How To Motivate Performance With Compensation

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Using Compensation to Motivate Performance
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Before you can think about motivating your employees performance with compensation, you have to understand that the relationship between employee and employer is often based on an exchange of value. For the most part, that value is exchanging hard work for money. But when push comes to shove, it’s not always enough.

Nobody understands this better than high-performing companies that know that there’s a significant level of nuance involved in optimizing that exchange of value. So how do these organizations most effectively compensate their employees to motivate outstanding performance? In this whitepaper, we’ll go over the different ways you can motivate your employee performance and set your organization up for long-term success.

How To Motivate Performance With Smart Goal Setting

What do you want to reward with your compensation dollars? To have an effective pay for performance program, you need to have good goals and metrics at all levels — individual, departmental and company-wide. You’ll also want to make sure that each individual employee has line of sight into how their efforts contribute to the overall success of the organization. One of the most tactical examples is a sales rep or account executive; their individual goals for new customer acquisition comes from their sale department goal for customer acquisition, which comes from the company’s goal for new revenue.

How To Motivate Performance With Meaningful Base Pay Increases

High-performing employees want to feel like they are getting bigger salary increases than average or low performers. If 80 percent of your workforce are considered “high-performers”, you won’t have enough budget left to reward truly outstanding performance. To ensure that you are differentiating pay by performance levels, consider using a merit matrix to allocate your compensation budget. The matrix is created by plotting employee performance ratings against salary ranges. This compensation tool can help you ensure you’re allocating pay fairly — based on where someone is in their salary range and performance.Sometimes, depending on how many ratings you have, a merit matrix can significantly differentiate pay for your highest performers.

How To Motivate Performance With Communication

Your performance management system won’t drive behavioral shifts if your employees don’t understand it or don’t believe it’s measuring relevant things. In short, you need employee buy-in. Get it by clearly and regularly communicating how the system works and why your
employees should care. You’ll also want to get all your managers onboard, as they’re the ones who need to buy into how your organization intends to evaluate employee performance.