Fairness and performance: A new approach to pay for the National Farmers Union
Bal Jacob, January 18, 2012
One year after we set the wheels in motion for a total overhaul of the National Farmers Union (NFU)'s approach to pay and performance, we are about to embark on our first financial year under a new pay strategy that has also fundamentally changed the way we assess success for each of our employees in the past year, writes Bal Jacob, NFU HRD.
This programme has changed the way we think about fairness and what performance means and has produced a radical shift in mindset for the NFU.
With more than 500 staff, the NFU is the trade organisation that represents UK farmers. Previously, the NFU's pay strategy was based loosely on length of service and had very little linking it to performance; performance appraisal was about development, not delivery. As a result, there were limited mechanisms in place for rewarding top talent and pay was seen as unfair and opaque. We were not making the most of the money we had available and the message to employees was not one of high performance. We partnered with Towers Watson, which provided us with much needed strategic perspective, solutions to help us break through some challenges and tools to make the process easier.
We started with a comprehensive programme of interviews and workshops to understand attitudes towards pay. We also engaged with senior leaders to clarify the drivers of organisational success. The key conclusions centred upon increasing the pay-for-performance link, but with a high degree of fairness and consistency. In order to do that, we needed to be assessing performance better from the start – fairness comes from clarity of expectations. This raised questions around what success looked like from role to role, in an organisation that is not commercially driven.
The strategy we developed with Towers Watson was holistic and covered all aspects of what it would take to deliver pay for performance in light of the change challenge – this in an organisation that was sceptical about whether this change could really be delivered. Critical to this fact-finding was to develop a bottom-up understanding of what high performance looked like – how it can be defined, how it varied by role and the extent to which it could be measured. This led to competencies becoming the key that unlocked the most challenging barriers to acceptance. Lastly, we also took some steps into the notion of segmentation. The work on performance definition made us realise that for our most junior roles, objective-setting and performance pay was neither welcome, appropriate nor would deliver us a return. As a result, we have adopted a service-based pay model here.
Competencies were the key because they enabled us to describe high performance for roles where outcomes were difficult to achieve or out of an individual's control – this overcame a key barrier of internal scepticism. We decided to ensure that all individuals were measured on competencies and role-based objectives. Towers Watson worked with managers and individuals in all areas of the organisation, using their bespoke Competency Atlas tool to identify specific competencies for each role within the organisation. Competency Atlas helped to quickly identify which skills were required across the company and which ones would be required for each specific role. This core and periphery approach meant the right balance was struck between role-specific descriptors and common behaviours across the organisation. The outcome was a very specific competency framework that could describe performance for the diverse roles in our business and provide a process whereby people were involved in creating it themselves.
The link to pay needed to be delivered with a refreshed performance-management approach. We also shifted the timing of the performance year to align with the business planning process. Lastly, we needed to introduce ratings to categorise performance levels. A radical change for us, but we had to ensure we could openly talk about performance and create a common language to ensure consistency, as managers reviewed their peers' ratings. We aim next year to align ratings with pay increases, also taking into account an individual's position in their pay range, using a typical merit matrix. We are deliberately doing this in quite an open and rules-driven way to reaffirm our principles of consistency. Lastly, we have also refreshed our pay structure to ensure it is aligned with both the market and the new performance pay approach.
When looking at implementing 'pay for performance', it is the performance aspect that is most important, working hard on defining the measures by which people are assessed. What helped was empowering employees to identify the problem and the solutions. Through the competency workshops, staff effectively selected their own performance areas and could recognise them as their own when the system came to fruition. Being clear about performance and following this up with clear and open process is how we have found a good way to manage fairness – it is just that our definition of fairness has changed significantly. Rewarding on merit is established as a principle and we continue to work hard to deliver on the process.
Tips for success
- Listen to staff, managers and senior execs to align what people want with what the business needs
- Ensure all parts of the programme are working together, from setting the structure, developing performance criteria, linking talent to learning and increasing manager capabilities. It is important each component is working towards the same end goal.
- Recognise what you can manage internally and where you need external expertise and perspective
- Follow through on consultation and planning – be confident in the strategy and the organisation will believe in it too.
Bal Jacob is director of HR at the National Farmers Union