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Pay for Performance - an Investment with Immediate Returns


A recently implemented Pay 4 Performance Program, or P4P, is found at the University of California, or UC. More than a performance review plan, UC’s program encompasses employee and staff development as a core component. UC approached the implementation of their plan cautiously and with personnel engagement to ensure quality and user adoption.

Following four general milestones, their project charter was executed as follows. Surveys were used to ultimately decide to enact a five-point scale for performance reviews. Second, formalized training was offered to managers to help facilitate appropriate performance reviews. Next, a formal campaign was launched to expand user awareness and adoptability. Lastly, they built a a progress tracking tool to supplement performance appraisal records and submissions. (University of California Santa Cruz, 2017).

The overview of their program describes the engagement practices they employed and the results that followed. They explain, “The Pay for Performance (P4P) Program is a merit-based approach and is a result of recommendations and analysis from Systemwide Human Resources and Compensation, as well as, feedback received from staff in the most recent Engagement Survey” (University of California Santa Cruz, 2017). Survey results show that staff members were interested in pursuing differentiated pay that is merit-based in order to more appropriately reward employees for performance. Absent of differentiated pay, employees faced an environment where incentive to perform well was lacking. One key factor of the program and its potential for success is ensuring proper dissemination of performance ratings. They say, “With proper distribution of performance ratings, managers can differentiate merit awards and appropriately recognize the strongest contributors” (University of California Santa Cruz, 2017).

In order to guarantee that this requirement was met, it became abundantly clear that UC needed to provide guided support to managers in the performance appraisal process. When considering appropriate training, UC personnel separated the training into two parts which helped avoid overloading managers and minimizing retention of materials. With Focus on Performance: Performance Appraisal Training & Feedback, they introduced the new performance rating tool to record appraisals. They also released a new rating scale to fit their new five-point methodology. Thereafter, they trained managers with the program, Focus on Performance: Goal-Setting & Feedback. Here, they demonstrate the importance of formally setting smart goals and providing feedback to drive quality performance. As they document, “Goal-setting and Feedback is essential to a high performing organization” (University of California Santa Cruz, 2017). It also helps reduce the potential for turnover. “The way [Pay For Performance] influences turnover is based on the supposition that it moderates the relationship between performance and the desirability of turnover” (Park & Sturman, 2015, p. 703).

Pay for Performance, as executed by UC, has the potential to strengthen the most valuable asset a company possesses; its Human Capital. However, it must be implemented and maintained effectively to guarantee positive results. Unlike equipment or other physical company assets, employees add complexity to Asset Management. Employees must be given the right mix of engagement, autonomy and development. Only then will they be positioned to add sustainable value to an organization.

References

Park, S., & Sturman, M. C. (2015). Evaluating Form and Functionality of Pay-for-Performance Plans: The Relative Incentive and Sorting Effects of Merit Pay, Bonuses, and Long-Term Incentives. Human Resource Management, 55(4), 697-719. doi:10.1002/hrm.21740

University of California Santa Cruz. (2017, June 16). Pay for Performance - Merit Program for Career Development. Retrieved from UC Santa Cruz: https://shr.ucsc.edu/compensation/comp_programs/p4p-merit-program/index.html

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