How do you like decoupling assessment and reward?

They have often already made a vigorous start, the HR managers who joined the roundtable discussion at Highberg's Utrecht office on Feb. 28. The link between appraisals and rewards has been loosened. But this is not without its challenges. Can you still differentiate and reward high performers for their performance? And how do you keep the good conversation going between employee and manager?

Colleagues agree on the disadvantages of the classic approach. Appraisals often lead to disappointment among employees. According to estimates, 60 percent consider themselves to be outperformers, while in reality only an average of 20 percent do, and only that group receives the corresponding salary increase. 'That is frustrating,' says HR manager Meindert Visch of Rituals. 'That while you want to stimulate engagement among employees, the key to performance.'

Optics chain Eye Wish is now in the final stages of decoupling appraisal and pay. 'The annual performance review ended up being mostly about salary increases,' says HR director Femke Swaan. 'That was at the expense of the good conversation. As an employer you want to offer perspective and focus on development, both of the individual and of the organization. That's what the conversation should be about.'

I noticed that the appraisal interview became an annual motivation dip. That should really be possible in a different way,' says HR manager Bertine van Dijk of SVn (Stimuleringsfonds Volkshuisvesting Nederland). She wants to shift the emphasis. 'We have recently invested a lot in cooperation, and we want to make performance management tools better suited to that. How do you as an employee and as a team contribute to the goals of the organization, how do you stay relevant?'

The question is, however, how do you then shape that? How do you ensure that the conversation about development remains central, when the routine of an annual appraisal lapses? That is a question HR project manager Dirk de Vries of research institute TNO is wrestling with. He has plenty of experience in unbundling assessment and reward. At his previous employer KPN he supervised that process and when he started at TNO a year ago it was also in full swing there. 'TNO is running into the same problems,' he observes. 'The issue is: how do you keep the good conversation going? With us the annual interview is no longer mandatory and then in practice it turns out to be difficult to make time for it, the trigger is sometimes lacking.'

At Facilicom Group, a family-owned company employing 1,500 people outside collective bargaining positions, initial enthusiasm for the new approach did fade somewhat, says HR director Wendy Aendekerk. 'The first sputters are now occurring. With us, employees have to initiate the conversations themselves, and it remains a challenge to get that done.'

So should it still be the manager who makes the first move? That's how it went second at KPN, Dirk de Vries knows. 'In order to keep the connection with the employees, it was decided that the initiative still shifted again from the employee to the manager.'

According to consultant Rita Ekkelenkamp of Highberg, continuing to schedule regular meetings can work fine, especially if you let the employees suggest the topics. 'They can indicate in advance in a form what they want to talk about, which can also be, for example, their well-being. Although the company's interests remain important, of course. It does stand or fall with the managers, who must be trained in conducting such conversations.'

What is also apparent in practice: there remains a need for HR to differentiate pay. How else will you retain your high performers?

Wendy Aendekerk of Facilicom has noticed that employees also continue to find differentiation important. People feel that it's not fair that colleagues who cut corners get the same pay increase. Moreover, people do want to be able to make strides, says Aendekerk. With the new approach, the reward system will guide salary increases. And newcomers often move up in the current tight labor market, so they quickly reach the norm salary. 'So then they would not be able to grow at all.'

Nevertheless, in most cases some budget is freed up for the outstanding performers, often in the form of one-time rewards. At TNO, for example, extra gratification budget became available after the decoupling of assessment and reward. 'We have no formal conditions for granting this and it still happens too rarely,' says Dirk de Vries. 'We really have to get behind it with the managers.' According to De Vries, it works best to award bonuses throughout the year for concrete performance achieved in short periods.

Such a reward, according to the interlocutors, can also consist of extra days off, a valuable education or an experience, such as a dinner or a balloon ride. The real salary jump is more likely to be linked to a promotion, which allows the outperformer to move up a pay scale.

At Facilicom this is difficult, Wendy Aendekerk explains. People stay with the organization for a long time and not everyone can be promoted. After five to seven years, employees are at their maximum within the scale. 'I get stuck on that.' Although there is the possibility of handing out substantial bonuses and bonuses for top scorers, employees still miss the differentiated salary increase, according to Aendekerk.

Understandable, thinks interim HR director Miranda van Putten of Ordina. 'If every year the conclusion is that you have done well and then nothing is attached to that, that is not very encouraging.' At Ordina, a new policy is before the Works Council for approval, with a focus on transparency and with some room for managers to differentiate. What is important here, according to Van Putten, is that, as an employee, you know what to expect.

In doing so, Van Putten touches on another point of discussion: how do you define an outperformer and who determines that? That can also be quite a challenge in this new set-up, the interlocutors acknowledge. Consultant Lianne Hamstra of Highberg: "The classic approach is to cascade the established business objectives into the organization and then look at the contribution of employees. When are they doing well? That now seems to be getting a bit on the back burner.'

TNO project manager Dirk de Vries recognizes this. 'How do you deal with this? You don't want to lose that high performance in your organization.' Experiments in which people assess themselves or each other via talent reviews do not appear to be an unqualified success. HR manager Miranda van Putten, for example, experienced this. In the end, people still need the manager to say something about it.

Granting each other salary increases does not always work well either. De Vries was once involved in a project in which all employees were set to ‘good’ unless you indicated that you considered yourself or your colleague to perform above average. This created an advantage for employees who could present themselves a little better and sometimes even led to one-twos.

So then it is still up to the manager to recognize the high performers. This applies just as much to underperformers, however, and managers sometimes find it uncomfortable to bring this up during an interview. Some guidance is then required.

Some organizations still use the normal distribution for this purpose. This can help, says Meindert Visch of Rituals, but misses the point if it is used primarily to manage budgets for salary increases. Others see it as an incentive for a critical attitude on the part of the manager.

Whereas performance appraisals used to involve elaborate matrices, HR managers now advocate more simplicity. This is an emphasis at Rituals, says HR director CoEs Carina Mulder.

For example, at Fox-IT, where Miranda van Putten previously worked, the 9-grid model has been reduced to four assessment points. Motivation has replaced potential in this, she says. This is mainly because the deeply technical Fox-IT employees want to move up within the organization as experts rather than managers.

Dat bewijst maar weer dat niet alle organisaties over één kam te scheren zijn, ook als het gaat om beoordelen en belonen. ‘Ik geloof niet in one size fits all’, zegt Meindert Visch van Rituals. ‘Bedrijven zijn zo verschillend. Wat de beste aanpak is, zal dus ook verschillen.’

Investeren in de ontwikkeling van talent blijft hoe dan ook een must. Daarbij gaat het wat Wendy Aendekerk van Facilicom betreft vooral om meer bonding. ‘Iedereen in de organisatie moet weten waar je met elkaar naartoe wilt en wat de eigen bijdrage daarin is. Die visie moeten ook managers hebben. Alleen dan haal je het maximale uit je team.’