The Complicated Relationship Between Pay & Performance

2 min read
Nov 18, 2021 7:46:00 PM

After posting our Comprehensive Review of the Performance Review, we’ve gotten a few questions about one part in particular: separating pay reviews from the performance review.

We’re so glad you're paying attention. 😉

The main question we heard was, "Why should you separate pay review from the performance review?"

Why Should You Separate Pay From Performance Reviews?

Tom DiDonato, SVP at Fortune 500 company Lear Corporation says it best:

"Performance reviews that are tied to compensation create a blame-oriented culture...they reinforce hierarchy, undermine collegiality, work against cooperative problem solving, discourage straight talk, and too easily become politicized. They’re self-defeating and demoralizing for all concerned. Even high performers suffer, because when their pay bumps up against the top of the salary range, their supervisors have to stop giving them raises, regardless of achievement."

So in 2010, Tom and the Lear (that looks so much like Leadr, but I promise, we're very different) team replaced annual performance reviews with quarterly sessions in which employees talk to their supervisors about their past and future work, with a focus on gaining new skills and mitigating weaknesses.

Reviews should be about giving and receiving feedback between the manager and the direct report. And in order for that to happen well, both people need to be heard. If an employee is focused on how much they're going to be paid, they will be less likely to truly hear feedback on how they can develop and grow. 

According to GlassDoor, culture, quality of leadership, and career opportunities, are at the top of the list for employee satisfaction. What's at the bottom? Work-life balance, compensation and benefits, and business outlook. Interesting, right? 

Separating Pay Reviews From Performance Reviews: Step One

So if you're currently combining pay and performance evaluations, here's the first next step.

In your next review cycle, let your team know that this time, you're going to focus the conversation on growth and development, not pay. Then schedule a separate meeting for three weeks after the review where you're going to discuss compensation. This is a great first step to separate the two and let your team know you value their growth and development so much that it deserves to be its own conversation. 

What do you think? Do you agree or disagree that pay and performance should be separate conversations? Let's keep the conversation going as we all try to lead better. Share in the comments below.

Want to know how Leadr helps with the entire employee experience from onboarding, to performance reviews, to every day development? Request a demo to see Leadr in action.

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