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Are you paying for performance or performing for pay?

Posted by Amy Wilson on December 17, 2008


There’s a religious war waging amongst our customers. Surprisingly, it has to do with money. There are two factions: the purists and the pragmatists.

The Purists

Peace

The focus is on a healthy and timely performance process. Managers are coached on writing meaningful documents and giving useful feedback. Calibration sessions occur to target development, reach agreement on promotions, and set the groundwork for compensation decisions. The compensation round occurs afterward. Performance ratings are a major factor in the compensation decisions. Before signing off on the compensation allocation, business leaders check their graphs to make sure they have indeed paid for performance.

The Pragmatists

The compensation cycle is a known entity. The pool comes down. Decisions are made. Money is distributed. It happens at the same time and in the same way every year. Everyone knows performance calibration must be done. Doesn’t it make sense to do this after the pool is communicated? All the information is there to allocate the right pay and make sure the ratings correspond. Managers can now communicate the full message to the employee.

Is your organization a purist or a pragmatist? Is there any hope for peace?

3 Responses to “Are you paying for performance or performing for pay?”

  1. Meg Bear said

    My general experience is that the decision tends to be more about the budget process and less about the commitment to the process or even a specific ideology.

    I think that HR leaders often struggle with getting these things aligned in a company. So this is where the pragmatism comes in, it is the process of dealing with the reality of what will work in a specific organization.

  2. Amy Wilson said

    I think we have a pragmatist on our hands. Any purists out there?

  3. […] pay according to performance measures. But, the reality is that many are stuck in the simultaneous performance and compensation cycle, in which performance decisions are made within the context of […]

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