Companies Increasingly Rely on Pay-For-Performance, But Struggle With Execution

NEW YORK, July 28, 2014 /PRNewswire/ -- Employers never stop looking for ways to improve efficiency, grow employee engagement and retain top talent. And, as the job market slowly starts to rebound, employers are thinking again about keeping key performers happy and feeling rewarded for the value they provide. Performance pay is increasingly viewed as a means to all these ends. But when poorly executed, variable pay schemes can bring with them unintended consequences such as distrustful employees, excessive employee risk-taking, or shareholder objections.

Executives, managers and even US employees at-large are more interested in understanding performance pay than ever before, according to Linda Barrington, labor economist and executive director of Cornell University ILR School's Institute for Compensation Studies. "The stakes are bigger, and more and more US workers receive some form of variable pay as part of their total compensation package. That's moving performance pay onto the 'need to know' front burner," she says.

Interest in performance pay is also motivated by more than one's own workplace. "While the World Cup was definitely the single most popular topic around the water cooler for much of the summer, performance pay has also stimulated all lot of workplace chatter," Barrington points out. Was Abramson paid fairly at the New York Times? Will "do good" fast food company Chipotle be pressured to re-think CEO Steve Ells' pay package following its dramatic negative say-on-pay vote? Is Lebron James returning to Cleveland for hometown love or money? And, is he worth it? Underpinning all these headline-grabbing stories is the common denominator of how well some employer did (or will) link an employee's pay and performance.

Linking pay and performance is easier said than done. According to Mercer's Global Performance Management Survey 2013, 89 percent of organizations say they link performance and pay decisions. In practice, however, only 42 percent of organizations actually track and measure the alignment between performance ratings and compensation decisions to evaluate the effectiveness of their programs and processes.

"More companies are linking employees' performance on the job to their take-home pay, but not all employers are happy with the way their pay-for-performance is working for them," says Stephanie Thomas, who leads the development of professional continuing education courses at the Institute for Compensation Studies. To fill this need, Cornell's Institute for Compensation Studies is launching a series of professional development courses addressing a broad spectrum of pay for performance considerations.

Explore here for more on the Institute for Compensation Studies and its pay for performance curriculum.

PRLog ID: www.prlog.org/12352151

SOURCE Institute for Compensation Studies at Cornell