September 15, 2009
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Business Forecasting 2012
Our special feature on forecasting sheds light on how to choose the right model, offers advice from Jack Stack and more.
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Payment based on performance is an increasingly popular business model for cash-strapped businesses. With higher performance potentially comes more revenue and growth for a company, and when the U.S. is both a nation of high competition and of clocked-in laziness, perhaps such structural changes are a natural shift for companies to encourage everyone to work harder.
Full salary jobs vs. performance based work works best based on the type of work an individual is doing. It also depends on whether they are a cost center or profit centers, says Marc Salvati, President of Continuity Partners Inc.
By cost center type jobs Salvati means accounting, administrative and human resource positions. He finds they tend to be more negatively challenged by the performance based model. “They are typically happier with a higher base salary,” says Salvati. “If put on a lower base, higher performance based model, it could cause them to have anxiety and not be as productive in their position.”
A career path geared more toward sales, client engagements, marketing and public relations is typically more suitable to the performance based payment plan. These positions tend to digest and thrive in the payment based on performance work dynamic much better because their performance bonus should be directly correlated to the work they have done over the course of the year. “This gives managers and companies [the ability] to build their firms as meritocracies,” says Salvati.
Companies opting for a payment based on performance model should give clear concise goals on a weekly, monthly and annual basis along with quotas and actual financial figures attached to reaching those goals, says Salvati. “Set team goals as well which encourages both the team and individual to perform.” With set expectations employees can refocus and view their work as a steady job.
Bottom line, the good thing about performance-based payment is that:
- Employees are working towards a goal, and given financial incentive for reaching it.
- There presumably are less wasted hours. When works is completed, employees move on to the next project knowing they will be incentivized beyond their base salary.
The bad side of performance-based payment is:
- Payment based on performance can cause the folk in accounting and HR some serious anxiety.
- The business model also changes the work environment. The idea might be to transition to a goal-oriented office, but it might end up a cutthroat culture.
- The company has to live up to its promise of a bonuses following hard work. Reneging on the payment is definitely not good for morale or company loyal.
And broken promises following hard work is a financial crisis we’re all tired of reading about!
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DOMINIC TONG 2 years 4 months and 26 days ago
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