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Evolve Pay for Performance

Shift from a one-size-fits-all to a tailored approach to base pay increases and bonuses.

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Contributors

  • Kareen Clattenburg, Director of Total Rewards, Moneris
  • Chuck Csizmar, Principal, CMC Compensation Group
  • Eric Grobecker, Director – Global Compensation, Ingersoll Rand
  • Irwin Jankovic, Ph.D., Strategic Program Manager – Human Resources Group, Metropolitan Water District of Southern California
  • Ilia Maor, Research Director – Application Practice, Info-Tech Research Group
  • Larry McMullen, Director – Learning & Organization Development, The Hillman Group
  • Robin Miller Dewit, Senior Specialist – Talent Management, Hamilton Health Sciences
  • Vatche Rubenyan, Senior Director Compensation and Benefits Programs, Rogers Communications
  • Dow Scott, Ph.D., Professor of Human Resources and Consultant, Loyola University Chicago, Performance Development International, LCC
  • Melissa Tucker, Vice President – Employee & Labor Relations, HealthNow Inc.

Your Challenge

  • Budgets typically aren’t big enough for true differentiation among employees, and many managers do not bother trying to differentiate their direct reports.
  • The annual merit increase process is lengthy with the involvement of many stakeholders, and the outcome has minimal impact.
  • Both the changing workforce and nature of work no longer support a one-size-fits-all approach to base pay increases and bonuses.

Our Advice

Critical Insight

  • Make realistic decisions on the base pay increase and bonus options that can be implemented.
  • Have the courage to identify and define objectives that depart from the norm.
  • Be creative in how you design an approach to achieve your defined objectives.

Impact and Result

  • Redefine the objectives of providing base pay increases and bonuses to align process with practice.
  • Design a tailored approach for base pay increases and bonuses that aligns with defined objectives in order to achieve desired outcomes.
  • This will require a cultural shift in how organizations and employees view the purpose of such compensation programs, as well as transparency regarding what the organization is paying for.

Research & Tools

1. Evaluate current pay for performance approach

Evaluate the organization’s compensation philosophy, employee value proposition, performance management practices, current approach to annual base pay increases and bonuses, culture, workforce data, and organizational readiness for changes to the current approach.

2. Determine new objectives for base pay increases and bonuses

Determine base pay increase and bonus objectives and select measurements of success over time.

3. Design base pay increase and bonus approach

Design the base pay increase and bonus approach, conduct a simulated costing exercise, and obtain stakeholder feedback.

4. Develop implementation plan

Conduct a risk assessment, pilot the roll-out, if appropriate, and develop the change management and communication strategies.

Guided Implementations

This guided implementation is a thirteen call advisory process.

Guided Implementation #1 - Evaluate current pay for performance approach

Call #1 - Review employee value proposition, compensation philosophy, performance management practices, and the current annual base pay increase and bonus approach to highlight areas that will inform the design process.
Call #2 - Examine workforce data and culture, ensuring that there is a stated dominant culture and the organization is trying to help drive a desired culture with the approach.
Call #3 - Determine organizational readiness for change and the extent of change possible in the new approach.

Guided Implementation #2 - Determine new objectives for base pay increases and bonuses

Call #1 - Determine if objectives will be by employee segment or organization-wide.
Call #2 - Identify the appropriate objective(s) for the approach.
Call #3 - Define each objective to reflect the organization’s strategy, structure, and culture.

Guided Implementation #3 - Design base pay increase and bonus approach

Call #1 - Review and discuss each of the options for base pay increases and bonuses.
Call #2 - Identify the appropriate options for each employee segment or organization-wide.
Call #3 - Conduct a costing simulation exercise to identify high-level budget impacts.
Call #4 - Prepare for the stakeholder meeting to present the proposed approach.

Guided Implementation #4 - Develop implementation plan

Call #1 - Identify risks and challenges in rolling out the proposed approach. Determine whether an organization-wide or pilot approach is appropriate.
Call #2 - Develop change management strategy and identify potential champions for change.
Call #3 - Create a manager and employee training plan to prepare the workforce for the new approach.

Onsite Workshop

Discuss This Workshop

Book Your Workshop

Onsite workshops offer an easy way to accelerate your project. If you are unable to do the project yourself, and a Guided Implementation isn't enough, we offer low-cost onsite delivery of our project workshops. We take you through every phase of your project and ensure that you have a roadmap in place to complete your project successfully.

Module 1: Identify Compensation Challenges and Complete a Current-State Assessment

The Purpose

  • Address compensation challenges and evaluate the current approach.
  • Gauge organizational readiness.

Key Benefits Achieved

  • Implications and organizational readiness for changes to annual base pay increases and bonuses have been assessed.

Activities

Outputs

1.1

Identify and discuss your compensation challenges.

  • Understanding of the current pain points of the compensation system
1.2

Determine current annual base pay increase and bonus approach.

  • Completion of a current-state assessment of your organization’s base pay increase and bonus approach
1.3

Evaluate the cultural landscape.

1.4

Assess your organizational readiness level.

Module 2: Create New Compensation Objectives, Select Metrics, and Design a New Approach to Base Pay Increases and Bonuses

The Purpose

  • Define objective(s) for annual base pay increases and bonuses, either by employee segment or organization-wide.
  • Set metrics and design the program approach.

Key Benefits Achieved

  • Objectives are aligned to organizational strategy, structure, and culture.
  • Metrics for success are determined and the program approach foundation is outlined.

Activities

Outputs

2.1

Determine new objectives for base pay increases and bonus programs.

  • New objectives for base pay increases and bonus programs, and determine appropriate metrics
2.2

Select metrics to quantify the success and impact of your approach.

  • Metrics to measure the success of your base pay increase and bonus approach
2.3

Design base pay increase and bonus approach.

  • Selection of the compensation building blocks for your new base pay increase and bonus program approach

Module 3: Complete a Costing Simulation, Identify Risks, and Develop Your Communication Strategy

The Purpose

  • Conduct a simulated cost exercise.
  • Identify potential risks with the new approach.
  • Develop an employee communication strategy.

Key Benefits Achieved

  • Budgetary implications are understood at a high level.
  • Risk assessment is conducted.
  • Communication plan is established.

Activities

Outputs

3.1

Conduct a simulated costing exercise to identify any budgetary impacts.

  • Complete costing simulation and identification of potential budget implications
3.2

Identify potential risks and difficulties in rolling out new approach.

  • Risks identified and mitigation solutions brainstormed
3.3

Plan your communication strategy.

  • Draft communication strategy