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Pay for Performance: A Clear Signal for Retention and Engagement

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Pay for Performance: A Clear Signal for Retention and Engagement

Pay increase budgets have been tight for the last few years, but as we begin to emerge from the recession and top performers seek to realize their worth, the issue of pay for performance is on the minds of many organizational leaders and HR practitioners. While many organizations say they “pay for performance,” most do not fully understand the connection between the two and how it impacts employees. In this webinar, compensation expert Mark Szypko will discuss Kenexa's recent research covering the link between pay and performance.

This session will cover:

What pay for performance means to employees.
The relationship of pay for performance to employee engagement and intent to leave the organization.
Pay for performance and employee engagement.
How to strengthen the link between pay and performance.

Who should attend:

HR professionals who need to understand the link between pay and performance, employees’ perception of this connection and what they as HR professionals can do to promote the link between pay and performance within their organizations.

Pay increase budgets have been tight for the last few years, but as we begin to emerge from the recession and top performers seek to realize their worth, the issue of pay for performance is on the minds of many organizational leaders and HR practitioners. While many organizations say they “pay for performance,” most do not fully understand the connection between the two and how it impacts employees. In this webinar, compensation expert Mark Szypko will discuss Kenexa's recent research covering the link between pay and performance.

This session will cover:

What pay for performance means to employees.
The relationship of pay for performance to employee engagement and intent to leave the organization.
Pay for performance and employee engagement.
How to strengthen the link between pay and performance.

Who should attend:

HR professionals who need to understand the link between pay and performance, employees’ perception of this connection and what they as HR professionals can do to promote the link between pay and performance within their organizations.

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Pay for Performance: A Clear Signal for Retention and Engagement

  1. 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: 920 265 837 #. You will be on hold until the seminar begins.
  2. 2. Speaker: Mark Szypko Managing Director, Compensation Kenexa, an IBM Company
  3. 3. • Q&A – Click on the Q&A icon on your floating toolbar on the top of your screen. – Type in your question in the space at the bottom. – Click on “Send.”
  4. 4.  Polling  Polling question will appear in the “Polling” panel.  Select your response and click on “Submit.”
  5. 5. 1. Will I receive a copy of the slides after the webinar? YES 2. Will I receive a copy of the webinar recording? YES Please allow up to 2 business days to receive these materials.
  6. 6. Deanna Hartley Senior Editor Workforce Management magazine
  7. 7. Mark Szypko Managing Director, Compensation Kenexa, an IBM Company
  8. 8. © 2013 Kenexa, an IBM Company PAY FOR PERFORMANCE: A CLEAR SIGNAL FOR RETENTION AND ENGAGEMENT Mark A. Szypko, CCP, GRP Managing Director, Compensation To us, business is personal
  9. 9. 9© 2013 Kenexa, an IBM Company 9 © 2013 Kenexa, an IBM Company AGENDA • What is “Pay for Performance”? • What happened to the link? • Why do we care? • How do we repair? • Questions
  10. 10. © 2013 Kenexa, an IBM Company WHAT IS PAY FOR PERFORMANCE?
  11. 11. 11© 2013 Kenexa, an IBM Company 11 © 2013 Kenexa, an IBM Company 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?
  12. 12. 12© 2013 Kenexa, an IBM Company 12 © 2013 Kenexa, an IBM Company PAY FOR PERFORMANCE • 3.0% increase budget • 2 employees each “doing their job” • They each get a 3.0% increase
  13. 13. 13© 2013 Kenexa, an IBM Company 13 © 2013 Kenexa, an IBM Company • Similar pay increases for all performance levels • Leading top performers to ask Impact on Pay Increases “Was all that extra work worth it?” PAY FOR PERFORMANCE
  14. 14. 14© 2013 Kenexa, an IBM Company 14 © 2013 Kenexa, an IBM Company PAY FOR PERFORMANCE • Employee A paid $20.00 per hour • Employee B paid $40.00 per hour • Both “Doing their Job” • Midpoint = Market Reference Point • Now what do we do? 403020 Minimum Midpoint Maximum Salary Range A B
  15. 15. 15© 2013 Kenexa, an IBM Company 15 © 2013 Kenexa, an IBM Company PAY FOR PERFORMANCE • Employee A paid $20.00 per hour • Employee B paid $40.00 per hour • Both “Doing their Job” • Midpoint = Market Reference Point • Now what do we do? 403020 Minimum Midpoint Maximum Salary Range A B
  16. 16. 16© 2013 Kenexa, an IBM Company 16 © 2013 Kenexa, an IBM Company • A compensation philosophy that asserts than an individuals pay is a function of their performance • Performance demonstrated consistently over an extended period of time • Target pay is achieved over time, not overnight • As opposed to increase for performance Minimum Midpoint Maximum PAY FOR PERFORMANCE
  17. 17. 17© 2013 Kenexa, an IBM Company 17 © 2013 Kenexa, an IBM Company If pay increases are made contingent upon performance: • 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 PAY FOR PERFORMANCE
  18. 18. 18© 2013 Kenexa, an IBM Company 18 © 2013 Kenexa, an IBM Company • Increase budgets in the U.S. have bottomed out in 2009 though the rebound is yielding increase budgets 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 FOR PERFORMANCE 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%
  19. 19. 19© 2013 Kenexa, an IBM Company 19 © 2013 Kenexa, an IBM Company WHAT’S HOT… Salary Growth 2008-13 Avg per Year Healthcare Case Management 23% 5% Software Engineers 22% 4% Speech and Language Pathologists 21% 4% Physician Assistant 21% 4% Occupational Therapists 19% 4% Advanced Practice Nurses 18% 4% Professional Pharmacy Staff 17% 4% Diagnostic Imaging 17% 4% Physical Therapists 17% 3% Hardware Engineers 16% 3% Chemical Engineers 16% 3% ALL JOBS 9% 2%
  20. 20. 20© 2013 Kenexa, an IBM Company 20 © 2013 Kenexa, an IBM Company …AND WHAT’S NOT Job Salary Growth 2008-13 Avg per Year Call Center Management 3% 1% Retail Store Employees 3% 1% Carpenters 4% 1% Attorneys 4% 1% Bank Tellers 4% 1% Machine Operators 6% 1% Assemblers 7% 1% ALL JOBS 9% 2% (Compensation Analysts – average at close to 10%)
  21. 21. © 2013 Kenexa, an IBM Company WHAT HAPPENED TO THE LINK?
  22. 22. 22© 2013 Kenexa, an IBM Company 22 © 2013 Kenexa, an IBM Company • Cultural Changes – Everyone can exceed, if just given the opportunity – Educational system – Athletics – Workplace – The entitlement mentality – Unwillingness to give 0% increases – Keeping up with inflation WHAT HAPPENED TO THE LINK?
  23. 23. 23© 2013 Kenexa, an IBM Company 23 © 2013 Kenexa, an IBM Company Reliance on “The Event”: • Once-a-year • Minimal communication • Reliance on manager’s memory • Little training WHAT HAPPENED TO THE LINK? Assessment Forms Became: • Too long • Too complex • Often designed to measure the wrong things
  24. 24. 24© 2013 Kenexa, an IBM Company 24 © 2013 Kenexa, an IBM Company Use/Misuse of Merit Matrices • A well-known former CEO has suggested that the bottom 10% of performers need to be culled each year. – Rating creep – Invalidating rating systems WHAT HAPPENED TO THE LINK?
  25. 25. 25© 2013 Kenexa, an IBM Company 25 © 2013 Kenexa, an IBM Company • HR began focusing on those needing help to succeed – More focus on the “Needs Improvement” employees – Less focus on “Outstanding” and “Good” performers WHAT HAPPENED TO THE LINK?
  26. 26. © 2013 Kenexa, an IBM Company WHY DO WE CARE ABOUT PAY FOR PERFORMANCE?
  27. 27. 27© 2013 Kenexa, an IBM Company 27 © 2013 Kenexa, an IBM Company “THE RECESSION IS DECISIVELY OVER”
  28. 28. 28© 2013 Kenexa, an IBM Company 28 © 2013 Kenexa, an IBM Company JOB OPENINGS
  29. 29. 29© 2013 Kenexa, an IBM Company 29 © 2013 Kenexa, an IBM Company JOB OPENINGS AND UNEMPLOYMENT
  30. 30. 30© 2013 Kenexa, an IBM Company 30 © 2013 Kenexa, an IBM Company QUITS, LAYOFFS AND DISCHARGES • Shifts are occurring in the employment market with layoffs trailing off while voluntary turnover and job openings are on the rise
  31. 31. 31© 2013 Kenexa, an IBM Company 31 © 2013 Kenexa, an IBM Company Increase budgets in the U.S. have bottomed out in 2009 though the rebound is yielding increase budgets still below the pre- recession levels SALARY INCREASE BUDGETS 2008 2009 2010 2011 2012 2013 Kenexa 3.0% 3.0% 3.0% IPAS 3.9% 1.1% 2.5% 3.2% 3.2% 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%
  32. 32. 32© 2013 Kenexa, an IBM Company 32 © 2013 Kenexa, an IBM Company AS WE EMERGE ….. • Your most valuable asset walks out the door every evening…. What are they thinking?
  33. 33. 33© 2013 Kenexa, an IBM Company 33 © 2013 Kenexa, an IBM Company 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
  34. 34. 34© 2013 Kenexa, an IBM Company 34 © 2013 Kenexa, an IBM Company 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
  35. 35. 35© 2013 Kenexa, an IBM Company 35 © 2013 Kenexa, an IBM Company PAY Fair compensation for a day’s work 25% Pay Compensation that is fair and respect(ful) Good pay for a hard day’s work Unfreeze pay Source: Kenexa High Performance Institute
  36. 36. 36© 2013 Kenexa, an IBM Company 36 © 2013 Kenexa, an IBM Company A COUPLE OF QUESTIONS
  37. 37. 37© 2013 Kenexa, an IBM Company 37 © 2013 Kenexa, an IBM Company Worldwide, My pay is directly related to how well I perform. Source: 2011 Kenexa High Performance Institute WorkTrends survey 54% DO NOT see a link 20% uncertain 25% DO see a link THE LINK
  38. 38. 38© 2013 Kenexa, an IBM Company 38 © 2013 Kenexa, an IBM Company 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
  39. 39. 39© 2013 Kenexa, an IBM Company 39 © 2013 Kenexa, an IBM Company 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
  40. 40. 40© 2013 Kenexa, an IBM Company 40 © 2013 Kenexa, an IBM Company 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
  41. 41. © 2013 Kenexa, an IBM Company HOW DO WE REPAIR THE LINK BETWEEN PAY AND PERFORMANCE?
  42. 42. 42© 2013 Kenexa, an IBM Company 42 © 2013 Kenexa, an IBM Company • Merit Pools: • We suggest that there be two basic pools of money for merit increases: • Management pool • Employee pool REPAIRING THE LINK
  43. 43. 43© 2013 Kenexa, an IBM Company 43 © 2013 Kenexa, an IBM Company • Merit Pools: • Each of these pools should have two subsidiary pools: – One for those in the highest performance category (e.g., “Outstanding”) – One for the balance of the organization’s employees. REPAIRING THE LINK
  44. 44. 44© 2013 Kenexa, an IBM Company 44 © 2013 Kenexa, an IBM Company • Seize the moment – 0% merit – Differentially reward top performers REPAIRING THE LINK
  45. 45. 45© 2013 Kenexa, an IBM Company 45 © 2013 Kenexa, an IBM Company • Re-recruit top performers REPAIRING THE LINK
  46. 46. 46© 2013 Kenexa, an IBM Company 46 © 2013 Kenexa, an IBM Company DON’T FORGET!! Pay for Performance, NOT Increase for Performance! REPAIRING THE LINK
  47. 47. 47© 2013 Kenexa, an IBM Company 47 © 2013 Kenexa, an IBM Company Mark A. Szypko, CCP , GRP Managing Director, Compensation Phone: (781) 851 -8863 mszypko@us.ibm.com
  48. 48. Join Our Next Workforce Webinar There’s an App for That, and That, and That: Managing Mobile in the Workforce Wednesday, June 19, 2013 Workforce Webinars start at 2 p.m. Eastern / 11 a.m. Pacific Register for upcoming Workforce Webinars at www.workforce.com

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