6 Ways to Make Pay for Performance Work for You
Napoleon said, “A man will fight long and hard for a bit of colored ribbon.” He was right of course: money isn’t always the greatest motivator for workers. But if you think money can’t be an effective motivator, just spend five minutes discussing commissions with a salesperson. Unfortunately, many companies employ the power of financial compensation poorly when it comes to motivating employees to higher achievement. If you truly link performance with pay, you can expect results that exceed your investment. Here are a few dos and don’ts to help make that happen in your organization.
- Don’t rely on annual pay raises alone. There’s no harm in annual pay raises, of course. People expect them. But it’s those expectations that diminish the annual pay raise’s power to motivate, especially if raises are capped. Anything less than the maximum raise is seen as a rebuke, while achieving the maximum is only fulfilling the expectation for competent work. That’s not very motivating.
- Do add bonuses for specific outstanding achievements. If someone has gone over-and-above in some specific way, reward him or her. That one-time reward can have a tremendous effect on how they look at their job—outstanding performance pays. You can be sure other people will hear about the bonus, as well, which can motivate them. Make a habit of achievement-based bonuses and you can expect overall achievement to rise. You don’t have to wait for review time to do this. The closer the reward follows the achievement, the stronger the motivating connection between the two.
- Don’t rely on revenue- or gain-sharing alone. Bonus income based on a portion of corporate profits or corporate goal-achievement isn’t a bad thing. It keeps everyone’s eyes on corporate performance. But the larger the organization, the less responsibility each individual bears for achieving corporate goals. Knowing a slacker can get the same bonus as you isn’t terribly motivating.
- Do create incentives for achievement in smaller teams. Creating achievable incentives for smaller work teams gives each member of the team both a substantial stake in the reward and substantial personal responsibility for achieving it.
- Don’t cap commissions. Telling an employee they’ll stop earning more when their performance becomes truly extraordinary—how de-motivating is that?
- Do look for commissionable opportunities. Salespeople are typically paid on commission, of course, which is a great motivator, especially when the commissions are fat. If you can find ways to “commission” non-salespeople—on a per-piece basis for production workers, for example—you’ll give them a strong reason to push their achievement level.