Although many employers promote a pay-for-performance strategy
among employees, few employers achieve greater rewards for significantly
greater contributions, a compensation expert said April 29 at the 2013 WorldatWork
Total Rewards Conference in Philadelphia.
By taking a meager budget and trying not to alienate employees
or put them at a disadvantage, employers end up sub-optimizing business
results, said Ken Abosch, compensation practice leader for the consulting firm
Aon Hewitt.
According to Aon Hewitt’s annual Salary Increase Survey results, 60 percent of employers give merit
increases for every level of performance, including below-average employees,
Abosch said. Top performers over-exert themselves, average performers work at
expected levels, and below-average performers do not meet expectations, yet all
groups receive rewards of about 3 percent, he said. For all three groups, the
award distribution is a loss, he said.
Most employers blame such as distribution on the lack of funds,
despite a differentiation in employees that was evident 20 year ago, Abosch
said.
“We’re spreading it across the population instead of really
targeting it at the individuals that are giving us the greatest value,” Abosch
said.
Managers rely on equal distribution among all employees
because of budget proprieties and ease of performance reviews, with some employers
failing to address insufficient performance, Abosch said, adding that there are
no consequences for such actions. An emphasis on collective rewards is another
excuse by employers claiming to be team organizations, he said.
In addition, employees lack appropriate performance expectations,
Abosch said, citing research that showed 80 percent of employees believed their
efforts were in the top two performance categories.
“You get who you pay for,” Abosch said. If a company is
known as a highly differentiating organization, it could hold on to higher-level
performers, which would tend to attract similar talented new hires, he said.
Organizations can implement merit-based programs more
effectively by including measures such as automatic zeros for average and
below-average performance and lump-sum merit increases, Abosch said.
By Kristin Washington