How to Manage Performance & Compensation

The success of any business relies on employee performance, and one of the top motivators in the workplace is compensation. Having a thorough performance management and compensation strategy means you can manage your team in a way that ensures they’re satisfied and aligned with business objectives.

How often have you been in a situation where you’ve been asked to do a task you had not done before and prolonged the completion because of it? Have you ever felt like your work wasn’t worth the reward? When your talent doesn’t feel supported or appreciated, productivity dwindles. Employees need motivation so they can grow alongside the company. So, how do you manage all of this?

Set Clear Performance Objectives – Be SMART

Before you can manage performance, you need to set clear expectations. It’s important that employees and managers alike understand the objectives of individual roles. This means having a discussion with each person on the team and defining what a successful outcome looks like.

Be SMART – Specific, Measurable, Achievable, Relevant, and Timely.

1. Be Specific – Ensure that objects are specific and measurable. If the goal is to increase sales, be clear about how much by and in what time frame.
2. Achievable/Challenging – Don’t set unrealistic goals. Challenge your team so that they can grow but do so within reason.
3. Align Business Goals – You want your employees to develop their knowledge and skills in alignment with the key goals of the business.

Offer whatever resources employees may need to achieve these objectives. It’s important to be inclusive and understanding here, as everyone comes from different backgrounds and experiences. The more comfortable employees feel to discuss their tasks, the better they can complete them.

Choose the Right Performance Metrics

Once you’ve established what your employees are aiming to achieve, you need to figure out how you’ll measure their success. Choosing the right metrics to measure performance is key.

Focus on what your organization values. If your priority is sales, a year-over-year revenue increase is an easy, trackable metric. If you’re building brand awareness, consider metrics like online presence and newsletter subscribers. Decide on short and long-term goals and break them into milestones.

Communicate these choices to employees. Explain why they’re important and how they relate to your priorities. It will help employees understand their role and how they uniquely contribute to the organization. Using these performance metrics, everyone can gain valuable insight into what’s working and not working using these performance metrics.

When it comes to bonuses or promotions, your metrics will guide compensation decisions. Management can use them to determine incentives or opportunities based on employee performance.

Provide Regular Feedback

According to Gallup, employees who receive daily feedback from their managers are 3x more likely to be engaged than those who receive feedback once a year or less.

Don’t schedule yearly or biannual performance reviews. Your employees want to hear from you regularly. Discuss their progress, any challenges they’re facing, how things can change to improve results, and praise or reinforce good behaviors. Regular feedback keeps people on track.

There are several reasons why feedback is so valuable. For starters, it shows employees that the organization cares about their development. It’s a time for positive reinforcement and constructive criticism. Employees can grow from this advice. Additionally, regular feedback is an opportunity to coach those who need more help. Different people need different support to reach their full potential.

When offering this feedback, make it a two-way, transparent conversation. This way, you can hear about roadblocks and offer guidance or make adjustments. Employees will be more engaged and productive when managers handle issues or questions quickly.

Pay-for-Performance

As you provide objectives and metrics, you’ll also need to manage compensation. Pay-for-performance programs incentivize employees to achieve specific goals. When done right, it is an effective motivator.

Consider the different elements of compensation, including bonuses, benefits, and promotions. What do your employees value? What can you afford? Rewards for good performance come in different shapes and sizes, including monetary and non-monetary. Establish a philosophy, consider what types of compensation you’ll offer, and be prepared to review these choices regularly.

It’s important to clearly define your pay-for-performance strategy and be aware of challenges that could arise. Healthy competition can challenge employees to reach their full potential, but you don’t want it to harm team collaboration. Be transparent when explaining how you’ll calculate pay-for-performance. Ensure that nobody is excluded and that everyone is offered equal opportunities.

Take Home Message

How you choose to manage performance and compensation determines how productive and engaged your team is. When you set clear expectations and goals, you empower your team. They may feel challenged, but a formalized plan shows that they’re supported and valued. Well-managed performance and compensation plans can also attract and retain talent. This way, your organization remains competitive and agile.

The performance management process is an ongoing task requiring constant review and revision. If your company dedicates itself to maintaining this program, you will see financial and developmental results. Employees’ objectives will align with business goals, and the organization will thrive.