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5 steps for starting a pay-for-performance system

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in Leaders & Managers,Performance Reviews

Most organizations believe they do pay for performance. They don’t. If they did, a few people would get lots of bonuses and high raises, while others would get nothing extra.

Does that sound like your organization? Didn’t think so.

If you’re committed to starting a true pay-for-performance system, you’ll want to ease into it with lots of crystal-clear communication. Here are five ways to get started:

1. Tell employees how much of a raise they will get if their work is distinguished, excellent or simply proficient.

2. Establish accurate performance appraisal systems, and train supervisors in appraisal and feedback skills.

3. Know what your employees want. Money is the most appreciated reward, but time off and public thank-yous are a close second. Older workers appreciate different rewards than young colleagues.

4. Budget for the change. Setting an average raise isn’t enough. You need separate pots of money to cover merit increases, adjustments in case of market changes, incentives and appreciation.

5. Communicate your new plan so everyone knows what to expect—and what to do to earn the most money.

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