The Nuts and Bolts of a Pay-for-Performance Strategy
When leadership at Northeast Ohio Medical University (NEOMED) charged human resources a few years ago with creating a new strategy for rewards and recognition, there was one clear mandate — no more across-the-board pay increases. With that direction and a pool of dollars allocated to fund five years of merit increases, HR set out to rethink the university’s approach to performance management. The outcome: a competency-based pay-for-performance system that rewards only top performers and is linked to institution-wide goals. Partnering for Success, as it’s called, has paved the way for greater communication, collaboration and dialogue around mission, goals and the future of the institution — and how employees contribute to all three.
Here’s a rundown of how the program works.
Integral to the Partnering for Success (PfS) program is the cascading of goals from the university level to the department level to the individual level. These goals are set during performance planning meetings — the first phase in the year-long PfS cycle. Performance expectations for managers include job-specific goals/ responsibilities (weighted at 50 percent); competencies (weighted at 20 percent); and people management (weighted at 30 percent). Performance expectations for professional and classified staff include job-specific goals and responsibilities (weighted at 60 percent) and competencies (weighted at 40 percent).
The second phase of the PfS cycle includes a mid-year review between managers and their employees. This review provides formal feedback regarding performance to date and an opportunity to adjust the annual goals if needed.
The third phase of the PfS cycle is the year-end review, which includes several steps:
- The employee completes a self-evaluation.
- The manager completes his or her initial evaluation of the employee.
- A “next-level manager review” is initiated (wherein the senior manager looks for similarities and differences in evaluations completed by direct-report managers; the focus of the next-level manager review is to confirm that evaluations are developed fairly and consistently and to provide senior managers the opportunity to discuss certain evaluations and to determine if any adjustments may be warranted).
- Calibration (which involves comparing the performance of employees in peer positions using consistent criteria in the following employee groups: director, manager, professional, classified and research).
- The manager finalizes the employee evaluation and rating.
- The manager conducts a meeting with the employee to reflect on and document feedback and goal attainment for the entire performance cycle.
The compensation outcomes are designed to reward the performance of employees with a rating of Performance Leader or Fully Meets Expectations. The form of the performance reward alternates each year between an increase to base pay and a bonus.
“Although the Partnering for Success program is still in its infancy, we’ve seen solid engagement results thus far as managers and employees better understand how performance is measured and how pay is determined,” says Barbara Tobias, director of human resources at NEOMED. “Equally important and valuable, PfS serves as a platform for effective communication by opening and enhancing the lines of communication between managers and employees at all levels of leadership. Through this process, each individual contributor has an opportunity to gain insight as to how his or her performance impacts the university on a daily basis as well as how his or her performance supports the successful execution of the university’s strategic plan and positions the institution for future success.”
Read more about Northeast Ohio Medical University’s Partnering for Success program in the current issue of CUPA-HR’s The Higher Education Workplace magazine. For more resources related to performance and talent management and recognition and rewards, see the Employee Awards and Recognition toolkit and the Performance Management toolkit in the Knowledge Center.