Case Study: Creating a Pay-for-Performance Culture
The Challenge
A financial services company updated its performance management process to create the capacity to build a pay-for-performance culture. Once they had the tools to foster application, they asked T3, "Now what?"
T3 worked with the Compensation and Organizational Development teams to:
- Ensure consistent application of performance management ratings across the organization's business units;
- Increase the utility, validity, and impact of feedback by calibrating the performance messages to be delivered;
- Build understanding of the compensation system, and the application of the pay-for-performance message;
- Enhance the role of HR representatives as consultants to the business units on these topics.
Our Process
First, T3 worked with senior HR leadership to define the bottom-line performance messages to be delivered across the organization. T3 then worked with the HR Business Partners to pull together the leadership within each core business area - from the senior executive of the division area through two or three levels of direct reports. Through interactive, small group discussion, a common understanding was built across the top leadership for addressing what each rating area should mean for the division, the department, and, in turn, each individual. Each session was designed to engage management in candid recognition of the impact of rating inflation on several critical areas: overall company performance; the application of the compensation program; and employee engagement. Key lessons learned were pulled together from across the divisions and were presented to the Senior Executive Committee to guide decision-making.
The Results
As a result of T3's work with the Compensation and HR Teams:
- There is a sense of accountability at the most senior levels for ensuring rigor in the application of performance management tools and messaging;
- The Executive Committee performs an organization-wide audit to address how the tools are being applied throughout the year;
- There is now a mandate for a mid-year review as a formal conversation - benefiting manager and employee alike in fostering structured conversation and greater comfort with tool application;
- Calibration sessions are run across every Division in the company as senior leadership now recognizes the importance and utility of consistency in performance management application;
- Employees have greater insight into the need for consistency in ratings application and the value of a pay-for-performance culture.
