What typically happens today on performance management?:
Some level of this alignment exists in today’s world. Based upon the strategy, a CEO defines the goals of his/her management team. The goals are given weight-age depending upon the strategic priorities. This means that performance assessment, ranking and rewards will be skewed towards heavier goals. The same approach is then cascaded down to the lower levels in the organizational hierarchy.
This surely works to a certain level. However, there are some more aggressive methods to consider:
Create special initiative reward pool-
As many of the strategic priorities are translated to strategic initiatives, one can create special incentive bucket for completion of those initiatives. If you do not want to give extra money, you can take it from the overall rewards pool. This means that people get less money for same performance for business as usual and get additional monies if they do well on certain initiatives.
Make variable component higher in the pay and align it to the strategic blue-print-
Organizations are increasing the variable pay component, and the level of variability goes-up with the levels of hierarchy. However, variable pay pool is typically spread equally. It is driven more by the levels, than the role played by the individual.
One can place higher level variable pay pool to the roles which have greater criticality and stake in the strategic priorities. This will attract, retain and propel these critical resources to deliver more than expected norms. The variable pool shift across the roles will keep on happening with the change in the priorities of the organization. For example, if raising customer service satisfaction index is a high priority, we will place higher variable pool with customer service function. Once the required benchmark is achieved, the variable pool next year could move to selling a certain category of products (say institutional products).
Provide mix of individual plus team incentives
Most of the rewards and incentives are individual based, whereas it is the teams, which make it happen. For critical performance indicators and priorities, one can give a mix of individual achievement and team achievements.
All of the above methods are aggressive, and have a challenge of design, introduction, articulation, operations and stabilization. However, they are part of new competitive era, where employees understand the need for an organization to be nimble.
There are many such tips on performance management in my portal Business Intelligence and Performance Management.
