Learn to Manage Pay and Performance Like an Entrepreneur

Abstract

Too much of the conventional wisdom about pay and performance management is based on large companies' practices. These firms typically define fairness in terms of consistency, reliance on inflexible human resource systems, and a culture that attracts and retains people who are more comfortable with predictability and fairness than with ambiguity and risk-taking. The bigger the firm, the more likely it will publish salary grades and ranges, rely on formal job evaluation, and use HR programs that don't support effective performance management.

Entrepreneurial firms, on the other hand, manage pay and performance effectively, not because they have sophisticated programs, but because they need to eliminate weak links and to reward top performers. They also have leaders who know what is happening in the organization and the will to hold people accountable for their performance. Big companies can manage like their entrepreneurial counterparts if they are willing to replace some long-standing HR practices with an HR approach that values inconsistency, flexibility, and hands-on management.