Reward and performance management programmes failing to keep pace with demands facing businesses

Reward and performance management programmes are not keeping pace with the demands facing businesses today, according to a study by professional services firm Towers Perrin.

Despite enormous shifts in the business landscape over the last decade, most companies have made minimal changes in the design and delivery of their base pay, incentive and performance management programmes.

As a result, current programmes do not appear to be meeting talent and people management needs effectively, the research concluded.

Towers Perrin surveyed more than 600 HR and compensation managers at organisations in 21 countries.

Although many of those surveyed said their reward strategies were designed to retain and attract talent (73% and 57% respectively), few of the actual tactics they reported were consistent with this focus.

"Overwhelmingly, we found that companies are making very incremental changes in reward and performance management programs," said Jim Crawley, principal at Towers Perrin. "What makes this of concern is that business changes have been anything but incremental."

Some of the trends highlighted in the study include:

• Minimal customisation of rewards beyond the sales function.
• Increased use of company-wide results in variable pay – surprising, given the relatively small number of employees who can materially influence corporate results.
• More than two-thirds said their organisation had no formal method for measuring the return on their considerable investment in rewards.
• Four in 10 said their systems did not effectively equip managers to identify, develop and reward high-performers or deal with poor performers.

Crawley said: "It's encouraging to see that companies are emphasising performance and talent retention. On the other hand, what they're doing to reward and improve performance is not particularly effective, or in line with overall business performance and strategy."