Paying for performance a critical tool to fuel both individual and organizational success

The Hidden Costs of Turnover• Administrative Costs: separation pay, exit interviews • Workload Costs: Extra hours, overtime pay, temp help • Recruiting Costs: Advertising, referral bonu

What is Pay for Performance?

Links pay (base and/or variable), in whole or in part, to individual, group, and/or organizational performance.

—The World at Work Handbook of Compensation,

Benefits & Total Rewards

“

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Cost Efficiency

1

Recruiting & Retention

2

The Hidden Costs of Turnover

• Administrative Costs: separation pay, exit interviews

• Workload Costs: Extra hours, overtime pay, temp help

• Recruiting Costs: Advertising, referral bonuses, interview time

• Productivity Costs: Covering for missing employees

• Training Costs: Time to contribution, trainer’s hours

Turnover costs are, on average, between six and nine months’ of an employee’s salary.

Epiphany Moments

• 6% increase on the anniversary of a hire date

• 9% increase on the anniversary of a promotion

• 12% increase after birthdays, especially milestone birthdays

• 16% increase after attending a high school reunion

Job-hunting activity jumps when employees make comparisons.

Research from CEB, as reported in Harvard Business Review

Moral Responsibility

3

A Culture of Trust

4

Three Keys to Building Trust

1 Repeat Interactions

2 Win-Win Situations

3 Effective Communication and Execution

• Two factors: hygiene factors and motivation factors

• Hygiene factors: salary, benefits, safety

• Motivation factors: expression, purpose, friendship

• Decreasing dissatisfaction with hygiene factors is the foundation for increasing satisfaction through higher motivations like an effective company culture and a fulfilling career path

Drives Results

5

Baby Boomers · 1946 – 1964

Communication About Comp: Mostly Private

Average Tenure: 15+ Years

Career Mindset: Retirement, Work/Life Balance

Generation X & Busters · 1965 – 1983

Communication About Comp: Somewhat Private

Average Tenure: 5+ Years

Career Mindset:Management, Work/Life Balance

Gen Y & Millennials · 1984 – 2002

Communication About Comp: Public

Average Tenure: 15 mos-2 Years

Career Mindset: Go-Getters, Advancement, Flexibility

Average Tenure: 15+ Years

Career Mindset: Retirement, Work/Life Balance

Generation X & Busters · 1965 – 1983

Communication About Comp: Somewhat Private

Average Tenure: 5+ Years

Career Mindset:Management, Work/Life Balance

Gen Y & Millennials · 1984 – 2002

Communication About Comp: Public

Pay and Performance Management

FREQUENCY TIME ACCURACY PURPOSE

FREQUENCY

TIME

ACCURACY

PURPOSE

• Individualized Rewards & Recognition

• Variable or Incentive Pay Plan

• Base Pay Plan

• Company Culture, Compensation Philosophy & Compensation Strategy

• Develop Clear Compensation Strategy

• Get Reliable Market Data

• Develop Clear and Aligned Goals

Performance Action Items

Compensation Action Items

“ Employees won’t believe there is a link between pay and performance unless they can see it.”

—Margaret O’Hanlon, re:Think Consulting

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Managing Employee Turnover Comp Is Culture

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