Implementing pay-for-performance programs can be a key part of employee retention, as it engages employees while driving improved performance at the same time. As one of a company’s most valuable assets, companies need to be sure that they have the most productive and best people they can to perform each function. An effective pay-for-performance program engages both managers and employees in enhancing individual performance.

So how do you implement such a program successfully? What are the primary success factors to effective implementation?

Success Factors of a Pay-for-Performance Program

There are several factors that can positively impact your pay-for-performance program:

• Public managerial support. The success of any program requires top management to fully support and utilize the system. "Top management commitment is very important and they must publicly support the process so employees gain a degree of trust in the fact that this is not just for their department, it’s an organization-wide commitment that top management embraces." Diana Neelman confirmed during a recent BLR webinar.
  This sends a positive message to managers and employees that this they take this process seriously and are committed to its success. HR, as a strategic partner, also has a key role in the program’s success, and serves to relay top management messages to the staff through consistent and ongoing training and mentoring.
• Inclusion of both results and behavioral criteria. When evaluating employee performance, many companies focus on very specific items or only a small part of the overall job. Effective performance management, on the other hand, includes both specific results and behavioral criteria.
  By evaluating performance based on looking at 1) the job function, 2) behavioral tasks, and 3) specific goals and objectives, you will have a well-rounded look at the employee’s contributions. This provides employees with a sense of direction and an indication of where they need to focus their attention.
• Emphasis is on managing performance through coaching and counseling. Performance management as a process, not an event that happens once per year. Managers should provide ongoing coaching and feedback to employees, to not only correct specific behaviors, but also to praise employees as they are doing the job.
• Managers are held accountable for effectively utilizing the process. The program success is based on managers doing their part in evaluating performance. HR must actively evaluate how consistently the program is applied.

What challenges should you anticipate with your pay-for-performance program? See our related article that prepares you for the challenges that arise due to external and internal factors.

For more information on successfully implementing a pay-for-performance program, order the webinar recording of "Pay for Performance: Keys to Engaging and Retaining Your Best Employees." To register for a future webinar, visit http://catalog.blr.com/audio.

Diana D. Neelman, CCP, is a Principal and Senior Consultant with Compensation Resources, Inc. (CRI) , in Upper Saddle River, New Jersey. With over 20 years of collective compensation and HR experience, Neelman is responsible for business development and project management in all areas of compensation, consulting to a variety of industries on salary administration, performance management, and incentive compensation, with a specific emphasis on executive and general compensation matters within not-for-profit organizations.