In an environment of lean workforces and overworked employees, companies face significant challenges keeping their staff motivated. This is a special concern as it relates to top performers. Employers simply cannot afford to lose them.

Does your company pay for performanceTo address these issues, many leading companies are transforming themselves into “Pay for Performance” organizations. The concept may be simple—put compensation structures in place that align the goals of the individual with the goals of the organization and allow the best performers to achieve rewards through great performance. The execution is not.

In the late 1990s and early 2000s, the corporate paradigm was very customer-centric, deploying strategies and tools that promoted Customer Relationship Management tactics. Companies were primarily concerned with keeping existing customers and securing new ones. Now, that paradigm is shifting inward toward the employees. Companies realize they can reduce turnover of key personnel and, as a result, increase revenue by truly rewarding top performers.

These compensation structures are not only for executives with “Management by Objective” programs. The truly effective organizations offer these programs to all employees. Quite simply, that is the key to successfully transforming your organization.

Transform to a Pay for Performance Organization

Transforming into a Pay for Performance organization requires significant effort in creating awareness, promoting the desired culture, and aligning the compensation structure. These efforts occur serially and all contribute to your ability to maximize benefits.

Awareness. To create awareness, the leadership team must be committed. Without this commitment, any initiative is futile. The leadership must also ensure that employees understand the corporate goals and how their individual objectives map to those corporate goals. This involves clarifying how each individual’s contribution helps the corporation achieve its objectives.

Culture. To promote a pay for performance culture, organizations should inform employees that major contributors would receive significantly more awards and compensation. At this point, it is critical to educate the employee base that your organization is changing to this model. This will help facilitate the shift in culture. This is also an excellent time to begin implementing enterprise-wide performance management processes.

Alignment. Aligning the compensation plans is where the rubber hits the road. This stage involves implementing the new compensation strategy and aligning the compensation plans to the individuals. It is extremely important that the goals of the individual are in line with the goals of the organization. This is also the time to implement the information technology tools to support the compensation plans and payouts.

Once you complete these critical stages, you will begin noticing some of the most common characteristics of pay for performance organizations including alignment of individual performance and pay to corporate objectives, employee behavior that maximizes revenue, a flexible operating environment that allows quick reaction to market changes, and an organization designed for growth.

Some articles that might be of interest related to compensation include and Compensation–Is it All it’s Cracked Up to Be and Do Candidates Reject You? The Lost Art of Extending a Job Offer!