Every working professional wants a good salary and bonus. However, not everyone earns one. This can be because of failed performance, but it can also be because of a failure to effectively communicate performance expectations. Performance measurement, evaluation, and compensation are three vital dimensions that are part of every organization. However, managing each of these dimensions is difficult due to the level of subjectivity involved. A standards-based approach to performance evaluation and compensation can make the process more objective and fair. By utilizing the standard cost and revenue information your company already gathers, it is possible to not only clearly communicate goals but also effectively evaluate and reward excellent performance.
Charles, a senior manager at Midton Industries, realizes that standards can facilitate better communication of expectations. In fact, Midton’s employees are already familiar with and responsive to available standards. Thus, both Charles and Midton employees know that desired performance levels can be achieved.
However, standards and variances don't reflect all important dimensions of performance. In these cases, managers and employees may focus on standards to the detriment of other important areas of performance that are less easily measured. Charles likes the idea of leveraging information Midton is already gathering to help objectively evaluate performance, but he wonders whether the trade-off is beneficial.
Before considering the use of standards in performance evaluation, you should identify the fundamentals associated with using standards for performance evaluation and compensation. It is also a good idea to pilot a controlled implementation of using standards for performance evaluation before using it for the entire organization. A pilot helps you determine the best way to utilize standards for performance evaluation, identify and resolve any issues, and also identify potential changes in behavior that may result from using standards in performance evaluation.
Are you wondering whether standards and variances belong in your organization’s performance evaluation and compensation system? The Accenture Academy courses Performance Evaluation and Compensation Fundamentals, Standard Costing Systems and Performance Evaluation, Applying Standard Cost Information to Evaluate Performance, and Implications of Using Standard Cost Information in Performance Evaluation use a real-world, case-based scenario to introduce the fundamentals of using standards and variance analyses to evaluate and compensate employees. From this application, you will be able to recognize how using standards and variances in evaluation and compensation decisions can improve decision making in your firm.
Accenture Academy offers proven, cost-effective learning solutions for a more versatile workforce and a more agile organization. We provide a flexible learning approach that helps your people be more versatile and your entire organization be more agile in the marketplace. Curriculum includes Supply Chain Management, Finance, Procurement, Analytics, Leadership & Management and Specialty Skills.