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Annual review tied to pay/bonus

Our annual review process wrapped up with discussion on how he person had met KPI's that helped lead to a monthly bonus program. Business results have not allowed for a bonus to be paid in over a year now. The annual review has not been changed. When companies face a pay freeze or bonus freeze how should the annual review be modified to still be effective even if there can't be a raise issued. Obviously a review should be more than money but most people over time have come to expect review = increase. What's the best way to combat this?

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Many companies aren't honest with their own employees; much to the dismay of the employees. They know when business is off, they know when its booming.

They may not know the exact profitability/loss numbers, but don't second guess them.

How about being forthright and explain the situation vis a vis the freeze and seek ways to increase productivity and profitability together.

Anonymous
(CFO) |

What if they have done all of that and while business is improving still not to a level where a bonus can be paid? After a while it still starts to get people down, even if they understand it. You are assuming the company is not being honest or forthright but what if they are?

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

Bonuses (incentives) does NOT have to be financial (dollars) in nature. You can grant other benefits like extra days off. My point is....be creative. As Wayne said, be forthright/open. Ask the employees themselves about alternatives (other than $$). I am sure that if the company can't be creative, the employees will be.

Steve Sheridan
Title: Associate
Company: Dean Lewis Associates
(Associate, Dean Lewis Associates) |

just a word of caution though...offering something like extra days off is very apparent to the other workers. When someone gets extra time off the others may protest as they think deserve them too.

Topic Expert
Jaime Campbell
Title: Chief Financial Officer
Company: Tier One Services, LLC
(Chief Financial Officer, Tier One Services, LLC) |

Consider that this may point to the idea that the bonus program wasn't effective.

What are the root causes and supplemental causes of the company's performance?

What could help the company? The performance results that can help the company evolve over time with changing SWOT conditions, so incentive programs can evolve as well.

And communication is key as well, especialyl if it's done in bulk so everyone knows they're being treated the same. If a raise is expected then no one really has skin in the game, do they? Perhaps this is part of why the company's performance is the way it is. Worth exploring.

Tony Maresca
Title: CFO
Company: BullseyeEngagement LLC
(CFO, BullseyeEngagement LLC) |

Performance review discussions should be detached from discussions about compensation adjustments. The focus of performance reviews should be the employee's performance. As the questioner implies, other external factors besides performance impact compensation. If you always tie performance discussions to compensation, the employee will never hear anything that is said about performance; they will only focus on the compensation outcome. As a corollary, effective performance management occurs continuously during a year. Annual performance reviews are an outmoded practice.

Topic Expert
Scott MacDonald
Title: President/Owner
Company: AlphaMac Resources, Inc.
(President/Owner, AlphaMac Resources, Inc.) |

Pay tied to annual performance reviews are an abomination and should be banned.

Any cost/benefit analysis you can produce show annual reviews are a losing proposition. We simply cannot afford to hold on to an outdated, worthless process that produces zero financial results.

Honestly, annual reviews have been around for probably 60 years. Times change.

If your employees don't know how they are doing on a daily or weekly basis, you aren't doing it right.

Pay increases should be based on 2 things. Cost of Living and increased responsibility. Bonuses should be used for outstanding performance and paid as close to the time of the performance as possible.

Abolish the Annual Performance Review!!!

PS - For those who disagree with me, General Electric has decided they are worthless. http://www.fastcompany.com/3052135/the-future-of-work/why-the-annual-performance-review-is-going-extinct

and so is IBM. http://fortune.com/2016/02/01/ibm-employee-performance-reviews/

Al Gil
Title: NA
Company: not applicable
(NA, not applicable) |

Interesting. Thank you for that perspective.

Hugh Fisher
Title: Manager of Financial Planning & Analysis
Company: QMax Solutions
(Manager of Financial Planning & Analysis, QMax Solutions) |

I found Scott's comments and support to make me really think about KPIs and Reviews. A key take-away for me was in showing the employee how their actions impact the KPIs, (and make sure to measure KPIs which employees can impact).

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