How to use your Reward Strategy to support good performance in 2024
Creating a high-performance culture is a common aspiration for businesses, yet achieving it requires a clear understanding of what high performance means for the organisation. In this latest blog, Simon Cook explores key ideas and strategies for aligning your reward strategy with performance to drive success in 2024.
Short-term and long-term planning
Develop a performance plan that spans both short-term and long-term goals. While a five-year plan is valuable, in a period of uncertainty, establishing metrics for each year can drive in-year performance. This prevents disengagement or unrealistic expectations among employees regarding bonuses or pay increases.
The stark reality of performance-based decisions
If you're going to align your strategy to performance, think through the realities of doing that, particularly if you are using variable pay to drive performance. Invariably it can mean making tough decisions if people haven't performed well, especially if there are mitigating circumstances.
One option is to use discretion in these circumstances, however, this can undermine the plan and also reduce the clarity around what performance means in your organisation. Define what good performance looks like to guide decision-making and maintain clarity within the organisation. Tough decisions may be necessary, but a well-defined performance standard helps navigate them.
To attract and retain talent by driving performance, try to see your Employee Value Proposition (EVP) from a total reward perspective, rather than dealing with things in isolation. Getting the whole package right can lead to better engagement, which generally translates into greater productivity.
For the EVP to drive performance, at least one element needs to be individualised and tailored. Overall, it must be fair and equitable, but with a degree of individualisation. More than ever now, we have multi-generational workforces that have moved away from the one-size-fits-all and employees like to choose what's most valuable to them.
For bigger brands to retain authenticity it can also be important to make sure your EVP is aligned with – and not at odds with - your customer value proposition. If a new recruit thinks that working for a company is going to be fresh and fun because it reflects its brand, it will jar if it’s not, and people could end up being disappointed.
There is sometimes a tricky balance to strike between differentiation and equity. One of the reasons clients sometimes hesitate with differentiation is that they worry about workers’ perceptions of fairness and consistency when it’s applied. This is understandable and one way to mitigate this is to have clear criteria and explanations around why different packages might exist for different groups. Typically, for example, sales, commercial, or senior roles may be geared more towards variable rather than base pay. Being clear and transparent on this will allow you to react and stay competitive in the market by attracting and retaining the best talent whilst still being fair and consistent with your reward.
Recognition and management’s role
Monetary rewards are not the sole motivators; recognition plays a vital role. Ensure line managers are competent in conducting performance conversations. Investing in upskilling managers is crucial for the success of any reward strategy.
Heavily linked to recognition is the competence and capability of your line managers. Even the best reward strategy can fall short if line managers cannot support it. If managers cannot hold decent performance conversations and evaluations, and instead default to taking the easy option, this will all fall. Worse still, if the Team A manager can do it but the Team B manager avoids it, the whole scheme is undermined and stops feeling fair.
If there is a process to go through to upskill your managers, do it, and if that skill gap means waiting a while before you can meet the full aspiration of your reward scheme, take a longer-term approach to phasing things in once they are fully on board.
Finally, the hottest topic of all right now: is wellbeing. If you introduce something new like performance-related pay and it marks a change in your culture, it’s important to ensure change does not happen at the expense of workers’ wellbeing. The result could have dire consequences for the company. At Innecto, we’ve seen clients inadvertently sleepwalk into a new culture where people feel under far greater pressure to work longer hours or simply stay longer in the office. These things can end up negatively impacting an organisation, from a reputational viewpoint outside and in internal retention. Be mindful too that a fast, aggressive culture change could negatively impact groups such as part-time workers, parents or those with caring responsibilities or disabilities.
Successfully using your reward strategy to support good performance requires a thoughtful and transparent approach. By defining performance expectations, planning for the short and long term, considering the realities of performance-based decisions, and aligning with your organization's values, you can create a reward strategy that fosters engagement, productivity, and a high-performance culture in 2024.
It's not too late to get real-time insights for this year’s pay review. Advance is our complete customisable solution that will help you make responsible, fair and effective decisions aligned with your pay policy. Find out more here or email Simon at firstname.lastname@example.org