Get More from Performance Reviews—Use Metrics to Link Pay

Old methods of measuring performance once a year just don’t work anymore. They’re cumbersome and only focus on recent performance goals. But, when performance reviews are directly linked to meaningful and simple pay or performance policies in force year-round, they have a greater impact on the organization. Take a look at some best practices for linking pay for performance during employee reviews.

Many workers don’t understand the connection between pay and performance

In the Towers Watsons’ Global Workforce Study, less than half of the 32,000 employees polled reported a link between their performance and what they were paid. The employees also reported a major disconnect between what their managers said about their performance and how their promotions would be handled. It’s not surprising then that a quarter of these employees reported being disengaged at work.

Similar results were discovered by the PayScale Compensation Best Practices Report, which surveyed nearly 7,600 business leaders from across multiple industries. “Sixty-three percent of employers cited “retaining top employees” as their primary compensation objective. However, 57 percent do not train managers how to speak with employees about compensation, and 38 percent are not very confident in their managers’ ability to perform this task.”

Learn More About Our Compensation Software


The main problem with traditional annual reviews is the inability to communicate how 12 months of performance equates to salary increases. Without this happening, employees lose the main motivating factor behind their jobs—the ability to earn more.

Methods to link pay to performance during reviews:

  • Conduct monthly vs. annual performance review sessions. It’s nearly impossible to see the progression of an individual employee during a singular performance review. Instead, these meetings should be brief, frequent, and focused on achieving specific goals. Employees who experience performance in this way can understand how their contribution affects the bottom line and thus, their financial growth.
  • Select a performance product that tracks real time data. The PayScale CBPR mentioned that this year, “Twenty-five percent of companies expect to make a performance management system their next software purchase.” This is a smart move because without a system for tracking weekly performance, how can management predict who should get promoted?
  • Develop a strategic appraisal system for all employees. Consider ways that management and employees can collaborate on performance systems. For example, the US Department of Defense is rolling out the first of its kind three-tiered performance rating system that’s designed to clarify goals with financial incentives. It’s all part of a “leading edge” culture building action that, “encourages active, year-round dialogue and greater participation by employees.”

By using the above best practices, it becomes easier to connect pay and performance in meaningful ways, and measure it more accurately for financial rewards.



Leave a Reply

Be the First to Comment!

Notify of