Evaluating the performance appraisal system for salary planning

Evaluating the performance appraisal system for salary planning

By on Oct 5, 2017 in Blog, Performance Management, Reward and Recognition | 0 comments

In our last post, we recognized that October often marks the beginning of salary budget planning for the next year and shared merit increase expectations for 2018.  We also mentioned that many organizations are moving away from the traditional performance appraisal process to better reward employee performance.  One way to change your performance review system is to focus on having a conversation with your employees about performance.  Some benefits of a conversational review are:

  • Employees’ performance is measured against their achievements, goals, and objectives.  This allows for detailed documenting of performance which can be used to accurately reward the employee.
  • Employers can learn what employees need to succeed.  Together they can discuss what needs to change in the future and managers can help their employees perform to the best of their ability.
  • Employees are given an evaluation beyond just a number.  This is more valuable for improving performance and allows for honesty between the manager and the employee.

Employees focus on accomplishing goals when pay is based on goal achievement.  So, if you do edit your performance appraisal system, it is also a good idea to review and update your merit increase practices.  For example, if performance conversations become a regular practice every quarter, it might make sense to adjust merit rewards to a quarterly schedule.  Another potential way to revise merit practices is to offer variable compensation.  Variable pay as a percent of salary can reward performance at every job level and connects compensation to corporate, department, and team goal achievement.

If your company is thinking about adjusting their performance review system to increase employee engagement and improve productivity or revise their merit increase system, contact us and check out our blog for more helpful resources.