Integrated Pay for Performance: The High-Tech Marriage of Compensation Management and Performance Management

Abstract

Over the past few years, there has been a surge of interest in pay for performance. One by-product of this trend is that more HR executives are placing pay-for-performance technologies—systems that successfully automate and link compensation management with employee performance management—at the top of their priority list. The attraction is clear: Individuals benefit from enhanced rewards, and organizations benefit from the cumulative boost in performance. However, establishing pay for performance effectively has always been the hard part. An effective pay-for-performance strategy requires that two processes—compensation management and performance management—not only function well separately but also operate together in an integrated way. Compensation management cannot fully realize its potential without accurate assessments of individual employee performance— assessments that properly come from a performance management system—and performance management cannot fully realize its potential without a well-administered compensation system.