Performance Management - A Critical Compensation Component

Public outrage regarding the levels of executive compensation has been well documented over the past few months in the popular press, online blogs, and at public forums. Clearly something needs to be done to eliminate unnecessary risk-taking and to get a better link between pay and performance.

However, performance management is an issue that should be addressed at all levels of an organization. Just as important as designing the pay program, the need for a critical performance management review at all levels in the organization is even more so. As golf's U.S. Open heads to New York's Bethpage Municipal Golf Course this week, elite golfers and the media have commented on the gorgeous design, intriguing layout and tempting risk-taking opportunities all around the course. If no one is there to count the strokes and add up the scores at the end, what was the point of it all? It's the same with compensation.

Laying the ground rules and setting the performance measures are just the beginning of the compensation cycle. Compensation consultants can design the most intricate of performance plans, capturing the subtle business objectives of the organization at every level. But if the actual performance management process is just a rote exercise with no dynamic discussions along the way, the elegant plan design was all for naught.

As we ride the waves of this turbulent economy, many companies are focusing their attention on performance management in an effort to hold their employees responsible for the successful achievement of the goals being set in place. These efforts should encourage the desired behavior to ultimately improve the organization's bottom line.