Performance management is the evaluation of an employee’s job-related performance with the primary objective being the improvement of the individual’s performance. It also provides justification for determining an employee’s compensation and ability to be promoted. Performance appraisals are part of a company’s performance management program and salary administration program tied to its pay-for-performance compensation philosophy. Credible performance appraisal tools enable managers to accurately and objectively measure employee performance that will then translate into compensation actions that are commensurate with that level of performance. The performance appraisal also provides managers with a means by which to document performance objectives established as part of the goal-setting process.
The key elements of a performance management program include the following:
- Formal compensation philosophy
- Salary administration program that directly ties merit increases to performance ratings
- Performance appraisal processes that enable managers to objectively rate employee performance
- A goal-setting process that enables managers to develop credible goals that enhance performance
- Reward programs (bonuses or incentive awards) that provide monetary awards commensurate with contributions
- Effective communication strategy
The performance appraisal is conducted between the employee and his/her immediate supervisor, in which the supervisor evaluates the performance of the employee. The supervisor provides feedback to the employee regarding his/her performance and areas of concern. The evaluated performance level during the evaluation will be used for justifying personnel actions relative to promotion, transfer and salary adjustments through the company’s salary administration program.
The prime considerations in the performance appraisal are to enhance overall performance and develop meaningful communication between the employee and his/her supervisor.
We will gather information through interviews and data collection to determine current performance appraisal processes in place; thereafter, we will clarify the compensation philosophy based on a pay-for-performance concept. In order to develop a performance management program, we will develop new performance appraisal tools specific to your company, including separate evaluation forms for management and other levels of employees. Subsequently, we will develop a performance management handbook to address the essential elements to conduct a successful performance appraisal and evaluation procedures. Compensation Resources is also available to assist with implementation and communication, including training human resources, management and/or staff.
Compensation Resources differs from utilizing a prepackaged software program in that we customize our appraisal tools based on the needs of our clients and provide supplemental documentation to develop a formal performance management program. In addition, we work with companies to facilitate the process to ensure the successful implementation of the program.
A pay-for-performance program provides small increases to most employees based on changes in the labor market, with large, meaningful increases granted to a limited number of exceptional employees. Increases are based on realistic performance evaluations with some employees not receiving any increase.
To find out more about how Compensation Resources can help your company with performance management, please contact:
Mary A. Rizzuti, CCP, PHR, SHRM-CP
Diana D. Neelman, CCP, SHRM-CP
Sara Schmidt, CCP, PHR, SHRM-CP