional, etc
– Status (exempt/non‐exempt)
– Common expectations on the job
Compensation is used to using data.
But there is no common performance data.
What we need is a clear consistent way to describe what it is that’s
required of a job, that defines what good looks like that can be
used by employees, managers, and compensation analysts
Big data needs consistent structure, solvable measures, and
common definitions.
37. Copyright Kenexa®, 2013 37
COMPETENCIES ARE THE
FOUNDATION
Using a Competency Framework
provides a common language
for your Talent Management
strategy .
Used WITH technology
systems it integrates those
systems.
Functional Job &
Competency
Framework
Career &
Succession
Planning
Learning
Needs
Analysis
Risk
Analysis
Recruitment
& Selection
Resource
Planning
Compensation
Performance
Management
38. Copyright Kenexa®, 2013 38
The Pay for Performance Job Model
• Job Description
– Title
– Summary
– Primary
Responsibilities
– Compensation
Market Data
• Competencies (KSA’s)
– Definition
– Behavior Statements
• Proficiency Target
– Performance
Accelerators
• Learning References
• Development Statements
• Coaching Tips
• Writing Assistance
– Interview Questions
Hierarchy and Alignment
Job Function, Job Level, Job Focus
39. Copyright Kenexa®, 2013 39
JOB SAMPLE:
Job Title Benefits Manager
Job Band ID 3
Job Family Compensation and Benefits
Job Definition
Manages the development and administration of employee benefits programs, policies,
and procedures and ensures compliance with related regulations.
Job Responsibility 1
Provides leadership in the planning, design, and implementation of benefits programs
(e.g. medical, dental, vision, disability insurance, life insurance, and employee assistance
programs) and ensures all activities comply with legal requirements.
Job Responsibility 2
Oversees the collection and overall accuracy of benefits data located within the
organization's HRIS; evaluates current benefits programs and identifies and monitors
critical performance.
Job Responsibility 3
Manages vendor relationships to ensure adherence to required service levels for
outsourced benefits providers..
Job Responsibility 4
Monitors the employee benefits eligibility and enrollment process to ensure employees
meet eligibility requirements.
Job Scope Description
Designs, plans, and implements corporate benefits programs, policies, and procedures.
Responsible for ensuring programs meet employee needs, comply with legal
requirements, and are cost effective. Requires a bachelor's degree in a related area and at
least 7 years of experience in the field or in a related area. Familiar with a variety of the
field's concepts, practices, and procedures. Relies on extensive experience and judgment
to plan and accomplish goals. A wide degree of creativity and latitude is expected.
Performs a variety of tasks. Leads and directs the work of others. Typically reports to a
head of a unit/department.
Base:
Percentiles: 25%, 50%, 75%
TCC:
40. Copyright Kenexa®, 2013 40
Compare Functional Roles
Job Bands
1 2 3 4 5 6
Exec Mgmt Senior Mgmt Management;
Senior Level
Consulting
First Line
Management; Senior
Professional
Team
Leadership;
Technical
Professional
Technician, Trainee,
Administrator
Top Compensation
and Benefits
Executive
Compensation
and Benefits
Director
Payroll Manager Payroll Supervisor Benefits Analyst Payroll Administrator
Top Compensation
Executive
Compensation
Director
Corporate Insurance
Manager
Benefits Analyst, Sr. Benefits Clerk, Sr. Benefits Clerk
Top Benefits
Executive
Benefits
Director
Benefits Manager
Compensation Analyst,
Sr.
Stock Plan
Administrator, Sr.
Stock Plan
Administrator
Compensation and
Benefits Manager
Benefits Supervisor
Benefits
Administrator
Compensation
Administrator
Executive
Compensation
Manager
Executive
Compensation Analyst
Compensation
Specialist
Workers
Compensation
Administrator
Workers'
Compensation
Manager
Compensation Analyst Payroll Clerk
Compensation
Manager
Payroll Clerk, Sr.
International
Compensation and
Benefits Manager
41. Copyright Kenexa®, 2013 41
COMPETENCY IMPACT
Functional
Competencies
Core,
Leadership
& Levels‐Based
Competencies
Reflects strategy and culture
Supports selection and hiring
Reflects the leadership pipeline
Applicable to all roles
Reflects functional
strategy and key skills
Applies to all functional
incumbents and
candidates
“A combination of knowledge, skills and abilities (KSA’s) describing
the demonstrable indicators of proficiency.”
Reflects job/role specific knowledge
and skills
Well suited for skills assessment, skills
inventory analysis and development
Applies to incumbents and candidates by
position
Technical and Domain
Specific Competencies
42. Copyright Kenexa®, 2013 42
SAMPLE: COMPETENCY PROFILE
Profile Name: Job Title Benefits Manager
Competency
Code
Competency Name Proficiency Importance
B0295 Business Orientation 3 - Extensive experience High
B0750 Budgeting 3 - Extensive experience High
B1020 Planning: Tactical, Strategic 2 - Working experience High
B1060 Effectiveness Measurement 3 - Extensive experience High
B1100 Standard Operating Procedures (SOP) 3 - Extensive experience High
I0480 Effective Communications 3 - Extensive experience Medium
I0700 Decision Making and Critical Thinking 2 - Working experience High
I1000 Managing Multiple Priorities 3 - Extensive experience Medium
I1010 Relationship Management 3 - Extensive experience Medium
I1020 Analytical Thinking 3 - Extensive experience High
L0010 Accountability 3 - Extensive experience High
L0070 Goal Setting 2 - Working experience High
M0810 Outsourcing 3 - Extensive experience High
THR000 HUMAN RESOURCES POLICIES, STRATEGIES AND ENVIRONMENT 3 - Extensive experience Medium
THR010 HR: Trends and Direction 3 - Extensive experience Medium
THR020 HR: Policies, Standards and Procedures 3 - Extensive experience High
THR030 HR Legal and Regulatory Environment 3 - Extensive experience High
THR110 Employee Counseling 3 - Extensive experience Medium
THR200 Compensation Management 2 - Working experience Medium
THR300 BENEFITS PROGRAMS 3 - Extensive experience High
THRV- Specific Benefits Plan Development 3 - Extensive experience High
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Competency Proficiencies
Competency Code THR200
Competency Name Compensation Management
Competency
Description
Knowledge of and ability to design, implement and evaluate compensation programs, policies and processes within an
organization.
Level 1 - Basic
understanding
Describes key purposes (e.g. motivating employees) of compensation management.
Cites organizational examples of compensation management.
Lists government regulations and industry policies related to compensation.
Lists major compensation programs (e.g. executive compensation) used in the organization.
Level 2 - Working
experience
Implements compensation packages for an organization's employees.
Assists in developing various compensation programs within an organization.
Maintains good relationships with staff from HR and business units.
Adheres to government and industry compensation regulations.
Conducts job analysis and salary survey activities within the department.
Level 3 - Extensive
experience
Determines if compensation management objectives are in line with overall business objectives.
Oversees the implementation of compensation programs within the organization.
Advises the management team on compensation issues, such as pay structure.
Evaluates the effectiveness and competitiveness of existing compensation programs.
Improves implementation processes of different compensation programs, e.g. executive compensation.
Adjusts the organization's compensation polices based on market trends and industry policies.
Level 4 - Subject
matter depth
and breadth
Leads in aligning compensation strategies with overall organizational strategies.
Establishes organizational best practices for compensation program design.
Develops standard compensation program implementation processes that are suitable for the whole industry.
Monitors the market trends and industry directions of compensation management.
Champions organizational adoption of new methodologies and technologies for compensation management.
Elaborates on key issues of existing industry compensation policies; makes recommendations accordingly.
45. Copyright Kenexa®, 2013 45
Competency Code THR200
Competency Name Compensation Management
Learning References 15
LR1 BK-0417: Business Ethics: A Global and Managerial Perspective
LR2 BK-0833: Compensation and Motivation
LR3 BK-3011: Rewarding Excellence: Pay Strategies for the New Economy
LR4 PUB-HRDR: Human Resource Development Review
LR5 GOV-DOL: Department of Labor
LR6 ORG-ACOM: American Compensation Association
LR7 ORG-ECFC: Employers Council on Flexible Compensation
LR8 ORG-IFEBP: International Foundation of Employee Benefit Plans
LR9 ORG-SHRM: Society for Human Resource Mgmt. (SHRM)
LR10 ORG-WAW: World at Work
LR11 TR-005: Strategic Issues in Compensation
LR12 UNV-BOS: Boston University
LR13 VND-AHI: AHI's Employment Law Resource Center
LR14 VND-CPM: Compensation Venture Group, Inc.
LR15 WEB-HRLAW: Human Resource Law Index
Development
Statements
Development Statement
Group
Development Statement
Name
Development Statement Description
Quantitative
Implement Compensation
Packages
Implement compensation packages for 2 business
units each month next year.
Quantitative
Conduct Salary Survey
Activities
Conduct job analysis and salary survey activities
for 3 business units within the next month.
Qualitative
Design a Compensation
Program
Design an organizational compensation program
(e.g. executive compensation) in one month.
Qualitative
Evaluate a Compensation
Program
Evaluate the effectiveness and competitiveness of
an existing compensation program in 3 weeks.
46. Copyright Kenexa®, 2013 46
Competency Code THR200
Competency Name Compensation Management
Coaching Tips
Coaching Tip Group Coaching Tip Name Coaching Tip Description
Professional Development
Attend Compensation
Policies Training
Attend training sessions or conferences to learn
about the latest industry compensation
policies.
Career Building
Assist in Compensation
Program Development
Assist senior level colleagues in developing an
organizational executive compensation
program.
Improving Operations
Consult Compensation
Management Experts
Consult experts on how to improve the
organization's productivity and
competitiveness through compensation
management.
Improving Operations
Document Compensation
Issues and Solutions
Document common compensation issues that are
raised by the organization's management
team and their associated solutions.
Relationship Building Organize HR Seminars
Organize seminars for employees from HR and
business units to enhance their
relationships.
Interview
Questions
Interview Question Group Interview Question Name Interview Question Description
Fit
Experience with
Compensation
Programs
What kinds of compensation programs have you
designed?
Knowledge
Describe Compensation
Regulations
Describe the main industry and government
regulations governing compensation.
Problem
Compensation Issues from
Management
What are common compensation issues that are
raised by the organization's management
team?
Solution
Improve the Compensation
Implementation Process
How did you improve the organization's
compensation program implementation
process?
Results
Compensation Program's
Impacts
What were the impacts of a compensation
program you implemented on the business's
overall performance?
47. Copyright Kenexa®, 2013 47
IMPLEMENTATION – SHORTEN THE
PROCESS REUSING CONTENT
Develop and use quickly and update over time.
Focus on buy‐in and change management processes.
Make sure you get to the applications; don’t get stuck
in model development
Get the “big things right”;
“don’t dwell on the small
stuff”.
Apply existing materials
and best practices in
developing a rapid draft
Focus on the overall
architecture
Key success criteria and
themes.
Position models as
prototypes for learning
how to change
behaviors
(vs. a perfect output
image).
Application
Integration
Iteration
Launch &
Communication
Implementation
Kenexa / IBM Competency
Development
80% of the effort
Recommended Approach
20% of the effort
Typical Competency Development
Application
Integration
Iteration
Launch &
Communication
Implementation
20% of the effort
(if able to move out of development stage)
Typical Approach 80% of the effort
48. Copyright Kenexa®, 2013 48
SALARY MARKET DATA
Aggregated, employer reported
salary surveys.
Monthly data modeling and updates
INTEGRATE YOUR TALENT
MGMT TOOLS AND PROCESSES
Talent
Management
/ LMS / HRIS
CAMD
•Survey Mgmt
•Aggregated Market
Data
•Salary Structures
Competency
Manager Tool
* Edit existing,
* Create new,
* Assemble New,
* Compare
Competencies/skills
EXCEL
Export
JOB COMPETENCY
LIBRARY
Industry specific Job Functions
JOB PROFILES and COMPETENCIES
TARGET PROFICIENCY level &
Behaviors
Interview Questions, Learning
Resources, SMART Goals, Coaching
Tips
49. Copyright Kenexa®, 2013 49
COMPETENCY IMPLEMENTATION
(BEST PRACTICES)
Model Building
•Ensure linkage between jobs, competencies and organization strategies
•Keep models simple at launch
•Add dimensional criteria and keep the momentum
•Start with a library or Competency Framework
Applications
• Focus on assessment and development first, then evaluation and pay applications
• Integrate of the competencies with all processes, even if tools aren’t
• Ensure consistency of applications rather than allowing too many variations
Change Management
• Clarify and communicate specific objectives of your applications up front
• Ensure top management and line management buy-in and ongoing support
• Be focused in implementation (i.e., one function, one pilot group first)
• Provide training and communication more consistently and carefully (building in training at
all stages of implementation)
• Develop and consistently apply a measurement system used to evaluate the effectiveness
of implementation over time
50. Copyright Kenexa®, 2013 50
• Merit Pools:
• We suggest that there be
two basic pools of money
for merit increases:
• Management pool
• Employee pool
REPAIRING THE LINK
Each of these pools should have two subsidiary pools. One for those in the
performance category and one for the balance of the organization’s
employees addressing wage relevance to cost of living, etc.
51. Copyright Kenexa®, 2013 51
• Employee motivation to become a
high achiever is increased
• The organization has a better
chance of retaining top performers
• Lesser performers are motivated to
increase performance level or look
elsewhere
If pay increases are made contingent upon
clear definitions of what good performance
looks like:
PAY FOR PERFORMANCE
52. Copyright Kenexa®, 2013 52
DON’T FORGET!!
Pay for Performance,
NOT
Increase for
Performance!
REPAIRING
THE LINK