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Dec. 17 --While most surveyed employers (55 percent) have implemented a pay-for-performance program, almost half (45 percent) expressed dissatisfaction with their program, according to Mercer's "2013 Pay for Performance Survey."
"That organizations are not satisfied with their pay for performance programs suggests that traditional financial incentives--the most common approaches--may be overused in situations or contexts where they are not the optimal choice," Brian Levine, partner and Workforce Analytics & Planning leader for the global consulting firm's North American Region, said in a Dec. 12 press release.
"There is often misalignment in terms of how the programs are implemented, and that's why there is a lack of satisfaction," Levine told Bloomberg BNA Dec. 16.
For rewarding performance, most organizations focus on financial incentives, according to the survey. Base salary increases and annual or short-term incentives remain the rewards most often linked to performance, reported by more than 85 percent of participating organizations.
However, this focus on financial incentives can present many challenges to employers, Jeanie Adkins, partner and co-leader of Mercer's Rewards practice, told Bloomberg BNA Dec. 16.
Survey findings revealed top performers receive twice the base pay and short-term incentives of average performers, which "does not leave enough money for the rest of the employees in a given organization," Adkins said. Furthermore, 63 percent of organizations indicated they are working to increase differentiation of pay based on performance, compared to just 2 percent trying to minimize it, she added.
It is also challenging to define the measures and metrics that will lead to the best implementation of a pay-for-performance program, Adkins said. In some industries, such as technology and innovation or research and development, performance goals may take a few years, and not align with annual assessment programs, she added.
The Mercer survey results are based on responses from more than 570 employers across all industries throughout the U.S. and Canada.
For companies looking to implement an incentive program with the intent of paying for performance, Levine advised them to first look at the conditions of the work. For example, if the fundamental goals of the company are complex, or involve coordination and cooperation among employees, that needs to be taken into consideration.
According to Levine, alternative incentive models include:
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