During my time as the head of HR at a successful semiconductor company I was constantly challenged to re-engineer our HR procedures. Often, our final approach was quite different than the methods commonly taught and historically used in other organizations.
This blog will discuss a novel way to set performance goals, assess individual performance and adjust pay.
First a little background setting. The ability to design new products with features that outstrip the competition was one of the keys to our company’s success, so I will use the senior design engineering role for purposes of this discussion. Like any role, not all senior design engineers have the same level of competence or aptitude. For simplicity let’s assume designers fit into one of the quadrants below:
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Quadrants A and C could represent individuals that were recently promoted into the role and are in the early stages of developing full competence at this level. Quadrants B and D could represent individuals who have a great deal of experience in the role.
By definition a new product design has a high degree of uncertainty. Finding innovative solutions enables the introduction of new products that generate the highest commercial value. Highly competent individuals are assigned more difficult design challenges than those that are just learning. The most challenging tasks are assigned those in quadrant D.
Given this background, let’s return to the topic, setting and assessing performance expectations. Historically, we asked managers to rate the performance of their groups and then we organized meetings to ensure our managers were calibrated. Performance ratings were subsequently used to determine pay increases. What we encountered is that managers were adjusting their ratings based on the level of difficulty associated with the design tasks assigned. If an individual in quadrant A completed a less difficult task and an individual in quadrant D succeeded in solving a far more difficult challenge, rating them both “achieved” and giving them the same pay increase wasn’t considered logical or fair. Arguments were made that the quadrant D engineer was actually performing at an above average or even exceptional level by completing the tasks they were assigned while the individual in quadrant A was performing at an average or below average level because their design task was far less difficult. Furthermore, managers would argue that due to the uncertainty associated with the most difficult design challenges they did not expect their best designers to find solutions100% of the time. They valued the designers that could find solutions some of the time more than they valued the designers that could successfully solve less daunting design challenges.
To solve this, we decided to set and assess performance individually and to set individual pay based on relative contribution. We asked managers to set their employees’ base pay according to their individual contribution based on demonstrated competence and aptitude. Generally speaking, designers in quadrant A would be paid in the first quartile, quadrant B designers in the second, C in the third and D in the fourth. Individuals were assigned tasks they were capable of and performance was assessed without adjusting for difficulty. If they constantly exceeded expectations their managers would pay them more and assign them more difficult tasks. In an ideal state, a manager would match task difficulty with capability, and everyone in their group would be rated “achieved” on the performance scale. Using this approach the correlation between performance rating and pay is reduced and competence takes precedence.
This novel approach is not appropriate in every environment. In some roles, every employee is asked to perform the same tasks with similar difficulty and uncertainty. In these environments using a common yardstick for assessing performance and rewarding those that exceed these standards consistently is both logical and fair.
Biography
Alan is the founder of TriFusion Consulting. His engineering, business and human resource management experience are the foundation upon which TriFusion was built. He works in partnership with his clients to identify and implement creative approaches to complex business problems that entail innovative technologies, people management and organizational culture.
Alan’s passion is working in collaboration with others to find and implement innovative solutions. This is reflected in his strong track record of transforming business strategy into results by working with stakeholders to maximize buy in and sustainability.
Through his recent work with the Innovation Synergy Centre in Markham, Alan has provided holistic advice to early stage companies. He was a judge for the 2008 Nicol Launch Pad $50K competition. He also lectures MBA classes at McMaster University in Technology Management, New Product Development and Pay for Performance.
Alan is a member of the Information and Communication Technology Council Steering Committee which is focussed on measuring and addressing the future requirements for highly skilled employees in this sector across Canada.
From 1999 to 2007 Alan was the Vice President of Human Resources with Gennum Corporation, a successful public Canadian high technology company with responsibilities for operations worldwide. He knows what it takes to attract, retain, develop and motivate a strong bench of highly skilled talent and is an expert in executive compensation and total reward programs. Gennum was identified as one of the “Top 100 Employers to Work For” during Alan’s tenure. From 2004 to 2007 his responsibilities expanded to include Quality Assurance, Environmental Health and Safety and Corporate Facilities.
Prior to 1999, Alan worked extensively in a variety of technology based industries including microelectronics, plastics, chemicals, and automotive. His senior management roles have encompassed everything from marketing and product development to process engineering and manufacturing operations.
Alan received his B. Sc. Chemical Engineering from Queen’s University, his MBA from Wilfred Laurier University and he is a Certified Human Resource Professional.