Robert Worobow, Vice President of Human Capital at Trustmark Insurance Company, said: "Even in companies where variable pay already exists, the performance governance system may still cause friction with the corporate culture. Different departments within the company have developed their own departmental performance-based pay methods and are unwilling to adopt a centralized corporate approach. Each department has a deep sense of ownership over its own performance pay allocation process."
Ardyce Plosser, Compensation Performance Manager, said: "Our employees seem to have an innate sense of entitlement; they believe they should receive rewards without considering their individual contributions to the overall success of the company."
The performance governance system may have to be modified due to violations of corporate culture. Employees at King Pharmaceuticals, a drug manufacturing company located in Bristol, Tennessee, were already accustomed to receiving bonuses when the company was performing well. Therefore, it was no surprise that last year, when the company implemented a variable pay plan, 2,800 employees expressed confusion and strongly resisted.
Performance governance means different things to different people. It could be a simple performance appraisal system or a tightly integrated goal process with some techniques involved. In a large enterprise, without a perfect performance governance system, employee performance cannot be scientifically managed.
For any performance governance system to be even slightly successful, employees must first accept it and then understand the company's expectations, which is an endeavor dependent on the collective corporate culture.
For Advo, one of the largest direct mail companies in the U.S., fear of the unknown is its biggest obstacle. The company’s 3,700 employees realized that the new performance evaluation system might eliminate speculation about who the high performers in the company are.
Most companies have no problem publicly recognizing high-performing employees. However, when it comes to underperforming employees, the situation is entirely different.
Telling the truth to underperforming employees
Gaining support from all levels of the company
These companies are at different points on the continuum of performance governance, and sharing the insights they've learned is significant. Participants each represent different corporate cultures and showcase unique perspectives on this topic.
Maureen Hilts, Vice Principal of Compensation at Charles Schwab, said: "At Schwab, for employee evaluations, we have three possible levels, but the lowest-level employees never know exactly where they stand in the evaluation results." Stiffler said: "This makes it difficult for managers to provide timely feedback on each employee's performance evaluation results, making it hard to achieve expected goals." He warned: Not communicating the results of performance evaluations to employees leads to a sense of entitlement, which hinders progress in company performance management, let alone adopting a variable pay structure in the future. A true performance governance system can make every employee clear about their position in the evaluation results compared to their colleagues. Stiffler said: "Employees should be able to say 'I am in the top 20%, so I can be considered excellent, but I am at the bottom of the excellent level, so I need to improve. Performance evaluations should not be conducted once a year, but every quarter, to allow employees to receive timely and effective feedback."
"For Wells Fargo, the most..."
The real challenge in implementing the performance governance plan lies in the fact that King Pharmaceuticals is composed of several small companies, each with its own culture and compensation model. The company has launched an educational campaign aimed at helping employees understand what a variable pay system is.
"Correcting this system is as difficult as taking away their children," Worobow said.
However, no amount of proactive methods or techniques will help a company realize its performance management objectives unless the company implements performance management at the right time. Mark Stiffler, CEO of Synygy, a performance incentive management company based in Pennsylvania, said: "Creating a performance incentive-driven organization ultimately comes down to culture."
At the Synygy Spring Performance Management Conference in Los Angeles, Workforce Management held discussions with some human capital management leaders and experts who have made achievements in the field of compensation performance management, sharing their experiences in performance management. Most of the discussions focused on the challenges related to employees when implementing and applying performance management plans, which aim to achieve the goal of pay-for-performance.
Focus on corporate culture, tell the truth to underperforming employees, gain support from all levels of the company, dual objectives, hierarchical information transmission is key, survival of the fittest.