At year-end, employers may be delivering performance reviews or thinking about their strategy for performance evaluations in the coming year. At the same time, discussions about raises and other salary adjustments may be underway.
MarathonHR encourages our clients to separate performance reviews from compensation reviews and handle each of them at different times. Evidence suggests that performance management is more effective when organizations separate evaluations from compensation discussion. In one survey, 47% reported effective performance management when handling the two separately compared with 30% at companies that don’t separate such discussions.
Best Practices for Performance Reviews
In our experience, performance reviews should always be more frequent than people typically do them. In general, Gen Z workers expect regular feedback in a manner that feels supportive of their professional development, and some may take critiques more personally than intended.
However, workers of all ages say that more consistent, regular feedback resonates with them much more strongly than the traditional annual performance review. When kudos or corrections are only delivered at year-end, the issues are usually history and have been long resolved. Managers risk bringing up an old grievance or delivering praise that has come too late.
So, how often should you deliver performance reviews? The answer depends on your industry and company culture. However, you can’t go wrong with frequent check-ins. Some businesses even report that weekly manager/employee meetings result in better performance and employee engagement. Weekly or monthly performance reviews also offer the opportunity to address serious concerns and implement a progressive disciplinary procedure, if needed.
Best Practices for Compensation Reviews
In our own company, MarathonHR does compensation reviews when we finish our financial year. At that time, we can determine our budget for compensation increases, as well as look at what we need to do to keep pace with the market.
When considering salary increases, it’s important to determine a few things:
- In looking at competitors, are current salary rates likely to be sustained in the long haul, or are they in response to transitory market conditions? If today’s new hires earn a higher rate than your current staff, consider a hiring bonus as an alternative to salary hikes.
- Have you experienced a sustainable bump in profits and are ready to share that wealth? In addition to higher pay rates, you may consider bonuses or increasing benefits.
- If you risk having a valued team member leave, what is the cost of replacing them in terms of training and onboarding time? Take that into consideration when establishing compensation levels for new hires and reviewing salaries of valued team members.
MarathonHR stands ready to help you review your performance evaluation and compensation practices so that you can get off to a solid start in 2024.