Separate Pay Reviews From Performance Feedback
Is your business is still doing an end of year employee performance and salary review? In some industries it is still considered the norm, but it has not been considered best practice for quite a while now. There are many good reasons why you might consider a better approach this year.
Why It's Time To Change
It's not the 1980's anymore, and just like big hair and shoulder pads, the world has moved on from the big once a year performance review. It's no longer fit for purpose.
It is now widely acknowledged that more regular conversations, focused on outcomes and deliverables are more effective in engaging people in their work. These outcomes conversations are a fundamental part of The H Factor system.
Employees today have an expectation of greater engagement and participation in achieving business goals. High frequency outcome conversations help employees take ownership of their accountabilities, and enable an honest conversation about the issues and challenges of achieving the desired results.
Honesty enables better decisions. If you link a conversation about performance with a conversation about compensation, it undermines the honesty - on both sides.
Employees are less likely to be honest about poor performance if they fear it will impact their compensation. Worse, they are actually less likely to address issues if they fear that raising them will be used against them. Likewise, managers are less likely to acknowledge and address the constraints on an employee's performance in areas such as their own leadership, clunky systems, business processes, and/or capacity bottlenecks.
There are so many factors that determine a person's salary, including the employment market conditions, inflationary pressures, business and economic conditions, their experience, and their qualifications. Then there's the conditions of the employer's workplace, including the physical environment, the systems and processes, their approach to flexibility, and the level of goodwill they nurture in the employment relationship itself.
People want to feel like they receive fair pay for the work that is expected from them, the experience they bring, the working environment provided, and the support they receive from their manager and/or the organisation.
Does your salary review calculation consider all of these variables? Even if it could, what weighting would you give the different aspects, and why would the employee feel that is a fair and reasonable process?
Research shows that once a person feels their pay is fair, increasing compensation is far less effective in retaining them. The other factors, especially the level of goodwill nurtured in the employment relationship, are far more effective in motivating them and driving their performance.
You can see there are many good reasons why best practice has shifted away from an annual appraisal and salary review process. Most telling perhaps is the increased complexity and sophistication of the modern employment relationship. This is often most evident in professional work environments where people are heavily invested in their careers.
Breaking The Habit - What To Do Instead
Change is difficult, and requires a little preparation. On the other hand, all of those one-on-one conversations required a heavy investment in time and energy, so why not use that preparation time to set the new way forwards?
Review existing salaries to what you believe to be the current market rate consistent with the outcomes of each role and the organisation's expectations of performance against those outcomes. Acknowledge the variation, and communicate the change and time-frame to each individual.
Most workplaces are already having more frequent performance conversations between managers and employees. Keeping these separate from salary conversations is important for all of the reasons mentioned above. If you are not yet having these frequent review conversations, then The H Factor can help you with implementing that process.
Use an appropriate formal performance management process where necessary to ensure that the required performance standards are clear and that there is a fair process for monitoring and documenting each persons deliverables.
The H Factor system is designed to nurture a performance culture in an organisation. It takes care of the process of documenting the outcomes, tracking the deliverables, and capturing the 'way things are done' in the organisation.
However you approach managing performance, it is important to be aware of the National Employment Standards and Fair Work requirements.
In addition to having frequent performance conversations at the one-on-one level, engage in an open dialogue with your team about business conditions, and the organisation's performance. You don't necessarily have to share the full results, but you can share some KPI's with the team and engage them in helping to understand the barriers, challenges, and successes along the way. The key here is to be honest - an employer who always says things are tough and challenging without ever acknowledging success merely creates cynicism.
Engage with external parties, such as recruiters, HR consultants, and industry bodies to understand what is happening in the employment market. Share that information with your team, and also share with them whether you think an increase is reasonable, the level of the increase (if any), and how you think the situation will change over the next 12 months.
Set a review date from which all salaries will be updated. Apply the change to all employees at the same time, so that everyone knows where they stand. With this approach you have the opportunity to budget for the change, so that you can understand the business impact.
Establish new criteria that trigger an individual's salary increase, for example attaining new qualifications, developing new experience, leading others, and/or achieving productivity targets.
These changes enable a shift away from having to manage individual personalities and negotiations, to a process that enables you to instil a culture change. You begin the foundations of a performance culture based on shared understanding of what performance looks like, mutual aspirations for growth and development, and a shoulder-to-shoulder approach to achieving business objectives.
Find out more about how The H Factor enables leaders to shift their focus from the administrative issues to the people aspects that improve the human experience of work.
Using a human centric system to keep employees connected, positive, and engaged explained.
The global pandemic has thrown the world a curve ball and businesses have had to shift focus to find new ways of engaging, attracting, and retaining the best people.
Cloud systems have gone a long way to alleviate the administrative burden of HR however until now, they have fallen short at actually providing a system to drive the human experience of work – This was our desire when designing The H Factor.
In the 2021 HR Software awards, Human Resources Director (HRD) magazine awarded
The H Factor (“THF”) their 5-Star HR Software Award; recognising us and nine others, as “best for quality and range of solutions, specialist expertise, and client service”.
We sincerely thank them for this acknowledgement and want to provide some assistance to help business leaders build a better future for themselves and their people.
In this guide, you'll learn:
How can technology assist us to focus on transformation rather than mere survival?
We have wonderful business technology however the human experience was being left behind. The human experience cannot be underestimated or ignored; we should be talking transformation rather than just recovery when it comes to the global pandemic of COVID-19!
We need to go back to the basics of the why/purpose of the organisation. But we need to do a lot more than just playing around the edges and using language like ‘soft skills’; they are not, they are human skills! Too many employees worldwide are disengaged, we’re working longer hours, and trying to cope with both financial and mental stress.
We believe that a system should assist in developing leaders differently; allowing them to reinvent themselves around a human focus. We need to change the way businesses lead their people without the need for face to face interactions.
The days are gone when we valued simply turning up to work. We need to value, and focus on the quality of outcome delivery. And we need to handover ownership to those tasked with delivering these outcomes, through simply posing the question “if this is the outcomes you are responsible for, how is it you’d like to deliver them, and what is it I (as the leader) can do to assist you in that?”
Human beings have an aversion to being told what to do. With this fact in mind, a system needs to give real autonomy and encourage ownership thinking through developing clear outcomes and self-developed KPIs; the result of which is motivated, more engaged employees, and leaders who begin to genuinely feel comfortable to let go the reins a little, and not micromanage.
Most systems manage employee data.
We’ve seen employers spending thousands on collecting data without a clear understanding of how to use that data to positively affect performance behaviours.
A system driven human experience needs to do much more than self-managed leave approval, time sheets, or number rated performance reviews. It should be about encouraging bottom up engagement that allows your people to strategically build how they want to best deliver their outcomes and how their success could be measured.
Were most systems are about process automation to drive efficiency and compliance that allows managers to then focus on the people, we wanted to assist users to focus on the people aspects first, and make the processes and compliance a non-issue.
The system comes complete with inbuilt compliance policies around fair work and the NES, along with a platform for users themselves to capture their work and operational processes as text, video, or pictures, to build your very own business ‘Wiki’. There’s easy access to capturing employee led innovation; a platform for peer to peer recognition; a new approach to recruitment that does away completely with the outdated CV and replaces it with an invitation to directly address the delivery of desired outcomes; and much, much more.
How do we maintain, or even improve on our business culture and values?
Being able to articulate your culture and the behaviours that drive it is of paramount importance to building a community that people want to be a part of and contribute to.
Taking on Simon Sinek’s philosophy of starting with why, goes a long way to delivering this. While implementing THF you’re guided to effectively articulate the reason your business exists. We like to practice what we preach and for us:
We believe that everyone has the right to create the extraordinary. Our system brings people together to enable them to share the joy of contribution, achievement, and fulfilment.
Your values - or perhaps better; your not negotiable rules of engagement - are what guide the behaviours of the people in your organisation. As such individual words like; honest, integrity, or teamwork, just won’t cut it!
These provide no guidance at all; they’re just single words, and without context mean absolutely nothing.
With THF you’ll discover what value statements will be most effective to drive the desired behaviours of the organisation. In order to effectively drive behaviours, your value statements should start with a verb, eg:
Value statements such as these, create clarity, give permission, and provide a base line for discussions around performance.
When your employees log on, the landing page is where they’ll find the “Business Story” expressing your business’s why, your brand values, your high level strategic intent, and your value statements; all designed to ensure that they remain relevant and top of mind.
How do we improve performance and productivity?
We know that most people do not look forward to the old fashioned performance appraisal process. Particularly those that ask you to rate yourself from 1-5 in a variety of competencies and then your supervisor will do the same and then you’ll get together to discuss your performance. But what actually happens is, you get together to debate the difference between a 2 and a 3! That’s not only uncomfortable, and sometimes even upsetting, but also a complete waste of time.
It's well known that the old system has failed ... but what do we replace it with?
THF system was based on the science of performance, engagement, and the positive benefits of collaboration, ownership, and achievement.
The best way to improve performance is to shift the focus of performance conversations/reviews from talking to someone about them (the reason they’re uncomfortable), to talking about the outcome they’re responsible for delivering and asking them how they would like to deliver it. Your job as leader is to simply guide the conversation through questioning, and clear the barriers to them delivering effective performance.
In effect it’s the difference between assessment and engagement. We wanted to build a system that was not about assessing performance of an individual. Instead we wanted it to engage them in the ownership of their own outcomes and deliverables, understand how what they do contributes to the bigger picture, and where deliberate poor performance could not be accommodated.
We also wanted to add self-driven KPIs that were strategically created, discussed, and negotiated, to ensure they would be an accurate indication of the success of the activity that was going to deliver the outcome/s.
There is a realisation though COVID that business cannot rely on attracting skills from outside. The skills shortage is impacting heavily and business needs to adapt quickly to build capacity and skills from within to grow. Therefore effective conversations about outcomes and a tool to build a skills matrix is imperative.
It’s human nature to seek; purpose, community, autonomy, and fulfilment. When you understand this and develop processes and systems that instil this within your organisation, you’ve already gone a long way to developing a positive employer brand through being a great place to work.
There’s no going back to the old ways of working … and that’s a good thing. Although we’re operating in challenging times, the end result, we believe, will be a positive shift in our approach to “Business for Humans”.
The challenge that COVID has thrown at us is that we have to create organisations where people can:
If you’d like to learn more about The H Factor’s approach to providing this, we’d love to show you.
The most recent Australian Bureau of Statistics survey on mental health of ages from 16 to 85 showed that 20% of Australians experienced anxiety, depressive, or substance use disorders. Just reflect on that.
1 in 5 people experience a diagnosable mental health disorder in any year.
It is not surprising that there is growing awareness of the duty of care requirements on workplaces in assisting people who experience a mental health disorder. To assist our clients, The H Factor have developed a sample Mental Health and Wellness policy.
There are number of things employers must consider in this area:
The H Factor draft policy incorporates all of these areas, and your H Agent can also assist you to tailor each area to your particular business situation.
There is a lot of misinformation and stigma about mental health disorders. Increasingly, employers of all sizes are recognising that they have an important role to play in raising awareness of the correct approach to dealing with mental health disorders, and in removing the stigma associated with them.
Some practical tips that are relevant to assisting people with a mental health condition are:
Most people who receive appropriate help recover from a mental health condition.
Employers are required to make reasonable adjustments to a person's work arrangements during a persons treatment and/or recovery period.
Headsup, by Beyond Blue, have some useful information for employers here and a helpful guide for for helping a work mate here. This is a good starting point for understanding the workplace issues.
Workplaces have long recognised the need for designated first aid officers, who are appropriately trained to respond to physical injury or a health crisis. We recommend that employers also consider having a designated mental health first aid officer in their workplace. Accredited training is provided by Mental Health First Aid Australia, a not for profit organisation that provides evidence based accreditation courses on mental health first aid.
There is a wide range of support and information available. We recommend that every employer have clear policies and procedures in the area of mental health.
Beyond the duty of care that arises in employment situations, it is a good business decision to have clear policies and procedures in the area of mental health and well being.
Upcoming Training and Events
FREE - BUSINESS FOR HUMANS WEBINARS
BIG THINKING - $55 Full Morning Workshop Style Training
Free Upcoming Information Sessions with our step9 Implementation Program Partners
We are pleased to release our first ever annual report.
For many businesses, including ours, 2020 was a year that presented many challenges as we all had to come to terms with the economic and social impacts of COVID-19. From these challenges came opportunities for us to learn, adapt, develop, and grow.
Please download our report to learn more about how we see our place in the future or work, and how we plan to continue to grow our system based on the human aspects of work.
Many thanks to our clients, licensees, and supporters in our network who have been so supportive on our business journey.
Happy new year, and all the best to you for 2021.
We face challenges. The world has changed, and how we respond is important. Intrinsically we know this to be true. There's part of us that knows we have an opportunity to make changes in our business, and actually balance our lives a bit.
Covid has changed our workplaces. It's forced us to adapt the way we work, the tools we use to work, how we collaborate with our colleagues, and even the way we serve our customers. For many of us, there just aren't as many customers either. Business is difficult, and especially when we face economic uncertainty.
It can be uncomfortable to confront, as we don't like the uncertainty, we might be anxious about our future, and it might seem that there's so much outside of our control.
In corporate speak; "we are facing headwinds".
It's time to click it down a gear or two and make the pedaling a bit easier. You can't change the wind, but there are other choices. You can react, rebuild, or retreat.
We are seeing all of our clients facing these choices at the moment. It can feel lonely, but actually many people are asking the same questions, facing similar dilemmas, and looking for the right gear. That's why we have started a webinar series. You're welcome to join the conversation with our H Agent's and other business owners who are also working their way through change.
Our advice to business owners is to turn off the news, block out the complainers, analyse your business strengths, make the time to think deeply about what you'd like to achieve for (and from) your business, and find people who can help you rather than judge you.
An H Agent can help you find your right gear. We're working beside our clients to:
The winds will change, and one day there will be tail winds. How we respond now will set how fast we can go when the winds turn. Now it's time to face the uncertainty and deal with it on our own terms. It starts with you.
H Agents write about the joys and challenges of entrepreneurship and managing people.