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Use Sage HRMS to Decouple Compensation from Performance Reviews

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How Talent Management Can Improve Employee Retention and Engagement

Many industries are facing talent shortages. That makes competing for and retaining talented employees more important than ever. It means that it is time to consider creative ways to manage and engage employees. One area to consider revamping is compensation and the performance review.

Take a new look at compensation and the performance review

An article in the Harvard Business Review suggests that tying compensation to performance reviews isn’t always effective. In the article, the authors state that using compensation to drive performance leads to hierarchical, politicized corporate environments. It undermines collegiality and fuels a blame-oriented culture, according to the same article.

But financial incentives work, don’t they? Yes, to a point. Problems arise when your superstars bump into the pay threshold for their position. If they can’t exceed that threshold, they may look for work elsewhere that pays better for their skills.

Instead of linking compensation to performance outcomes, an integrated human resources management system like Sage HRMS, that looks at multiple factors, can be used to evaluate compensation. Monetary rewards are only one way to recognize achievement; employee satisfaction increases from other non-monetary awards as well. Actively recognizing an employee’s achievements is one of the most cost-effective means to increase employee satisfaction and loyalty. Through HR technology, managers can know when performance goals have been met and initiate recognition

A human resource management system can evaluate:

  • Performance factors, such as progress towards goals;
  • Learning and professional development accomplishments;
  • Attendance factors;
  • Customer feedback on an employee’s performance.

This type of system provides a holistic, 360-degree look at employee accomplishments rather than tying compensation solely to performance. Employees who provide great customer service may not be the best at achieving financial goals, but their accomplishments can, in the long run, retain customers and save the company money in acquisition costs. Such accomplishments can be more easily noted with a robust human resources system that takes multiple factors into account than a simple system that can only note progress towards arbitrary goals.

Sage HRMS with talent management helps you be creative

Sage HRMS with integrated Talent Management modules will give you the analytics you need to make informed decisions across the talent life cycle from applicant tracking to career development. Using real-time information, you can monitor performance, reward and manage employees in a way that will maximize employee engagement. This HR software can be used to transform your talent strategies, maximize employee engagement, and improve the ability to hire. Sage HRMS is social, mobile, cloud-based, and has strong analytics.

Investment in HRMS and talent management software will increase employee engagement and retention, resulting in better business performance. Sage HRMS is an integrated HR management software that will enable you to lower costs and empower your employees. It can help improve Return on Employee Investment® (ROEI®), and build a more profitable and successful business. To learn more about improving HR productivity, download our whitepaper, “ROEI®: Return on Employee Investment®, Increase Competitiveness on Your Biggest Asset”.

How to get started with a new performance/compensation system

It may seem counterintuitive to decouple raises from performance reviews. One way to ease your employees into the new system is to schedule frequent performance reviews and only one annual compensation review. The emphasis on performance, along with direct and frequent feedback, often helps firms achieve their goals better than the old-fashioned performance/compensation system.

Support your compensation and performance review changes with a strong HR management solution like Sage HRMS.  Contact us to receive a free HR Management Solution information kit and discover the value an on-premises or cloud-based HR solution could bring to your business.