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Performance and Comp?

A common mistake companies make is when they try to motivate their workforce to increase performance by offering salary increases in conjunction. Historically, this is how businesses have structured their performance management process. However, this process is sending the wrong message to employees. A strong performance appraisal system works to foster self reflection, increase employee engagement, and encourage an open dialogue with employees. Ultimately, employees should leave a performance review with constructive feedback that helps provide them with a direction and new accomplishments to achieve. If this process is tied to a salary review, the company may face the following pitfalls - 

Self-Assessments Would Be Useless -  A self assessment should drive employees to reflect honestly on their achievements. If performance appraisals are closely tied to salary increases, this could cause employees to undermine any areas of improvement in fear it may affect the level of increase they receive. Ultimately, employees may be afraid that honesty could result in unfavorable results for them. 

A Raise Does Not Mean Employees Will Work Harder - A performance review should be viewed by employees as an opportunity to receive feedback and guidance on furthering development. However, if it is tied to a salary increase, it may blur any connection with the greater organization or culture. These reviews are often more transactional in nature and fail to motivate employees as much as intrinsic motivators do. 

Managers May Battle Objectivity - When conducting the pay for performance process, employees will have to undergo a rating system. These rating systems may increase potential biases such as: recency bias, “horn” or “halo” effect, or excessive leniency or severity. 

The goal of the performance management process is that employee development should be the main focus, not salary increases. In that case, the company must showcase that they value the employee’s professional growth and advancement through identifying strengths, training gaps, and areas for development. The best practice is to have performance conversations on a regular basis and discuss pay increases in a separate meeting that occurs once a year. Do you need HR expertise on creating the best performance management process for your small business? Here at The HR Trail, LLC™, we can help generate a performance management process that improves employee engagement, sets clear expectations, and identifies development opportunities! Let’s connect -

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