Effective Performance Based Reward Practices

GETTING WHAT YOU PAY FOR

Once Upon a Time Ago . . . . .

Performance/Reward Connection• World At Work Survey: 89% of Employers

are Using Short Term Incentives (up from 2004 & 2005)

• Employee Confidence in Long-Term Rewards is dropping”Generational Shift:What We Saw At the Workplace Revolution. Tulgan &

Rainmaker Thinking Inc.

• Business Finance Survey of Readership: Only 17% of Pay-For-Performance plans are considered to be highly successful.

Effective Performance Based Reward Practices

• Basics of Effective Pay for Performance

• An Example

• Some Technical Details

Pay-For-Performance

“We believe that careful examination of criticisms of monetary pay-for-performance systems indicates not that they are ineffective but rather that they are too effective: strong pay-for-performance motivates people to do exactly what they are told to do.”

Baker,Jensen, Murphy,Compensation & Incentives: Practice vs. Theory

Journal of Finance

“. . . . strong pay-for-performance motivates people to do exactly what they are told to do.”

Know Your Business

Vision&

Mission

Employees To achieve the Vision & Mission What must our employees be?

DevelopmentTo achieve our Vision & MissionHow will we sustain our ability to grow & change?

Business ProcessesTo achieve the Vision & Mission what business processes must we excel at ?

FinancialTo achieve our Vision & MissionWhat must our earnings be?

CustomersTo achieve our Vision & MissionWho will our customers be & How must we treat them?

Drivers Goals

Factors Metri

cs

Drivers Goals

Factors Metri

cs

Drivers Goals

Factors Metri

cs

Drivers Goals

Factors Metri

cs

Adapted from Paul Arveson, 1998

Drivers Goals

Factors Metri

cs

Define Exactly What You Want

And exactly what you don’t want

Create A Performance Culture

• Vision• Mission• Success Drivers • Strategic Goals• Critical Success Factors• Success Measures

Vision &

Mission

Organization Long-Term GoalsAKA

Success Drivers

Organization Short-Term GoalsAKA

Strategic Goals

Critical Success Factors

Annual BusinessPlans

Long TermPlan

Vision &

Mission

Success MeasuresOrganizational

Metrics

Success MeasuresIndividual Metrics

Tell Everyone About It

Again

& Again

& Again

& Again

Make it Personal

Make It Real Define Exactly What You Want and How You Want It At the Individual Level

Connect The Rewards to the Results

=

A Knowledge ServicesExample

Planting the Seeds

A Knowledge Services Organization Excels At

Transformation of Information Into Knowledge Useable by the Customer

for at least its original purpose

Vision&

Mission

Employees To achieve the Vision & Mission What must our employees be?

DevelopmentTo achieve our Vision & MissionHow will we sustain our ability to grow & change?

Business ProcessesTo achieve the Vision & Mission what business processes must we excel at ?

FinancialTo achieve our Vision & MissionWhat must our earnings be?

CustomersTo achieve our Vision & MissionWho will our customers be & How must we treat them?

Drivers Goals

Factors Metri

cs

Drivers Goals

Factors Metri

cs

Drivers Goals

Factors Metri

cs

Drivers Goals

Factors Metri

cs

Adapted from Paul Arveson, 1998

Drivers Goals

Factors Metri

cs

Knowledge Services ExampleBusiness Process

Development

Success Drivers

Clearly Defined, Efficient & Effective Processes

Innovation & Learning

Strategic Goals

Business Processes MappedProcess Benchmarks Established

Niche Development

Critical Success Factors

Turn-Around Time MetBudgets Met

Niche Knowledge Repository EstablishedRecognition of Expertise Established

Success Measures

100% Realization of Fees Billed

Niche Clientele Established

Knowledge Services Example

Financial Customers

Employees

Success Drivers

High Consistent Earnings

Deep Relationships

Right Talent Available When Needed

Strategic Goals

Gross Revenue /Person Managed Costs

Client Base That Meets Criteria

Employee Satisfaction

Critical Success Factors

Billing Rate Acceptance

Client Qualification Criteria

Career PlanningMentor ProgramAssignment Management

Success Measures

Profitability Client Satisfaction

100% Retention of the Right People

Performance Management Process• Anchored to

Business Success Drivers

• Clear Expectations• Clear Performance

Standards• Forward Focused

Feedback• Specific Achievable

Success Measures

Individual Measures

Financial Customers Employees

Utilization RateRealization Rate

Turnaround Times met

Investment in Self & Others

Performance Based Rewards• Linked to the success measures

Organizational

Team

Individual

Connecting Rewards to Results

• Individual

• Team

• Organization

• Individual Goal Achievement

• Business Process

• Development• Business Process

• Financial • Customers• Business Process

Technical Details

Establish & Communicate

• How the Pay-For Performance $$ Will be Determined & Paid

• Weighting on Individual, Team, Organizational Results

Technical Details

• Ensure Noticeable Differences

Technical Details• Timing of Rewards (Short-

Term & Long-Term)• Actual Results Consistent

with Plan

=

Getting What You Pay For

• Know Your Business

• Know Exactly What You Want & Don’t Want

• Create A Performance Culture

• Communicate

• Make It Personal

• Make It Real

• Connect Rewards to Results

Comments or Questions

THANK YOU