Does performance matter?

Companies know that rewarding a job well done is the quickest route to top-notch, motivated employees. Problem is, employers aren’t putting their money where their mouths are.

In a Watson Wyatt survey of 113 Canadian organizations’ compensation practices, 74% of employers said short-term incentives such as performance bonuses are key to attracting and retaining top performers. But in reality, most employers don’t even identify who their top performers are. Only 12% of employers said they differentiate performance ratings among employees to a great extent, while the majority said there’s just a slight or moderate difference between their employees’ performance ratings.

Workers’ take on the situation is only slightly better. In another Watson Wyatt survey of 3,000 Canadian employees, only 29% said their companies do a good job of identifying and rewarding top performers, and just 27% said there is a clear link between performance and pay.

And what about workers who don’t measure up? The perception is they aren’t being singled out either. Only 24% of employees said their companies manage poor performers so their work improves, while 25% of respondents said consistently poor performers are let go.

“Creating a high performance culture — in which top performers are rewarded and developed — is an important element of motivation,” says Graham Dodd, Canadian practice leader of Watson Wyatt’s human capital group. “This should be a cause for some concern.”

To improve employee motivation, the Watson Wyatt WorkCanada 2004/2005 report says organizations should focus on improving career paths, rewards and recognition, performance management and coaching of poor performers. (For more advice, see “Replacement planning,” April, p. 43.)