Is linking performance to pay still the best way to motivate a workforce?

Author: Liana Cafolla | Date: 16 Nov 2016

Classified Post’s HR Conference 2016: experts discuss the latest rewards trends

Performance has been inextricably linked to pay for so long that the logic can seem unquestionable. But new trends in Hong Kong are leading HR practitioners to question the rationale that linking performance to pay is still the best way for organisations to structure their reward programmes.
 
At a panel discussion held during the Classified Post’s HR Conference this month, experts discussed the latest industry developments and offered their own views.
 
Performance means different things in different organisations and depends on how an employer defines success, said Jeffrey Tang, managing director of Willis Towers Watson in Hong Kong. For some, success means market share, while for others it’s the organisation’s share price. Similarly, some measure performance on an individual basis, while others use a team metric. Organisations need to define what performance means on their own terms before deciding how to reward it.
 
Assessing performance over a particular time span is also important, said Tang, who believes more employers are recognising that assessing performance annually does not tell the full story. “You need to take a multi-year perspective,” he said.
 
For industries where business fluctuates according to seasonal highs and lows, such as retail, performance timescales need to be adjusted accordingly, and the performance of the overall economy should also be taken into account, says Mabel Wong, vice president of talent and organisational development at Hong Kong luxury retailer Lane Crawford.
 
The best way to enhance performance is to rid the organisation of low performers, said Niq Lai, chief talent and financial officer at Hong Kong Broadband Network (HKBN). “Good people hate to be dragged down by bad people,” he said. Removing the lowest performers immediately strengthens the company, he adds.
 
In addition, high performers need to be offered choice about the benefits they receive in return for their efforts, said Lai. At HKBN, employees can decide whether to invest in the company and its performance, rather than the stock options which were an obligatory part of Lai’s pay structure when he previously worked in the banking sector.
 
Identifying the right benefits to build performance is essential, agreed Wong, especially in retail, where it has become increasingly difficult to attract and retain young talent. “We look at incentives beyond just pay,” she said, including experiences and life opportunities that might not be offered elsewhere.
 
The best strategy to improve performance in retail is to respond to requests for flexibility and a good work-life balance, she said, including the possibility of telecommuting for office workers. “It’s a trend we see with both younger workers and those who have been with us for decades,” said Wong.
 
In Asia, the use of bonuses to reward performance is inherent to the culture, said Tang, whose counterparts in the UK were astounded by the percentage of pay that is given out in bonuses. The bonus culture encourages employees to perform above expectation and builds an entrepreneurial mentality. “It suits Asian cultures well,” he said.