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Wednesday, 05 June 2013 15:59

Making Performance Management Part of Your Total Compensation Strategy

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Total compensation statements are a great tool to help employees understand all the contributions a company makes on their behalf. Frequently listed items include salary, bonuses, insurance and retirement benefits, and PTO, as well as hidden or mandated costs, such as workers’ compensation and unemployment insurance. Companies may also list some special benefits, like free parking, continuing education, or free coffee.

But, how do you list the intangible benefits employees receive from a performance management plan? Do you even consider performance management as part of your total compensation strategy?

The 2012 Employee Job Satisfaction and Engagement research report published by the Society for Human Resource Management listed the top five contributors to Employee Job Satisfaction. Compensation was among this group, albeit at number three. The number one factor was opportunities to use skills and abilities.

The importance of providing these opportunities has continued to grow over the past six years, yet many companies still have not developed a strategy to ensure success in this area.

Harold S. Resnick, author of Energizing Workplace Performance, has described performance management as a defined process for aligning organization, team, and individual goals; and for continually improving team and individual performance. Key aspects include a defined process, setting goals, and ensuring continuous improvement.

As seen in the SHRM report, employees have a need to feel valued at work. With job security improving, employees are looking for a greater sense of fulfillment in their roles. Each has a unique set of skills and abilities; and, when recognized for those skills, their engagement in the workplace also increases.

Companies can improve their employee satisfaction rates by developing a clear performance management plan as part of a total compensation strategy. Here are three things HR can do to make this strategy successful.

Defining the Process. Mama always used to say that if you fail to plan, you plan to fail. The same holds true with performance management. It’s important to define the process, outline the different components, and train management to use a performance management program to develop employees and increase performance. It is also critical to describe how success is measured.

Managers may be great at ensuring the functions of their department are met and budgets are kept, but without a guide, some are lost in the wilderness when it comes to developing their employees. Job descriptions, performance reviews, informal coaching, goal attainment, training plans, and long-term career opportunities are all part of performance management. However, it takes a plan and a defined process to put these individual components together to create an integrated strategy. It also takes coaching and training from the HR department to ensure that the strategy works effectively. This is where the HR staff can shine and show the value they bring to the table.

Setting Goals. Goal setting has frequently been left to the very end of the process. It’s the last page on the form. It’s the last thing a manager may think about. And sometimes, it’s the last thing employees do before their next review. Why?

One reason may be that employees and managers still believe that goal setting is just another box to check. Yep, been there, done that. Instead, provide a different direction for your company. Use goal setting as a professional development tool. Organizations can show their commitment to employees by not only encouraging professional development, but can also reap the benefits of a greater depth of employee skills and knowledge.

Over the past five years, training, certifications, and conferences have been on the chopping block. We acknowledge that reducing the training budget may be preferred over laying off more employees, but it is important that the budget be restored as soon as possible. Companies can do this by reintroducing more cost-effective approaches, such as web-based training, thereby reducing the cost and time of travel, but still see the benefits of greater institutional knowledge.

Goal setting should also be more than selecting which seminar the employee attends or completing a task they would have to do anyway. A meaningful goal should include what actions employees should take to move to the next level in their career. What responsibilities can they take on? Should they participate in a mentoring program? Do they have a five-year timeline, and do they measure their progress on a regular basis? Each of these steps will not only help employees continue their career path, but will also show that the company is interested in and invested in that journey.

Improving Continuously. Defining the performance management process is crucial to getting started, and setting effective employee goals is central to engaging the employees; but, unless the success of the entire program is measured on a regular basis, companies won’t know if their strategy is working. Appropriate measurement must be taken year after year.

Performance management can’t be measured in monthly or quarterly increments but instead must be evaluated on a longer-term basis. While some may say this isn’t true, if managers and employees are developing three- and five-year goals, how can a performance management strategy be deemed truly effective after just 12 months?

This is not to say that the program can’t be reviewed on a regular basis but rather to cultivate a sense of continuity. Wholesale changes to the performance management strategy year after year will not provide results that can be measured long term. It becomes more difficult to determine if aspects of the program are working as expected and those that need refinement.

Another key element in measuring the strategy’s effectiveness is the incorporation of manager accountability. Changing the managers’ job descriptions to include the professional development and performance management of their direct reports will illustrate the added importance of this strategy to not only those managers but to the rest of the employee population as well.

A hot button item in our schools today is teacher pay for performance. How are they suggesting that teacher performance be measured? By how well the students do in school. While the tool to measure this performance is up for debate, the concept is one that should be used in the workplace. We already measure the performance of managers’ departments and their individual contributions, but do we also review the managers’ success by how well they develop their employees?

Back to the total compensation statements. It’s not practical to list a performance management program as a bullet point on a document that comes out once a year. The performance management process must be incorporated into every aspect of the workplace through regular coaching conversations, the formal review process, a career development plan, and a well-documented action plan.

When implemented effectively, employees understand not only their value in the organization but also how the company is assisting them in their career development. Now their time at the company is much more than just a paycheck and a job, but rather it is a place to grow their skills and develop their career.

Chad V. Sorenson, SPHR, is President of Adaptive HR Solutions and a Co-Founder of Talent Development, Inc. Chad is also President- Elect of SHRM Jacksonville and can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..