Setting Pay for Performance Payouts

If Entrepreneurs buy into the concept of Pay for Performance (P4P), then setting payouts under the program become important.

While establishing the payout levels for a P4P Program, three factors need to be taken into account – expected performance level, level of difficulty, and likelihood of achievement.

Based these factors, one can set up a matrix to develop different payout levels. For example, for a level of performance at 75%, with a level of difficulty of 80% and likelihood of achievement of 85%, the payout level could be 70% of target P4P bonus.

If you are interested in setting up a P4P program for your company, please contact Patel CFO Services at www.patelCFOservices.com

Ravi Patel

www.patelCFOservices.com

Application of P4P Programs

We have discussed Pay for Performance (P4P) programs in previous posts (Pay for Performance and  Measuring Employee Performance). During my presentations and discussions, I have been asked who is the P4P program applicable for.

The simple answer is – for every level in a company. The beauty of a P4P program is that it is not restricted to management level employees. If properly designed, it could become a valuable tool for every level in a company.

Performance management is important for all employees of the company and tools to enhance and reward performance should be a focus for all Entrepreneurs.

For more information, please contact Patel CFO Services at www.patelCFOservices.com

Ravi Patel

www.patelCFOservices.com

Measuring Employee Performance

In an earlier post I suggest the use of Pay for Performance

A fundamental aspect of using Pay for Performance is measuring performance. How do you measure the performance of your employees? Do you have objective and SMART metrics? In the event you use some type of metrics to measure performance, you need to evaluate if they are appropriate for Pay for Performance. If not, you might need to refine them.

If you do not utilize objective measures to gauge employee performance, your evaluation of an employee’s performance  is not comprehensive. Entrepreneurs might want to re-think the performance measurement and evaluation process in their company before thinking about Pay for Performance.

If we can assist you, please contact us at Patel CFO Services at www.patelCFOservices.com

Ravi Patel

www.patelCFOservices.com

Pay for Performance

Paying for performance is quite in vogue now. Many Entrepreneurs are embracing this compensation philosophy. Have you done so?

The traditional mode of initially compensating people based on their skill level, experience and knowledge and then merit adjustments based on annual performance evaluation is becoming obsolete.

Instead, the enlightened approach is to establish appropriate metrics and then compensating employees based on performance. There are various combinations to create an appropriate program for your company and method of operations. The benefit of a Pay for Performance philosophy is that it holds employees accountable for performance and rewards superior achievement.

If you have not explored this approach, you might want to do so.

Please contact Patel CFO Services (www.patelCFOservices.com)  for more information.

Ravi Patel

www.patelCFOservices.com