A Pay for Performance Perspective and Tips

Recently Business Insider reported that one of Gawker Media’s writers, Neetzan Zimmerman decided to leave the company to work at a startup social media organization. While the news of someone making a career move may seem mundane, this move is interesting when you start to delve into this particular reporter’s performance successes and how they relate to a pay for performance model. Gawker employs approximately 15 writers and it turns out that Zimmerman was responsible for bringing in 99% of Gawker’s web traffic. 99% of the results that Gawker needs to be successful. 99%! And while we of course don’t know the complete story of why Zimmerman left the company, the statistics provide an interesting perspective regarding whether an organization should use a pay for performance model as an incentive to ensure top performers don’t even think about leaving.

Many organizations have a tendency to give a cost of living pay or ‘thanks a latte’ increase across the board, which usually amounts to about 3%, without truly measuring which employees are bringing the most value. This means that even poor performers are being rewarded. By not differentiating financial rewards between top and poor performers, there is no incentive for poor performers to “up their game” to accomplish the tasks that are most critical to the bottom line. And it’s a slap in the face to the ones who are giving it their all (and then some) to achieve success for the company when they receive the same, or minimally different, increases as the slacker sitting across from them.

Quick tips for creating a successful pay for performance model:

  • Define what metrics are driving your business success (revenue, number of clicks, safety, service quality, clinical outcomes, patient experience, efficiency, etc.).
  • Communicate clearly and often with employees to track their progress.
  • As part of your performance management plan, create SMART (specific, measurable, attainable, relevant, and time-bound) goals for employees.

By creating a pay-for-performance culture, employees have a clear line of sight on how their daily actions contribute to the success of the organization and the size of their paycheck, which puts organizations in a position to thrive.

To help you have productive conversations with employees regarding compensation, we have put together these tips.

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