Pay for Performance Doesn’t Work – Best Pratices Research

Pay for Position and Reward for Performance

“Pay” Program Areas That Rarely Work Include:

1. Merit Programs
2. Bonus Programs
3. Job Descriptions
4. Hay System for Job Evaluation
5. Adjustments vs. Pay Range Changes
6. Promotional Increases
7. Stock Options

What Executives Want in a Pay System

1. Variable vs. Fixed Compensation/Salaries
   • Based on ability to pay (= profit)
   • Shared risk and reward
   • Lower long-term salary/benefits cost
2. Tied Benefits to Performance vs. Longevity Only
   • Cafeteria benefits
   • 401K investments
   • Profit/gainsharing vs. pension guarantee
   • Improved ROI (vs. 39-40% of pay today)
3. Link “Pay to Performance”
   • In a more comprehensive way
   • Rewards vs. pay
   • Total performance vs. individual performance
4. Tailor Rewards to Different Jobs/Personnel
   • That they can influence
   • Many different incentive programs/multiple goals
   • Cafeteria rewards approach to non-financial rewards