Distinguishing Knowledge From Results
Pay for Performance is HR’s biggest epic fail. Community™ provides the framework for organizations to manage salary movement clearly and objectively based on staff knowledge and experience, while rewarding achievement in a performance year.
Our Community™ approach has made it possible to distinguish recognition from reward, where pay movement is linked to skills growth, and performance is linked to rewarding achievement.
Pay for Performance” is the method used in almost every modern organization to manage compensation — both annual increases and variable pay like bonuses and incentives. It’s popular, and everybody does it. But it’s not working!
The problem is organizations have created one approach to both recognize the individual growth of an employee in their job and to reward the fulfillment of objectives for the year.
If an employee has a “good year,” they are rewarded with a high bonus and a generous “merit increase.” But in the following year, if they do just OK, how much of that pay increase do they give back?
Using a single approach for rewarding both job growth and achievement is muddled. Birches Group believes separate approaches are needed — one to recognize growth in the job, and another to reward the specific achievements accomplished during the year.
Birches Group Community™ Skills uses the job levels established within an organization as a basis for defining progressive Skills Stages, which can be used to measure the growth of an employee within their job. In short, it provides an explicit measure of “experience” rather than relying on time as a proxy.
If we can define and examine all jobs through the use of the three factors and six indicators in Community™ Jobs, the same can be done for skills. Community™ Skills circles back to the foundation of the job because it is explicitly linked to the same three factors and six indicators, allowing managers to easily track the skills progression of their staff across all fourteen levels.
Employees acquire and demonstrate new skills gradually over time, driving their capacity to perform their job even better. Skills and knowledge are cumulative, like salaries. We recommend using Skills as the basis for salary growth, rather than performance.
Performance management is the most maligned area of human resource management. Nobody likes it, few trust the results, and the most innovative solutions offered focus on snappy apps and technology without addressing the fundamental flaws that have existed since companies abandoned step increases over 50 years ago.
Birches Group believes performance can be measured using the same criteria we use to evaluate the contribution level of a job by asking just three questions:
If you can answer yes to these three questions, you are a strong performer!
Community™ Performance uses a performance standard linked to job levels, focused on how an employee performs in their job overall. We use a multi-rater approach that includes peers inside and outside the organization. Best of all, it actually works!
We’ve spent decades building our experience and knowledge, and expanding and refining the methodology behind Community™. Now we’re sharing that knowledge with you on our Insights page.
The labor market continues to shift. It may be difficult for organizations to keep up as the market relies on changes from other sectors of the economy and events from around the world. As such, it is critical to keep track of the ever-changing landscape.
Pay equity and transparency in the workplace doesn’t happen overnight. Companies must take active steps to ensure clarity around pay management policies, as well as standards on how employees are assessed and developed.
Birches Group’s Community Market Compensation and Benefits Surveys are designed with developing markets in mind. And because developing markets are dynamic, our surveys cover all elements toward total compensation to give our clients the full context of the local labor market.