The intersection between HR strategy and HR technology

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Performance Management to Compensation Management Integration

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Unfortunately for most managers, technologists usually see a need to integrate performance scores with the compensation planning tools, but not much more than that. The reality is that if you are a manager, you really need more than just a score. First of all, the score has to be meaningful in some way, and second the score needs to be interactive.

Let’s take the simplest example – the merit matrix. Many organizations utilize a combination of the performance score weighted by the employee’s position in the pay grade (or compa-ratio). Simply translating the performance score into a merit matrix isn’t really enough information for the manager to be guided by. In order for a manager to create a good compensation adjustment, bonus, or whatever, s/he needs to be able to drill down into the performance scores.

Let’s take another step back. Your organization has many types of incentive compensation plans (cash bonus, incentive stock, etc.) which are each individually tied to a similar number of performance plans. These plans may be graded by a pass/fail type of score, or somehow numerically graded. In fact, each of these scores may actually be an aggregation of other scores, weighted against each other. Ideally, when you integrate performance to compensation, you want to bring as much of the plan configuration as you can. If this is an integrated talent management suite, your chances are better for achieving good backwards and forwards drilldown abilities. However, if you purchased disparate products, you’ll need to program the integration manually.

The key to the integration of performance and compensation is to make the manager user more informed and better able to support decisions.

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One response to “Performance Management to Compensation Management Integration”

  1. C.M. Peters Avatar

    Well put! I’ve always believe that it is HR’s duty to help a manager make a better decision but to not make a decision for them.