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Dec. 7 — Everyone agrees that employee compensation has to be linked to performance, but consultants disagree over how supervisors should discuss the two issues.
“It’s a very good idea to decouple the compensation conversation from the performance feedback conversation,” Dick Grote, founder of performance management consultancy Grote Consulting Corp. in Frisco, Texas, told Bloomberg BNA in a Dec. 6 e-mail. “Hold them at different times, in separate meetings. That way only one item at a time is talked about, and the manager is assured of the employee’s full attention.”
Views like Grote’s on separating compensation discussions from performance discussions date back to a seminal 1964 Harvard Business Review article, Gerry Ledford told Bloomberg BNA Dec. 6. But it doesn’t work, he argued, “because people keep waiting for the other shoe to drop” if the supervisor deliberately avoids bringing up money while discussing performance. Ledford is a senior research scientist at the Center for Effective Organizations, University of Southern California.
Instead, he suggested, if supervisors can’t talk about exact dollar figures, they should at least give employees “a general sense” of how their performance may affect compensation. He pointed to a 1986 paper in the journal Organizational Behavior and Human Decision Processes, titled “Does Salary Discussion Hurt the Developmental Performance Appraisal?” to support his position.
“Most of our clients hold developmental discussions throughout the year only for development, and compensation and pay discussions are only happening at the end of the year,” Steffen Maier, co-founder and chief marketing officer of New York City-based Impraise, told Bloomberg BNA Dec. 7. The company offers a mobile platform for transitioning from annual performance reviews to a more continuous process.
“The employee has to be clear whether the discussion is to help in their development” or is a performance assessment to determine compensation, he said.
Grote conceded that many companies may not be able to hermetically seal off the performance discussion from the compensation talk for policy reasons. “In that case, it’s vital to start the conversation by talking about the compensation change, then move to talking about the individual’s performance and how the individual’s performance affected the amount of the raise,” he said.
As did Ledford, Grote said it’s best to find a way to keep the employee’s focus on performance development uncontaminated by the money issue. “It’s far better to start by saying, ‘Come in George, sit down. I’ve got some good news for you. In your next paycheck you’ll be receiving a 3 percent increase. Now that you know that, let’s talk about your performance over the past year,’” Grote said. “That’s a far more effective approach.”
Grote, Maier and a document provided by Impraise offered several other suggestions for performance development and compensation discussions:
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