The Reward/Culture Tipping Point: Balancing Performance Pay with Workplace Perks

I had, the opportunity, in connection with Hay Group's release of 2013 salary planning data last week, for a chat with Jeff Blair, who serves as the firm’s U.S. Productized Services Leader. 

We talked about whether and how the recession is changing the way companies are rewarding employees.  Jeff shared a number of great observations and insights; one that I found particularly interesting was his take on the interplay between pay for performance (which is increasingly a matter of identifying and focusing available reward dollars on top performing employees) and the resurgence of non-cash “culture building” workplace perks.

Flat salary increase budgets are pushing up the stakes for figuring out how to put 3% raise pools to the best use.  Jeff notes that he is seeing employers devoting more attention and science to understanding who their high performing and high potential employees are.  At the same time, and with an eye on that same pool of money, employers are also seeking to identify and watch those positions – the “hot jobs” – where it is most difficult to find and retain qualified people.  With these priorities and pressures, salary planning has evolved from being a spreadsheet exercise to a process of serious business conversations about what must be accomplished with the dollars available for salary investments.

Position that, if you will, alongside the second reward trend that Jeff called out – the revival of non-cash perks.  While a lot of the press on employee perks focuses on the practices of tech companies, Jeff notes that he has seen a pick-up in their popularity over the past year across all industries as employers seek to create a more positive workplace culture and climate in the aftermath of the downturn.

Do we have two opposing forces at work here?  On the one hand, you are funneling discretionary cash to the highest contributors, and on the other you are offering enticing perks without condition to the broader population, creating what some see as a culture of entitlement.  I asked Jeff whether these efforts, in his eyes, could be sending conflicting messages.

“An interesting question,” Jeff responded, “but no.”  The danger, as he sees it, lies in doing one without the other.  Both actions are essential to creating a high performance workplace.  It’s all, ultimately , about balance.

As Jeff says:

There will always be differences in performance and potential among an organization’s employees, but focusing only on the top 10-20% while ignoring everyone else could trap you.  Most of the  work gets done by “meets expectations” employees.  It is important to keep them engaged because they influence the climate and culture in which your high performers must succeed.

Do you agree?  For those who have both pay for performance and broader workplace perk initiatives underway, how do you see the interplay between them? 

Ann Bares is the Founder and Editor of the Compensation Café,  Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting services to a wide range of client organizations.  She earned her M.B.A. at Northwestern University’s Kellogg School and is a bookhound and aspiring cook in her spare time.  Follow her on Twitter at @annbares.

Creative Commons image "Circus" by Tanya_Cataldo

Comments

[E. James (Jim) Brennan]

Yep, agree, that as long as the "entitlement" is tied to continued membership in the organization, it has minimum toxic effect. In fact, as long as the enterprise continually maintains or raises its minimum threshold standards for acceptable performance, such "entitlements" merely mirror the performance dynamics that are otherwise reserved to only the top outliers. Higher "normal" expectations justify enhanced benefits for all workers.

That is precisely the reward philosophy of all elite units. The vast majority are well treated as long as their output results fall above the uniformly high expectation level. The very few who manage to excel beyond those daunting "standard" heights tend to vary in identity over time. Those top outliers earn extra recognition as role models and win other extraordinary rewards; they also frequently get accelerated progression opportunities that further enrich their remuneration value proposition, too.

[John A Bushfield]

I also agree, but in a slightly different context. Everybody knows that salary budgets are tight, and most understand that the exceptional performers get a bigger slice of the pie. So long as the credibility of the organization to deliver the right rewards to the right people is there, the comp piece will be fine (again, my plug for transparency!). Culture, on the other hand, can be tricky. Sudden change in organizational behavior breeds suspicion among employees. Remember, the unfortunate reality in most companies is lack of trust, and when management all of a sudden starts offering free lunches or installs fuse-ball machines in the break room, when historically such things were unheard of, even the slickest communications are gonna be suspect. Change is a constant in business, and in life. It creates uncertainty and anxiety. Culture, which defines life at work, should be consistent, driven by principles, and well understood. Well developed and well managed cultures serve the basis for company actions. In this context, additional 'perks' to offset skewed salary actions are really unnecessary; people know they are appreciated, there is clarity of purpose, and trust reigns supreme.

[Ann Bares]

Jim:

Point worth noting, that this picture - and the presence of generous workplace perks - does suggest the membership model, which rests heavily on the enterprise's ability to "maintain or raise minimum threshold standards of performance" in order to ultimately keep the entitlement beast at bay.

John:

I love your comments about culture. Yes - it must be consistent, well-communicated and driven by principles. The sudden, unexpected appearance of perks and freebies in a climate dominated by mistrust and obfuscation tends only to raise employee suspicions.