Dive Brief:
- Despite embracing the pay for performance concept, a surprisingly large number of North American employers say their programs aren’t doing what they are designed to do — drive and reward individual performance — according to a survey by Willis Towers Watson.
- Only 20% of employers surveyed find merit pay to be effective at driving higher levels of individual performance, and 32% say their merit pay program is effective at differentiating pay based on individual performance.
- Similarly, only half say their short-term incentive programs are effective at boosting performance, and even fewer (47%) say annual incentives effectively differentiate pay based on how well employees perform.
Dive Insight:
Laura Sejen, global practice leader, Rewards, at Willis Towers Watson said that while employers continue to invest significantly in traditional pay-for-performance programs, primarily annual merit pay increases and annual incentives, these reward programs clearly fall short in the eyes of many employers. It appears that organizations are either trapped in a business-as-usual approach or suffer from a "me too" mentality when it comes to their programs.
Sejen says employers need to make changes, rethink their approaches, but most of all they must define what performance means for their organization and how managers can ensure they are driving the right performance.