This is a book excerpt from “Smarter Collaboration” by Dr. Heidi K. Gardner and Ivan A. Matviak.
The annual performance discussion is your chance to use compensation to encourage a collaborative culture. Because the recap of employees’ performance against targets (what they achieved) should be relatively uncontroversial, your efforts should be directed at explaining your assessment of their behaviors (the how part of their overall rating).
As obvious as it sounds, what you pay people has to be directly linked to what and how they deliver against their goals. We have worked with a range of organizations to review their compensation outcomes. Many have a compensation policy that includes up to twenty factors they claim to value. When we run a statistical model, however, they pay for performance on just two or three metrics. More often than not, the ones that they compensate for our highly individualistic goals, such as hitting personal sales targets. This is why rigorously applying weightings to each destination is critical. Read more.