Linking strategy, performance, and pay.

The appraisal portion of the strategic plan has long been a problem. How do you reward the achievement and performance of individuals as they operate the organization's strategic plan? How do you use the performance appraisal area to motivate the management team to achieve the objective in the strategic plan? How do you provide incentive for your people to stay with your organization? How do you develop a commonsense approach to salary and bonus rewards? The keys to performance appraisal and salary administration within the strategic plan are profit and performance. This discussion focuses on two factors: (1) appraisal and reward for individual performance and (2) group bonus reward systems. Exhibit 1 represents the various possible reward alternatives each individual faces. In the lower lefthand Section A, the low performer in an organization whose objectives were not achieved would receive low pay and a low bonus. At the other extreme, in Section C where the individual had achieved his objectives and the organization had achieved its objectives, then the individual would receive high pay and a high bonus. Sections B and D represent other situations. In Section B, the individual achieves his objectives yet the organization has modest success. Then he could receive high pay and a medium bonus. Section D is in a situation where a person didn't do as well on achieving his individual objectives but the organization did well, and he would receive medium pay and a high bonus. The rest of this column will discuss specific programs that contribute to individual rewards along with the group bonus reward.