CompLogix Insights

Should Performance Metrics Be A Part of Compensation Programs?

Jun 16, 2016

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When talking about compensation management, considering the role performance metrics should (or should not) play in your compensation strategy is important to consider.  If your compensation strategy doesn’t include performance metrics and things are working out okay for you, then maybe you don’t need to worry about it.  But performance metrics can be a very helpful addition to your compensation strategy in a number of ways.  It can help you identify weaknesses (and strengths) in your workforce, allowing you to optimize departments and reward hard workers, as well as help keep your employees engaged.

Performance metrics can be incredibly helpful when it comes time to plan for merit increases, pay raises, and promotions.  They allow you to see who is performing well in their specific position, and are thus eligible for some sort of increase or promotion.  They can also show you who is not performing up to pace, allowing you to either speak with the employee about their performance or (if the situation calls for it) let them go and find someone who will meet the stated expectations.

Rewarding employees for their hard work is beneficial in a number of ways.  Firstly, it gives all employees incentive to work harder, to take more ownership of their performance.  If they know that hard workers will be recognized and rewarded for their performance, it will give them further incentive to work harder.  This can also keep them engaged, not to mention help you retain top-performing employees.  If your employees know that they have avenues to progress in their careers within your organization, they won’t feel like they’re working at a dead-end position with no hope for advancement, and will probably not go shopping around for other opportunities.

If you’re not already including performance metrics in your compensation strategy then it may seem like too much effort to incorporate them now.  However, a good compensation management solution can help take some of the burden off of your shoulders.  It can allow for managers to input performance ratings on their direct reports, allowing compensation professionals to see who is eligible for raises or promotions at a glance.  And if you’re already using some kind of performance software, it can also incorporate that program’s data into it.

Performance metrics are a valuable tool to have in your compensation toolbox, because they allow you to more strategically decide where to allot your compensation budgets.  By knowing that you’re rewarding the employees who deserve it and providing them opportunities for growth, you can rest assured that you’re getting the most out of your compensation dollar.

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