Mr. Cobb

Human Resources, Recruitment & Training

Pay for Performance Strategies: Achieving Success through Communication

By Adam Cobb, Regional Manager, Halogen Software

Your customers’ overall experience with your hotel is dependent on the quality of service they receive from hotel staff and the level of comfort they feel in your hotel environment. From interactions with front desk staff, to the comfort of their room, to service received in on-site restaurants and amenities, the quality of service provided by your staff is critical to your bottom line. This ability to deliver the best service possible to your guests makes the attraction and retention of competent and accountable employees a top priority.

In recent years, talent management strategies have been implemented by a growing number of hotel executives to create an organization-wide commitment to high quality service. Talent management is the process of attracting, developing, managing and retaining workers, and covers a number of key human resources areas such as: compensation, learning, performance and succession planning. As part of an overall talent management strategy, compensation-based strategies such as pay for performance offer a powerful tool for hotel organizations to motivate and reward employees for high levels of performance, such as service delivery to customers.

Making Sense of Compensation Concerns

Compensation can be a contentious subject, and with good reason. The Top Five Total Rewards Priorities Study – from Deloitte Consulting LLP and the International Society of Certified Employee Benefits Specialists – outlined the top five areas of concerns and priorities for employers for addressing compensation, benefits, career development, performance and recognition. The top concerns of respondents pertaining to pay for performance specifically were as follows:

• Will our reward programs attract, motivate, and retain talented employees? • How do we implement a total rewards strategy that aligns with our business strategy and brand? • Do our reward programs accommodate the varying needs and interests of different generations with distinctly different needs and priorities? • Will we achieve a return on our investment for our reward expenditures?

Many of these concerns stem from the fact that while pay for performance can offer a proven strategy for organizations, often these programs fail due to poor program design, or faulty execution and communication.

Execution and Communication of Pay for Performance

The majority of organizations pay employees largely based on their position and seniority, and not on their performance. A pay for performance program on the other hand inextricably links pay to performance results, and relies on employee performance appraisals as the basis for compensation decisions. With this type of approach, high performers are rewarded and encouraged and all employees have a clear understanding of how their compensation is determined. Consider the following example.

Pechanga Resort Casino in Temecula, California implemented a pay for performance program, which was a major cultural change for the organization since the organization’s 4,500 team members were previously paid primarily on their position and seniority. Moving to a pay for performance system required careful and consistent communication to gain employee buy-in and acceptance for this new approach. A key component of Pechanga’s success with the move to pay for performance was taking the time early on in the process to help employees understand how individual performance impacts that bottom line and that the organization’s success ultimately benefits them. The end result has been a program that is widely accepted and by employees, and an overall change in how the organization approaches performance.

The Pechanga example serves to illustrate the importance of communication around pay for performance programs. The sensitive nature of compensation demands that programs are built on communication and mutual trust. Moving to pay for performance involves a cultural change, and it will take time to move employees from simply getting the job done to being engaged in achieving business goals.

As part of this cultural change, the program itself should be well-defined and clearly communicated, particularly in the following areas:

• Engage Employees & Managers from the Get-Go. Making the move to a pay for performance culture shouldn’t be done overnight. Take the time to get buy-in from managers and employees by holding training sessions, roundtables and other venues for everyone to clearly understand the process and ask questions. Setting the stage in advance will help make the transition to a system based on specific competencies and behaviours much smoother as both employees and managers have time to accept and adapt to the new approach.

• Honest and Ongoing Discussions about Performance. First and foremost, for pay for performance to succeed, both managers and employees need to be having honest discussions about performance and pay. Everyone needs to understand that each individual’s performance makes a tangible difference in the quality of guest’s experiences. By tracking and measuring performance on an ongoing basis throughout the year there’s a basis for compensation decisions, and part of that process are regular conversations about performance. Performance becomes the basis for compensation, and everyone comes to understand that higher performers should be rewarded.

• Establish the Importance of Competencies. A key part of the pay for performance process is to identify the competencies important to each functional area within the hotel organization, as well as organization-wide. Defining and documenting competencies for each functional area enables managers in these areas to identify desired behaviours and rate employees accordingly. Establishing organization-wide competencies enables the organization to reinforce core values such as customer service or interpersonal skills that are critical to the organization’s success. These competencies then should be clearly communicated to employees so they understand how they will be evaluated and compensated based on these areas.

Supporting Pay for Performance Programs with Technology

Often, the move to a pay for performance system involves a cultural change across the organization and requires active and ongoing participation of managers to make it work. Managers can make or break your pay for performance process, so having an easy to use, online talent management system in place can help overcome common barriers:

• Decisions Need Data: Managers need more information when it comes to making pay decisions, such as: salary history, employee performance history, and how the employee's pay compares to that of other people in the group. Often, managers do not have this information and are basing their decisions on a limited data set. An online tool can help ensure managers have this data at their fingertips.

• Paper is a Pain: Making pay decisions can be hard on managers. They have to worry about how their staff will react, and they have to fit the time spent on making and communicating pay decisions into an already packed schedule. If the process feels like a chore, they won’t do as good a job as they will if they have easy- to-use tools. Furthermore, if they are spending too much time on administrative tasks, they have less time to spend on the "soft side" of communicating pay decisions.

• Day-to-Day Disconnect: The great weakness of many pay for performance programs is that there is little connection between the day-to-day work and the pay for performance program. The only way to bridge that gap is to have a clear link between performance and pay, as well as established performance goals where progress on achieving goals is reviewed on a regular basis. Having the ability to track progress does not guarantee that people will do so, that’s a matter for the manager and employee. However, this ability opens up a new terrain for pay for performance; it creates the conditions where the employee can constantly be thinking “Am I doing the right things? Am I making progress?” and be confident that they will be rewarded for attaining high performance.

For example, Pechanga Resort and Casino relies on an online talent management system which supports performance appraisals and pay for performance organization-wide. Having an online system in place helps eliminate these challenges and provides Pechanga’s managers with robust tools to distinguish among levels of performance, communicate about performance and make pay decisions. This helps managers focus on performance conversations and on improving performance. The end result is that Pechanga has experienced tangible business results in the form of lower turnover and better goal alignment.

As regional manager at Halogen Software, and a certified Human Capital Strategist, Adam Cobb has worked directly with hundreds of human resources professionals to plan and implement integrated talent management systems in support of their organizations’ strategic plans. With more than a decade of software solutions experience, Mr. Cobb applies his expertise in performance management, succession planning, pay for performance and performance based learning solutions to help Halogen’s clients build solid business cases for investing in automated talent management systems. Mr. Cobb can be contacted at 613-270-1011 x 4110 or acobb@halogensoftware.com Extended Bio...

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