Leolingham2000
Management Consultant
Rakeshjain
Hr Manager
+1 Other

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my company's HR is in the initial setup stage...so this year there is a problem which has come up as regards to performance related pay.lsat time the basis on which performance related pay was given there is an uneven format in which this pay ws given......so if we implement something now there will be a difference in what ws given last time....so how should we go about.
and the number of employees have also gone up.....so what solution is possible....anybody please help me..........need your help guys...am a frsher in this...need your guidelines...

Hi deepti,
Performance Linked Variable Pay is highly sensitive area. You should be extremely careful while dealing with this issue. This system will work only if there is robust performance management system which include performance planning, review & feedbacks and peformance appraisal. In the absence of robust PMS, performance linked variable pay will fail miserably on its objective i.e. to build a culture of performance in the organization.
Once you have established and ensured a robust PMS system, then you can link the pay to the performance. Generally there are three components to performance linked variable pay:
1. Corporate performance contribution (generally contributiing to 20-30% depending on the level of executive. It is higher for higher level executives)
2. Department Performance quotient (generally 30-40 % again depending on the level)
3. Individual performance (generally 30- 50%. It is higher for lower level executives)

These levels of contributions are set to ensure that people work towards the organizational goals.

I hope this will give you some clarity in for your concern. Please feel free to ask for any clarification on my email;

Regards,

Rakesh

DEEPTI,
I understand your situation. It is not an easy one.
Setting up a new performance linked variable pay system
would take time, but may not please many.
At the same time, the basic pay structure should not be disturbed.
I HAVE A SUGGESTION.
-review the company objectives / department objectives.
-take the employee job description .
-develop the 4/5 KEY RESULT AREAS [ KRAs ]
-for each KRA ,develop KPi [ KEY PERFORMANCE INDICATOR]
this should be done in conjunction with department heads.
==================================================
NOW HERE IS A SAMPLE CASE, OF A PROJECT MANAGER
HOW KRA / KPi IS APPLIED FOR PERFORMANCE PAYMENT.
=============================================

THESE ARE THE MAXIMUM 5 KRAs FOR THE POSITION/
WITH WEIGHTS [ IMPORTANCE ] FOR EACH KRA.

KRA 1: PROJECT MANAGEMENT AGILITY=======30%
KRA 2:CORPORATE OBJECIVE ALIGNMENT=====15%
KRA 3: VALUE FOR MONEY OUTCOME ======20%
KRA 4: PROJECT COLLABORATION ==============20%
KRA 5: PROJECT MANAGEMENT LEADERSHIP =======15%
TOTAL WEIGHTS........................................... .......................100
================================================== =
WHEN ANYONE [ BOSS/ PEER/ ANYONE ] APPRAISES THE
PROJECT MANAGER, THE APPRAISAL IS DONE FOR EACH
KRA [ KPi ] out of 10 ratings.
SUPPOSE THE BOSS RATES THE KRA [ KPi] OUT OF 10
AND GIVES THE RATINGS AS FOLLOWS
KRA 1: =30%------7/10
KRA 2:=15%-------8/10
KRA 3: =20%-----6/10
KRA 4: =20%------7/10
KRA 5: =15%-----8/10
--------------------------------------------------
TO GET THE WEIGHTED AVERAGE,
we multiply the weights by their respective ratings
KRA 1: =30% X 7 = 210
KRA 2:=15% X 8 = 120
KRA 3: =20% X 6 = 120
KRA 4: =20% X 7 = 140
KRA 5: =15% X 8 = 120
----------------------------------------------------
TOTAL =710
TOTAL MAXIMUM POSSIBLE = 100 X 10 =1000
THE SCORING OF THE BOSS =710/ 1000
OR 71%.
============================================
PAYMENT FOR PERFORMANCE

FOR SUCH EXERCISE, WE ADOPT THIS PRINCIPLE.
-the bonus is paid for performance.
-the performance is linked to the job responsibilties.
-the job responsibilities are reflected in the KRAs [ KPi ]
-pay is linked to the job description/ responsiblities/ KRAs [kpi ]
==============================================
SUPPOSE, THE PROJECT MANAGER IS ON 150,000 DOLLARS ANNUAL PAY.
80% OF THE PAY = 120,000 IS THE BASE PAY, WHICH IS FIXED.

WE ALLOCATE 20% OF THE ANNUAL PAY AS THE MAXIMUM PAYMENT
for PERFORMANCE.
WHICH IN THIS CASE IS 30,000 DOLLARS.
WE APPLY THE KRAs [ KPi ] evaluation method.
IN THIS CASE, IF THE PROJECT MANAGER ACHIEVES THE
RATING 71%
WE PAY THE PROJECT MANAGER 30,000 X 71% = 21,300 DOLLARS.
which is the performance linked pay .
THE TOTAL PAY = FIXED PART + PERFORMANCE BASED PAY.
=120,000 + 21,300 = 141,300.
IN THIS WAY , THERE WILL BE NO DISPUTE AS each one is paid
according to their
-responsibilty
-pay scale
-based on their performance
-same system / principle
=======================================
DEEPTI, SOMETHING TO THINK ABOUT.
################################################## ########3
REGARDS
LEO LINGHAM

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