How to Transition a large organization from a anniversary performance review/merit cycle to a focal (all at one time a year) merit cycle
How do you convert from an anniversary to a calendar appraisal cycle and not spur union activity?
Many organizations have annual performance review programs that include a salary increase based on that performance. Smaller organizations typically provide that performance review around the anniversary of the date of hire. This works for small organizations with smaller total base salary costs. For larger organizations this anniversary cycle creates operational challenges of having to constantly be reviewing performance, decoupling of annual mandatory tasks (education requirements or vaccination requirements) from the performance cycle, and creates challenges in adhering to a budgeted total base salary increase for the year. Also changes in merit to incorporate cost of living increases also becomes challenging.
A hypothetical organization has 16,650 employees, an annual salary budget of $967,500,000, and budgeted 3% to address any market adjustments in class of jobs (ED Nurses for example) PLUS the annual Merit award of the 16,650 employees. Annual performance reviews are batched by the quarter with 50% of the employees increase scheduled in quarter 3, 30% in quarter 4, 15% in quarter 2 and 5 % in quarter 1. The “average” merit increase is 2% of base salary in any given year.
This group of employees is NOT eligible for a bonus based on key performance indicators, but adding a small bonus $500.oo per employee for a KPI would be desired to better align staff to the organization’s strategic goals.
This organization is looking to convert but not upset employees by delaying raises, have total program cost exceed the budget, not create a significant balance sheet impact with the transition, and not create any opportunity for unionization as a result of the change.
Thoughts?
Is any of your population unionized now? You can do this as a phase in, perhaps starting with all new hires, and/or with any future job changes.
Coming from a much smaller organization we are doing the exact opposite! We are currently on an annual review/comp adjustment basis which is significantly time consuming and causing issues with the budget all at once. We are therefore transitioning to anniversary date evaluations.
As far as how to transition: I would suggest significant planning (including front-loading the budget) and convert or transition to new plan early as not to delay anticipated raises. This obviously would incur increased costs initially. In your example, nursing staff, would likely appreciate an early cost of living raise and you would prevent grumbling about any delays. I would use it as a “we value our team” move. At the same time I would introduce the new strategic KPIs. I love the idea of aligning the staff with organizational goals, this can often foster teamwork. I would not phase it in, as the “old” employees may feel under appreciated if the newbies have “extra” incentives or benefits. Transparency and fairness go a long way.
My two (or three) cents.
Assuming you are unionized you need to sit down with your unions and change your collective agreement language to enable what you want to accomplish. I would suggest an ‘interest-based’ approach to this, perhaps with all your unions versus each individually. This would be where you come to them and say, “here is the problem we want to solve” and discuss it with them versus giving them paper at bargaining and setting up a positional discussion. They may have a better solution to the issue than you have come up, or they may agree with you and find a way to help you make it happen.
normally when you change out of one model to another you will need to be prepared to pay more in either the last or the first year so there is an overlap and you don’t end up with disengaged staff. You have to be super clear with your change-plan and communications though (especially ensuring front-line leaders understand what you are doing and how things will change), because if you aren’t you’ll have paid more and still end up with the disengaged people.
Lastly, does $500 really add up to enough to incentivize behavior or performance? would/could the money be spent differently in order to increase morale and satisfaction and therefore achieve the outcomes you are looking for? Do you reall yknow what your people want and what will incentivize/motivate them? Often we don’t because its hard to figure out – but if you can do that you can get to something that will make a difference.