If There's No Perfect Way to Measure Employee Performance Objectively and Meaningfully, How Do You Manage "Pay For Performance Schemes?

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Negotiate bonuses upfront for employeesFirst, it's true that it's virtually impossible to measure the VALUE of employee contributions in terms of the overall goals of the company, which is, after all, what counts. You can easily objectively measure trivial things, but you can't measure objectively, the really important things.

So, if you base salary increases or bonuses on individual performance metrics, you have a problem. It means you make important decisions on at least partially flawed information.

The solution: Forget about objectivity, and move to giving rewards based on goal achievement that is NEGOTIATED with the employee up front. First, set goals with employees. Negotiate and settle on criteria that would indicate the goal was achieved. During appraisals, then negotiate to decide what was achieved or not. It's all discussion. It's much like a contract that is negotiated.

The advantage to this is that by negotiating UP FRONT, the employee knows and has agreed to what will enable his or her pay increase, and that's IS motivational -- much more so than simply giving rewards at the end of the year, without employees knowing why they will be given, and what they will be based on.


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Bacal & Associates was founded in 1992 by consultant and book author, Robert Bacal. Robert's books on performance management and reviews have been published by McGraw-Hill. He is available for consultation, training and keynote speaking on performance and management at work.


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  • Performance management and appraisal MUST be a partnership between manager and employee where BOTH benefit.
  • Performance management can be the lever for improved employee engagement.
  • The review process is the LEAST important part of performance management
  • If managers aren't managing employee performance, why are they there?

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