A New Way to Pay

Author's Note: This article is the first in a series presenting techniques that can be used to build a stronger performance culture and to link rewards-monetary and otherwise-to employee performance. The phone rings: "We need to implement pay for performance at our institution immediately. The board and our president have decided to make this a priority."
	Karen Hutcheson
We have heard this statement or some version of it more frequently and more fervently from colleges and universities in the past year than at any other time we can recall. While academia has long recognized the need for a stronger performance culture and a clearer link between rewards and what is accomplished, getting started has been hard for many institutions, largely because of concerns about the significant change this represents. For instance: How do we pay for performance without eroding the collegial culture? How will we measure performance? How can we ensure equity and consistency across the institution with so many different jobs and responsibilities? Are supervisors up to the task?
	Jim Kochanski

While these concerns remain, the current economy and associated financial constraints seem to have provided the push academia needed to start down this path. Board members and institutional leaders alike know that in order to realize the institution’s strategic priorities, they must set high performance standards, hold people accountable for achieving them, and provide rewards that correspond to actual contributions.

Changes within the workforce are likewise adding to this momentum. More professionals on the staff side are coming from outside of higher education, where performance planning, coaching, and evaluation are the norm, and younger generations have grown up accustomed to rewards and recognition for performance. Finally, organizational efficiency and effectiveness require that expectations align with the institution’s needs, job requirements are clearly spelled out, and feedback about performance is targeted, regular, and intended to improve performance.

Stepping Toward Performance Management

Some have argued that paying for performance, setting goals, and measuring outcomes are incompatible with the academic environment. We believe that execution is the key to the success of these endeavors. Rewarding performance—increasingly important within contemporary workplaces—hinges on clear expectations about job responsibilities, annual goals, and how employees should interact with their colleagues. Your institution can lay a solid foundation for transitioning to a pay-for-performance culture by pursuing five key steps.

1. Develop and maintain accurate job descriptions that articulate accountabilities associated with the job. Accountabilities must delineate what the organization needs, not necessarily what an incumbent employee wants to do. Job descriptions should include statements that are detailed enough to provide real guidance and clarity around the role. For example, the following accountability statement is clear: “Coordinates the budgeting process for the department by collecting relevant data from each manager, consolidating information into a database, verifying the accuracy of the data, and developing reports on a monthly basis for presentation to the department director.” By contrast, “coordinates the department budget” does not provide clear and detailed guidance.
2. Identify and describe institutionwide competencies for how employees are expected to perform their work. Also called “success factors,” these competencies apply across all jobs. Customer service, quality orientation, and continuous learning are common competencies, and each must be supported with descriptions to ensure understanding.
3. Establish and hold people accountable for planning and goal setting. If this process is new for your institution, begin with leadership, but cascade throughout the institution in short order. In our experience, when executed well, goal setting is a powerful way to engage individuals and link their work to the institution as a whole. Without goals and clear expectations for job accountabilities, the next step of performance management and evaluation is quite difficult.
4. Implement or improve your performance management system. In our experience with academia, this is an area where many institutions fall short. See the "Assessing Pay-for-Performance Readiness" sidebar for our checklist to gauge whether your institution is one that needs improvement.
5. Eliminate policies in your salary-administration program that conflict with a pay-for-performance culture. The most obvious is a step system, but policies that explicitly or implicitly focus on seniority can also send mixed messages. A common example of this is a policy that prohibits or discourages paying new hires at the same or a higher level than the pay of an incumbent.

Ultimately, succession planning at all levels within an organization is critical to sustaining the institution’s momentum, and this requires that high performers be identified, groomed, and rewarded to keep engagement high. The next article in this series will present guidelines for developing incentives at the executive level and within the broader employee population.

Karen Hutcheson is a senior vice president at Sibson Consulting and a co-leader of Sibson's higher education practice. She specializes in consulting to colleges and universities in areas of compensation, performance management, and HR assessments. E-mail: khutcheson@sibson.com.

Jim Kochanski is a senior vice president at Sibson Consulting and leads the firm’s performance and rewards practice. He consults in the areas of organizational effectiveness and performance and rewards. E-mail: jkochanski@sibson.com.