Compensation Cafe: 3 Lessons Learned from Over-Reliance on Pay for Performance

Recognize This! – Recognitions serves a distinct and critical role from compensation. Don’t confuse the two.

Check out my post this week on Compensation Cafe in which I share the story of one team of highly skilled professionals in one very large organization and how a sole focus (poorly implemented) on compensation as a substitute for true recognition affects their daily motivation and engagement.

Specifically, I talk about 3 lessons learned from these bad practices:

  1. Moving the merit target.
  2. Hitting the pay range ceiling.
  3. “Promoting” to salary but reducing earnings.

All three instances led to one result – growing employee resentment. Of course, these examples speak to poor management practices and poor implementation of how pay-for-performance is intended in the organization. The obvious solution is better management training. But a first step should be an honest, direct conversation with the entire team on their value to the organization and how that is compensated.

Even better, would be to stop relying solely on compensation and pay for performance as a means of communicating to employees the worth of their contributions to the organization. Yes, managers should better implement the program as intended, but additional levers should be added – primarily, a frequent, timely and specific social recognition approach. Every day, encourage all employees to notice and appreciate the good work of their colleagues and recognize them for it. Make it possible for celebration and acknowledgement of success to happen in line with the daily work, stop killing employee desire to do the work, and see motivation grow.

Derek Irvine

About Derek Irvine

The VP of Client Strategy and Consulting at Globoforce, Derek Irvine is one of the world’s foremost experts on employee recognition and engagement, helping business leaders set a higher vision and ambition for their organizations. As a renowned speaker and co-author of "The Power of Thanks" and "Winning with a Culture of Recognition," he teaches companies how to use recognition to proactively manage company culture. Derek holds a B.Comm and Masters of Business Studies from the Smurfit Graduate Business School at University College Dublin.

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