Should Boss Cover Performance, Salary in One Talk?

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By Martin Berman-Gorvine

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.

Multiple Development Talks

“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.

Get Employees’ Minds Off Money

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:

  •  “Evaluate an individual’s performance using both an absolute comparison and a relative comparison approach,” Grote said. “With absolute comparison, the manager asks the question, ‘How good a job did Joe do in meeting his goals and expectations? Did he exceed my expectations, or meet the expectations, or miss meeting the expectations?’” In relative comparison, the manager asks how good a job the employee did compared with his or her teammates.
  •  If using peer-to-peer review, take steps to ensure it doesn’t become a mere popularity contest. One Impraise client uses peer-to-peer evaluation and lets employees award their colleagues gold, silver or bronze stars for especially helpful feedback. Those with the most stars get a bonus from HR, Maier said.
  •  Use “calibration meetings” among managers to prevent subjectivity if using a qualitative review system, Impraise said.
  •  Consider asking employees to come up with their own “objectives and key results,” as tech giants Google, Intel, Adobe and LinkedIn do, Impraise said.
  •  Make reviews more transparent by setting standard formulas, Impraise said.

To contact the reporter on this story: Martin Berman-Gorvine in Washington at mbermangorvine@bna.com

To contact the editor responsible for this story: Tony Harris at tharris@bna.com

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

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