Performance strategy | How do we move forward with pay and reward in 2021?

How do we move forward with pay and reward in 2021?

By Hannah Bateson, Content Executive, Clear Review

Nobody will be shocked to hear that the Covid-19 pan­dem­ic has had a huge effect on organ­i­sa­tions across the world.

For many this has includ­ed their pay and reward process. A lot of com­pa­nies have oper­at­ed using a bonus scheme, e.g. if you reach your allo­cat­ed tar­gets through­out the year, we’ll give you a bonus. How­ev­er last year changed things, many organ­i­sa­tions had to shift their pri­or­i­ties, mean­ing rank­ing and reward­ing employ­ees took a back seat to ensur­ing well­be­ing and pro­duc­tiv­i­ty whilst remote work­ing. But if all goes as planned, in 2021 organ­i­sa­tions will start return­ing to some form of nor­mal­i­ty and employ­ees will expect that their pay and reward scheme will be re-instated.

But before you sim­ply put back in place the exact same pay and reward sys­tem you were using before the pan­dem­ic, it might be a great oppor­tu­ni­ty for your com­pa­ny to make some much need­ed improve­ments. In the recent 2021 Per­for­mance Man­age­ment Report com­mis­sion by Clear Review, 0% of HR direc­tors said pay and rat­ings should be a main focus of per­for­mance man­age­ment, while 46% said pro­duc­tiv­i­ty and engage­ment should be the focus (read the report to find out more). So how do you shift the focus away from rat­ings and pay and onto pro­duc­tiv­i­ty and engage­ment while still reward­ing high per­form­ers? In this blog we will explore this while look­ing at sim­pli­fi­ca­tion, fair­ness and recognition. 

Sim­pli­fy­ing per­for­mance strat­e­gy

Since the Covid-19 pan­dem­ic we’ve been approached more than ever by organ­i­sa­tions who are look­ing to sim­pli­fy the way they make pay and reward deci­sions. These organ­i­sa­tions can see how Clear Review’s per­for­mance man­age­ment soft­ware is being used to build a clear and full view of an employee’s per­for­mance over a stretch of time. Mean­ing when it comes time to eval­u­ate an employ­ee at the end of the year and decide if they are on track or not, the infor­ma­tion man­agers need is already there in front of them. 

Our sug­ges­tion is to keep it sim­ple. Use a sim­pler 3 point scale with clear, unam­bigu­ous descrip­tions. We rec­om­mend ‘on track’, ‘off track’ and ‘excep­tion­al’. Those on track get the stan­dard bonus or pay award, those off track get less or none at all, and those who are excep­tion­al receive more than those on track.

To decide which cat­e­go­ry each employ­ee falls into man­agers can use the Clear Review plat­form, which will present them with an auto­mat­ed sum­ma­ry of their team mem­bers’ per­for­mance and devel­op­ment data which has been con­tin­u­ous­ly col­lect­ed through­out the year from check-ins, feed­back and objec­tives. Then the sys­tem asks the man­ag­er a few tar­get­ed ques­tions to help frame their think­ing and make the appro­pri­ate deci­sion based on the data. We call this a ‘per­for­mance snap­shot’, and it takes just minutes to complete.

Recon­sid­er­ing fit­ness for pur­pose and fair­ness

Dur­ing the pan­dem­ic organ­i­sa­tions have had a chance to pause, reval­u­ate their pay and reward sys­tem, and decide if it is fair to all employ­ees. A recent sur­vey by the Cog­nizant Cen­ter found that of the 4000 C‑suite and senior exec­u­tives that took part 58% want to val­ue and pay essen­tial work­ers more, and 43% want to cut high exec­u­tive salariesread more here.

What we now have is an oppor­tu­ni­ty to look at how to reward those who deserve it more fair­ly, and stop over reward­ing those who don’t. So those who achieve ‘excep­tion­al’ sta­tus should ide­al­ly be a small mar­gin, like the top 10%.

Recog­ni­tion, not just reward

Dur­ing the last year many organ­i­sa­tions have been strug­gling against the unsta­ble eco­nom­ic envi­ron­ment, many have cut back on reward­ing staff with mon­ey, but still want to let them know their work is appre­ci­at­ed. We all want to know our hard work is being seen, and enjoy that feel­ing of pride when we get con­grat­u­lat­ed on a job well done. Accord­ing to research by Deloitte, employ­ee engage­ment, pro­duc­tiv­i­ty and per­for­mance are 14% high­er in orga­ni­za­tions that proac­tive­ly fos­ter recognition. 

Stud­ies show that the moti­va­tion­al effect of an extrin­sic reward such as pay does not last long, and that only 15% of the effect of a salary increase sur­vives longer term. There­fore you would need to fre­quent­ly reward staff with ‘spot’ bonus­es in order to con­tin­ue to have an effect. How­ev­er this then brings up argu­ments about con­sis­ten­cy in these rewards being award­ed, fair­ness in who gets them etc. So a bet­ter way to moti­vate your staff is by show­ing their achieve­ments have been recog­nised by the organ­i­sa­tion. This could be praise from their man­ag­er, a pub­lic shout out on a team call or awards giv­en to top achiev­ers each month or quar­ter. This way employ­ees know their good work is not going unno­ticed, with­out the need to keep reward­ing them with bonus­es or pay increases. 

You can down­load our eBook on ‘Max­i­miz­ing pro­duc­tiv­i­ty in the new nor­mal’, and ‘How to man­age pay with Con­tin­u­ous Per­for­mance Man­age­ment’ for a more in-depth look at some of the sub­jects cov­ered in this blog, and to receive updates on new con­tent around per­for­mance man­age­ment please reg­is­ter here.

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