Pay for Performance is everywhere these days; software vendors hawk it, speakers at
conferences yak about it and professors preach it. But when you sit down and
think about it, it seems like it’s a long way off. And who knows if it’s right
for your organization or if it’s even a good idea in the first place. Any HR
practitioner that I’ve ever met is still working hard to make performance
management work and to most, real Pay for Performance is a still pie in the sky
idea, even if it is a very alluring one.

In a 2004 report on the subject, Mercer Consulting revealed “that for 42%
of organisations “improving the linkage between performance and
reward” is among their top two reward priorities for the coming year, with
38% stating they intend to take action within the next 12 months. But if you
want to take the breath away from any HR director, you might ask, “So,
what do you propose to do about it?”"

Though it’s definitely a foggy issue, my take is that a step by
step approach to Pay for Performance is the only way to think about it – with
performance management being the first step. After all, how can you even begin
to think about paying for performance if you don’t have a really good idea
about how your employees are performing? In any case, what is clear is that
regardless of what you do first – automated performance reviews or distributing
compensation, for example – Pay for Performance is not an issue that is going
be solved overnight.

Ultimately,
choosing a partner who can walk you through the steps, be it a software vendor
or consultant, is probably the most important decision you can make when
thinking about pay for performance.

Here are some good articles I’ve found that discuss the topic in
some depth:

• Washington Post: “Long,
  Hard Road to Performance Based Pay”

• Workforce Management: “Can
  Pay for Performance Really Work?”
• Mercer Human Resources Consulting: “Getting
  what you’re paying for: Linking performance and reward”

Do you have thoughts on Pay for Performance? Questions? Do you disagree with what
we’ve written? Submit a comment below.

Keywords: Pay for performance, Pay-For-Performance, P4P