Mid-January is a bleak time. Christmas is well and truly over and now you’re faced with the unholy trinity of performance management reviews, bonus reviews and pay reviews.
Fortunately, Innecto has some handy ways to get started.
Performance Management review
This always comes up sooner than you think – normally accompanied by frustration that learnings from last year have not been applied to make the process slicker.
At this stage, you need to communicate the importance of completing these reviews in plenty of time for the pay review deadline. Make sure managers are actually conducting the reviews; and most importantly, collecting reliable data throughout. Completion in plenty of time means HR can differentiate performance effectively, and distribute the allocated pay pot the way it was intended.
You should also challenge performance distribution to ensure that it is aligned to departmental and business results. Pay particular attention to the distribution of performance ratings by gender and push back on gender bias (unconscious or not). Sales functions also need to be under the spotlight. Sales performance is very often reflected within the sales incentive scheme – the performance management system should be looking wider than achieving sales targets. If you conclude after this year that the performance management system needs a full review – strike whilst the iron is hot!
A few questions to think about now:
What are the objectives and metrics for your variable pay - what do you want to reward and do these align with business objectives? Obviously individual performance is important but other objectives could include customer satisfaction, sustainability, team collaboration and process efficiencies.
Look at last year’s data – how effective was the bonus scheme in driving performance? Using this information will provide the basis of forecasting and setting appropriate targets going forward.
How are the team getting on with the current scheme? Are there any problems that need addressing? This is a great opportunity to gain real and relevant insight into how the bonus scheme is being received and how to improve on last year’s model.
Your main focus now should be on collecting and interrogating data. Doing this provides credible and relevant information for pay pot approval, but crucially it also helps with building key messages for employee and line management communication.
Internal data from your HRS can be time-consuming to track down, unless you’ve been meticulously tracking every P45, P46 and wage slip. Performance review results, out of cycle salary increases paid, an up to date list of employees, their roles, departments, locations, salaries and variable pay are all key to making informed decisions concerning the distribution of the annual pay budget. It’s a cliché, but knowledge really is power.
Beyond understanding your internal demographic, gaining insight into the external market should be at the top of your ‘to do’ list. Taking into account economic factors and market rates is key to positioning how much you need to spend in order to satisfy demand. How does your pay compare to your immediate and wider competitors? Will the salaries coming out of this year’s pay review put you in a competitive position? Benchmarking your internal salaries against the market will unlock this knowledge.
It's a lot of work, but it’s essential to prepare your business case with the right level of information to engage the stakeholders. This makes life much easier when it comes to gaining agreement for the pay pot.
Innecto can help with any aspect of pay and reward. Call us on 020 3457 0894, fill out the contact form or email email@example.com.