REWARDING PERFORMANCE
US employers urged to improve link between employee performance and compensation
Short-term incentive plans provide employees with compensation, usually monetary, above and beyond their base salaries, linked to the achievement of pre-established targets. For many organisations lured into adopting short-term incentives the main objective is to forge a closer link between individual goals and business goals. But has this relentless chase after the perfect pay system really helped to bolster corporate performance? No, is the conclusion of 30% of employers canvassed by the Society for Human Resource Management (SHRM) — the IPD’ s equivalent in the US — and management consultancy Arthur Andersen in a large-scale survey published last month.
Short-term incentives are certainly all the rage across the Atlantic. Among the 783 organisations polled by the SHRM and Arthur Andersen, nearly seven in ten (69%) offer short-term incentives to their employees, and as many as 88% of large companies (those with more than 5,000 employees) use this practice.
As the table below illustrates, by far the most popular type of plan is the individual incentive, used by 67% of survey participants, with non-monetary recognition programme in their wake (43%).
US organisations use a vast array of short-term incentives . . .
| Type of short-term incentive plan | Per cent of organisations |
| Individual | 67% |
| Non-monetary recognition awards | 43% |
| Cash recognition awards | 35% |
| Spot bonus | 35% |
| Operating unit | 30% |
| Work group/team | 30% |
| Oriented with specialised project | 26% |
| Discretionary | 23% |
| Cash profit sharing | 19% |
| Gainsharing | 10% |
| Other | 6% |
Source: SHRM/Arthur Andersen.
Sample size: 783 organisations.
Broadbanding yet to take off
There seems to be a burgeoning supply of books, articles and seminars devoted to the subject of broadbanding. And yet, although it has its origins in the US, this reward practice is far from flourishing across America: only 15% of participating organisations in the SHRM/Arthur Andersen survey have broadbanding.
Other statistics gathered by the US researchers reveal that:
around half of these broadbanding veterans have more than one broadbanded structure
organisations have an average of 10 bands overall, with three or four bands for each main employee group
range spreads are typically 100% — regardless of position levels
job evaluation is the most common basis for placing a job in a particular band, used by exactly two-thirds of those with broadbanding
rather than a mid-point, nine in ten use control points — defined as two or more target points for jobs within bands .
The attractions of broadbanding appear pretty compelling: survey participants found it can be very effective in increasing flexibility in determining hire rates (mentioned by 38%), and almost as many rated it highly in recognising the expanded role of employees in organisations (36%). But others had yet to be convinced. As the authors of the survey write: A large number of respondents report that broadbanding has either no effect, or is somewhat, or very ineffective in obtaining these results.
And there are some formidable stumbling blocks for those of you considering a move to broadbanding. Most of the real challenges, the survey says, revolve around gaining employee acceptance, using existing market data and supervisor administration — each of these issues was taxing around two-fifths of organisations.
Survey details
Title: Strategic compensation survey
Survey sample: the 72-page survey is based on information supplied by 783 US organisations, of which 60% employ 1,000 or fewer employees.
Business sectors: participants are drawn from a broad range of sectors from across the US — split almost equally between public, private and government/educational/non-profit organisations .
Methodology: survey questionnaires mailed to organisations with affiliated SHRM members in April 1999.
Availability: call the Society for Human Resource Management, tel: 001 703 548 3440.
Want to know more?
Visit SHRM online at www.shrm.org
Arthur Andersen on the web at www.arthurandersen.com