Well-defined, clearly-stated targets lie at the core of the pay-for-performance model, but the unlike-any-other year of 2020 was all about constant shifting of the goalposts.
Major economic disruptions arising from the coronavirus pandemic upended the bonus plans and other performance-based compensation arrangements of many companies, having sown the seeds of distrust in this incentive-based mechanism in the hearts of top talents.
Undoubtedly, there is still a group of enterprises that believe in the effectiveness of the pay-for-performance (P4P) model. So the key question now is how companies can use it effectively to earn the trust of professional workers in today’s uncertain times where even the most precise forecasts can be wrong.
Here are some recommendations that can help answer this question:
Shift the focus away from just money
The coronavirus took many of us on a soul-searching journey and caused us to rethink our values and priorities, the lasting impact of which will not only be personal, but economic too.
Pandemic or not, it is always important to get competitive compensation right, but companies should bear in mind that money is no longer the main trigger or the ultimate form of reward for an increasing number of top performers.
As the lines between work and home continue to blur, business leaders should focus on taking employee experience—not only inside but also outside of work—to new heights, and consider allocating some of the compensation dollars to exciting and enviable incentive programs, including one-time offers, that could deliver differentiated rewards.
These could include personalized programs such as coaching for new parents or caregiving services to assist employees with arrangements for children or aging parents. Such experience-focused benefits, combined with recognition and career growth plans, can do wonders.
Sit down with future or present employees and try to get to know their world, needs, and expectations. Be open to all views and suggestions to ensure you get the best ideas moving forward.
It is also important that businesses alter performance targets to include more qualitative elements and tailor them to reflect the new state of affairs.
Constructing a set of scenarios as for the evolution of the pandemic and defining different target ranges for each possible path can help executives cut through the murk of uncertainty.
Put transparency at the center of your P4P model
Thousands and thousands of pages have been written that glorify authoritative, confident leaders, but not much has been said about the power of vulnerability. If anything, the pandemic experience showed us how fragile and vulnerable we all are, regardless of the label we wear.
Some business-related estimates may prove far from accurate in the coming months. Executives should acknowledge this and tell all stakeholders in an honest, transparent manner that they may need to either set shorter-term or modify some performance goals along the way to reflect the economic reality at hand.
Regular updates can go a long way toward winning back the confidence of all the parties concerned in the P4P model.
In addition, companies can take a wait-and-see approach and set major targets later in the year after analyzing how the economy evolves. The strategy of under-promising and over-delivering at the right level can be another powerful tool in your business arsenal.
Leverage the latest technologies to give employees greater control
The pandemic-induced digital revolution not only made some of the most recent software tools outdated in the blink of an eye but also made the absence of efficient digital tools and technological know-how much more conspicuous.
The newest tracking systems have enabled more workers to better understand different aspects of their work and take greater control of their careers, which means the competition for talent is rapidly intensifying.
Business decision-makers should consider the new reality, stay on top of the latest technologies, and empower employees by giving them access to the most updated tools and solutions so that they can view current results versus goals and track exactly how their pay is determined and calculated.
Don’t forget the purpose!
COVID-19 could not have been a better lesson in the power of corporate purpose and aligning it to individual aspirations. Start with purpose as it is the glue that ties everything together.
Define a clear purpose for the organization, involve everyone that can contribute to it, outline all the ways you expect them to help realize it, effectively communicate the progress being made to team members, and reward for each contribution in a unique way to attract, retain, and engage employees.
It is true that the coronavirus moved the goalposts but, in many cases, success is just the matter of learning the new rules of the game and adapting to the new playing field.