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Originally published at Internet.comPay for performance models can work to everyone's benefit in an IT organization. But IT management first must be clear about just what PfP is, and smart about how they implement it.
bITa Planet recently discussed the topic with David Turetsky, director of Product Management at Workscape, a provider of compensation and performance management solutions and outsourced benefits administration. Turetsky also has worked in various organizations including Deutsche Bank, where he was vice president of compensation for a staff that included some 30,000 IT professionals.
Turetsky says there's often confusion about what PfP is. What it's not, he says, is the universally used merit increase, where an organization tries to spread a 3% or 4% increase across all levels based on daily job performance.
PfP, in contrast, is "at risk" pay - the percent of an employee's income that is tied to a bonus based on performance, either of the individual, group, or organization at large. Additionally, some industries are better suited to PfP models than others - in financial services, it's expected by most employees, including IT, that base salaries will be smaller (comparatively speaking) and bonuses bigger. In a service industry like retail, there's less of a focus on the model; instead, higher base pay is used to combat employee turnover.
Compensation isn't the be-all and end-all of why people ultimately leave a company, but "it's definitely the trigger mechanism," Turetsky says. Workers may tolerate 60-hour work weeks and a boss they hate - but only as long as they feel their package reflects their worth.
With that in mind, here are some guidelines about how, in those IT organizations where it's appropriate, leadership can take advantage of PfP to motivate and retain their staff.
1. Spell our your PfP criteria.
In IT departments - especially programming environments - individuals often work as part of a team. In those cases, "you have to make sure your message is consistent - that either the team lives or dies together, or if you grade on a curve within the team you have to communicate each person's responsibilities in advance so they can make sure they fulfill that role and get judged accordingly," says Turetsky.
And be aware that whatever method you choose has its own potential pitfalls. For instance, one member of a programming team may not have been able to adapt to a new language, leaving it up to others to constantly check his work and potentially even causing a project to fall behind.
In such a situation, those who are picking up the slack would be justifiably angered to be treated the same way as their colleague who can't master the new programming skills - or even the same way as other team members who do their own work well but never step in to resolve the problems created by the poor performer.
IT managers have to be aware of these situations as they're happening, and potentially make some tough calls to rectify the situation before it creates further problems.
"In this era when you can't find good people, do you hold onto those who aren't performing as well, or do you try and train them up or find other opportunities for them," Turetsky says.
Where compensation is concerned, you can't over-communicate. For instance, it's not enough to give a team a project deadline - you've got to be clear about your expectations for that deadline. For example, Turetsky says, "Did the team have an expectation they had to deliver everything, or that they had to deliver by April 30?" Some developers might have assumed that as long as they've got 75% of the requested features implemented by a given date, that they've met the requirements.
"The goals need to be very clearlly written and communicated, so that when compensation decisions are made, it's not a surprise," he says.
It's all about making sure the staff understands what the bonus is about and why - as well as when (end of project or end of year, for instance) - they're getting it.
Do you have experience - good or bad - with PfP? If so, we'd love to hear about it in our Forum.
2. Be flexible.
"Cafeteria-type compensation is not out of the question," says Turetsky. Younger, less experienced workers may be the ideal candidates for having a larger portion of at-risk pay, while older workers, more likely to have families and bigger responsibilities, may prefer a higher salary and less of a bonus opportunity.
"You can give [younger people] a short term incentive - you can say, 'I think you're valuable and I'll pay you a competitive salary, but if you do well you get a big bonus to buy a car.' They like that," he says.
3. Don't leave this up to HR.
If this isn't a practice in your organization, or isn't implemented in a way that makes sense for the IT staff, it's not inappropriate for any IT manager that has hiring or compensation management or budgeting responsibility to bring up the topic with HR.
The IT leaders know what their people are saying to them about how they'd like to be incented, and HR likely would welcome some feedback - especially if it's obvious to them that the IT department is having retention problems or isn't able to sign on the individuals it would like to.
"You can treat IT with PfP compensation while recognizing they are not built the same way as investment bankers or product people who make cars, and in doing so you will reward them, they will feel appreciated, and hopefully that translates to a higher-performing IT workforce," Turetsky says.
At the same time, when HR is leading the charge, IT managers shouldn't present the prospect of risk-based pay as something being foisted off on them.
"That's a failed strategy at the beginning," says Turetsky. "Instead, they should say, 'We're trying to be aligned with where the company is, and we're making investments in you, and we can succeed together. If expectations are met, you get this, and here's the reward for going beyond expectations.'"
4. Remember the forgotten.
It's possible that not everyone in an IT organization that does use PfP models is profiting from them. Consider, for instance, the personnel working on back-office systems.
"They're responsible for making sure the business operates, the general ledger is taken care of. That's thought of as a sleeper" in comparison to higher-profile IT personnel working on trading systems or robotics or other sexy topics, says Turetsky. But the truth is that without really good back-office IT support personnel, the business can't survive.
"You have to make sure that when you look across the entire IT organization, you're not just looking at the ones with the hottest skills today, but also at what might be areas of concern in the future, like ERP and back-office systems, and help desk people," he says. "If those people don't feel like they are part of your organization, and don't feel incented to come to work, wow, look at all the things that fall apart."
Another key group that you'd better hope have PfP options: Your outsourcing personnel. If your outsourcing provider doesn't provide that option, Turetsky says, it's quite possible the staff won't be as incented as they might otherwise be to deliver top customer service to your organization.
Do you have experience - good or bad - with PfP? If so, we'd love to hear about it in our Forum.
Author: Jennifer Zaino
Read article at Internet.com site