Prepare for performance-based pay (2023)

The Foreign Service Magazine>December 2018>Prepare for performance-based pay

The new local employee performance management program offers many benefits for employees and managers.


(Video) What is Pay for Performance?

Prepare for performance-based pay (1)
Quelle: US-Außenministerium, Office of Human Resources, Office for Employment Abroad.

Have you ever managed a great local employee who is no longer eligible for a raise because they are at the top of their grade? Or did you have to encourage a local team member to "retire local" at the top rung? An exciting development for supervisors in the US and LE is the new performance management program for LE personnel in US missions called Merit-Based Compensation.

By the end of 2019, nearly 50% of US missions worldwide will have implemented MBC's new pay-for-performance system tools. Today, in 66 embassies around the world, supervisors and local officials recognize the many benefits this method of performance management offers. The Office of European and Eurasian Affairs fully adopted the CBM for all positions in 2016, and other offices have begun to implement the post-a-post program.

This is an important initiative that all American managers should be well informed about. Here's a short tutorial on the history of MBC, its many benefits, and what US direct employees and overseas local managers need to know about this inspiring program.

What is MBC?

Merit pay plans, incentive pay or performance pay as they are sometimes called, reward employees with raises, bonuses or other forms of financial compensation. Instead of tying performance bonuses to time on the job, employers reward top performance in the form of annual variable compensation. In 1995, the London Embassy launched a performance management program called Performance Related Pay. Jon Lloyd, HR Specialist on the LE team at Embassy London, led the initial effort to create the new performance pay scheme to shift the mission to a performance pay system consistent with prevailing practice at the time.

Embassy London was specifically seeking to develop a more contemporary methodology for managing, recognizing and rewarding LE employee contributions to US government work. The goal was ambitious and the territory disputed; Many stakeholders were highly skeptical and the chances of success were assessed as low. But, as the saying goes, "fortune favors the brave" and the HR team in London made progress. More than 20 years later, London and many other LE officials around the world are praising the show that came to be known as MBC.

MBC gives managers the ability to link employee performance directly to section and mission goals. Managers can create specific goals and prioritize them based on importance, not time spent. A numerical rating system (0-3) combined with more specific goals allows managers to differentiate team performance over a period of time, rather than having to give employees a general overall rating. At the end of the cycle, eligible employees receive a performance-related monetary reward based on total points. High-performing workers have the opportunity to receive a higher reward than they would with the current serial or level-up system. They also have the opportunity to move through the salary range more quickly than in the tiered system.

(Video) Major new study examines link between performance related pay and stress

MBC gives managers the ability to link employee performance directly to section and mission goals.

Employees already at the top of their category are also eligible for an award under the MBC. They can't increase their base salary, but they are entitled to a lump sum reward for their hard work. In many positions, a significant percentage of employees have already reached the highest level, and the MBC will allow these employees to receive a performance bonus for the first time in many years. Many of these employees are high achievers who want to stay on mission. MBC can be an additional tool to help managers retain top performers.

In addition, MBC is working towards an annual cycle for all LE team performance reviews. Under MBC, supervisors are not required to track and complete employee performance reports at random times throughout the year based on each employee's hire date. MBC operates on a fixed annual benefit cycle, much like permanent direct hires in the US. Most positions use the February 1-January 31 evaluation cycle, and all LE team evaluations are due on the same date. Consequently, all LE team assessments are completed on time!

The crucial role of the supervisor

MBC creates the opportunity to improve communication between managers and employees. Because employee annual work plan criteria can include specific projects and items, such as teamwork and supervision, managers and employees need to communicate with each other more frequently to better assess employee progress. Since the MBC results in a variable monetary reward, both the employee and the supervisor have an interest in doing well.

Employees and managers take more ownership of the process and regular feedback is essential to the program. John Lloyd says: “Pride in shaping the future success of the mission has always been at the heart of our oversight body and the MBC program is the perfect platform for overseers to demonstrate the critical role they play in managing the resources that play in the best interest of the United States government".

MBC offers managers the opportunity to focus employees on mission objectives and the most important aspects of their individual work. For example, embassy leadership may require all departments to focus on a specific goal or objective proposed by the ambassador during the evaluation period. Because MBC allows for custom criteria in the evaluation, a manager can also have more control over how to instruct the employee to focus on a specific weighted objective.

Additionally, managers can use MBC to help employees improve and develop in specific areas. The flexibility of the program even allows supervisors to identify important jobs that fall outside of an employee's normal duties, such as: B. temporarily filling in for a colleague who has left the company.

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But this has been tried (and failed) before...

It is true. The US government tested the benefits for civil servants and eventually went back to the tiered system. There are a few things that set MBC apart from other shows that have tried and failed. Under the MBC, public servants are placed in a performance group with other public servants of similar functions and grades (eg, grade 8 consular performance group). MBC adds an additional layer of review through the role of Group Supervisor, a senior employee hired directly from the US who is responsible for reviewing and approving employee reviews in their department or agency. Nicknamed the "gatekeeper of fairness and consistency," the group supervisor helps maintain the credibility of the program by ensuring that supervisors justify their scores.

Another aspect of CBM that other versions of pay-for-performance programs lack is the extensive analysis and evaluation that occurs at the end of each performance cycle. Missions can evaluate the data to determine if additional training is needed or if other adjustments are needed.

CBM represents a major transition for HR employees, supervisors and managers, therefore, when an entity decides to adopt CBM, the implementation is carefully orchestrated with subsequent specialized training. All HR assistants complete a one-week FSI course to ensure they are ready to implement the program and gain the tools they need to answer questions from their colleagues at work. Each mission also receives an in-depth visit from a subject matter expert who works with management to ensure that all mission personnel are fully briefed on the new program.

Many fear that a show like MBC will not work in certain regions or countries. In fact, pay for performance is very common (ie mainstream practice) around the world. An augmentation system is rare; it is usually only found in government organizations. Most of the organizations that US missions compare compensation and benefits with to make sure they are a competitive employer have used similar performance management systems for many years.

Will my next post include MBC?

In November 2017, the results of a survey sent to all agencies that have implemented pay for performance for a year or more were overwhelmingly positive for the program. 70 percent of those surveyed agreed that the CBM promotes additional meaningful communication between managers and employees and is an effective target identification tool. In addition, 56% of all employees felt that the start of the program at their workplace was well organized.

The experience in San Salvador is significant. There, the Human Resources team overcame misinformation and skepticism to successfully implement the CBM. With broad support from head office, they developed a highly effective marketing plan that included public meetings, presentations by US experts, and 34 informational sessions with 544 participants.

As CEO Holly Peirce explains, “The campaign delivered an easy-to-understand, fact-based message centered on three compelling points: (1) CBM is not a cost-saving measure; (2) the new system will result in higher compensation throughout an employee's career; and (3) all money budgeted for salary increases goes to employees (which was not the case previously).' The campaign, Peirce reports, has turned negative perceptions into cautious anticipation.

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As of this writing, 66 stations worldwide have implemented or are in the process of implementing the program, so there is a good chance that US monitors will find MBC at their nearest station. All Office of European and Eurasian Affairs positions were moved to MBC, and at the regional level they were taken over by the Offices of Western Hemisphere Affairs and East Asia-Pacific Affairs. By the end of 2019, the Departments of Middle Eastern Affairs and South and Central Asia will have implemented the CBM in two locations, and the Bureau of African Affairs has initiated a trial and implemented the program in one location.

Overall, almost half of all foreign agencies will take over MBC by the end of 2019.

Prepare for performance-based pay (2)

Elizabeth LaMontagne currently works in the Office of Foreign Employment in the Department of State's Office of Human Resources in the Locally Employed Personnel Policy team, focusing primarily on the performance management portfolio. She joined the Foreign Office in 1999 as a family member entitled to Foreign Service and has served on numerous international assignments, including Vietnam, Suriname, France and Benin. Before joining the State Department, she worked at IBM in communications and brand marketing.

More information about MBC

MBC Basics2 day workshopFSI oder Regional Service Center (en Frankfurt)Aimed at managers who want to know more about the program
Performance-Based Compensation (PA-339)5 Take the courseRegional Service Center (for EUR in Frankfurt)

Florida Regional Center (for WHA in Fort Lauderdale)

Regional Employee Development Center (for EAP in Bangkok)

Designed for the HR team responsible for the ongoing program

Quelle: US-Außenministerium, Office of Human Resources, Office for Employment Abroad.

See more information...


What is performance-based pay mean? ›

Key takeaway: Performance-based pay is compensation directly tied to an employee's contributions to a company, or the company's financial performance over the pay period.

How do you structure performance-based pay? ›

Typically in a performance-based pay structure, employees are compensated depending upon performance tied to a set of criteria or goals. For example, if sales exceed a specific amount based on weekly, monthly or annual goals, the manager may rate and consider compensation increases.

What are examples of performance-based pay? ›

Examples include spot bonuses (where employees are rewarded “on the spot” for achievements that deserve special recognition), project bonuses (where employees are rewarded for successful completion of a project), and retention bonuses (usually awarded to long-tenured employees to encourage retention).

Is performance-based pay good? ›

Is performance-based pay effective? It can be an effective way to motivate your employees and reward them for being more productive. The advantages include increased employee retention, better recruiting, and higher performance.

Why do companies pay performance based pay? ›

For employees, performance-based compensation is a reward for their hard work and acts as an acknowledgment of their contribution to the firm as well as functioning as an incentive to stay with the company. Most employee bonuses are performance-based compensation.

Why would performance based pay suit you? ›

It can act as an incentive to increase employee performance and efficiency, through goal-setting, as employees want to achieve the best pay increase. It can improve motivation, focus and morale in the workplace. It can assist to achieve a strong bond between employee and company.

What are the key components to a pay-for-performance plan? ›

To be effective, every performance-based pay system must encompass a few key elements. These include clear objectives, a thorough performance process, and a tool to support your pay-for-performance initiatives.

What are the key components of a pay-for-performance system? ›

There are 5 major components of an effective pay-for-performance program:
  • Evaluation forms. These can be differentiated by employee groups if necessary. ...
  • Administrative manual or handbook for managers. ...
  • Initial and on-going training. ...
  • Effective communication channels. ...
  • On-going coaching and feedback.
Jul 24, 2013

Can you give an example of a performance based task? ›

However, performance-based assessments can be applied to almost any lesson and any objective. For example, children could be asked to design and carry out an experiment in science, write and perform a poem in English, or create a series of themed paintings in art. In general, these assessments can take many forms.

What is an example of a performance based assessment? ›

Examples of performance assessments include composing a few sentences in an open-ended short response, developing a thorough analysis in an essay, conducting a laboratory investigation, curating a portfolio of student work, and completing an original research paper.

How does performance based pay motivate employees? ›

Pay-for-performance motivates employees to work above the expected standard to earn the extra compensation. Therefore, when employees are compensated based on their performance, they are more likely to work effectively to increase their income.

What is the disadvantage of performance based? ›

Disadvantages: Some disadvantages of performance based tests that are given to our children can include limitations to the teacher such as teaching specifically to the test and not allowing the students to learn outside of the test material as well as limiting the value of the test ("What Should").

What is the dark side of pay for performance? ›

It may demotivate low-performing workers

If not conducted correctly, pay increases based on performance may affect your low-performing workers negatively. They may see themselves as incapable of reaching such incentives, and their effort may suffer.

What are the disadvantages of performance based pay system? ›

High stress levels

A recent study published in the Human Resource Management Journal found that employees who receive performance based pay work harder than those who don't - but also experience higher stress levels and lower levels of job satisfaction.

What is the problem with pay for performance? ›

The evidence for how pay for performance can undermine intrinsic motivation is rooted in a body of literature led by Deci & Ryan. These studies found that tangible rewards, especially monetary ones, tend to undermine participants' intrinsic motivation.

What are the two levels of performance based pay? ›

Two levels exist: Individual level, and team and organizational level. a pay plan consisting of a pay rise which is linked directly to performance. a pay plan that rewards employees for recent performance rather than historical performance.

What are the 5 performance elements? ›

Performance elements and standards should be measurable, understandable, verifiable, equitable, and achievable. Through critical elements, employees are held accountable as individuals for work assignments or responsibilities.

What are the three pillars of performance? ›

In all sports there are three “Pillars” of Performance for the athlete. These are: technical skills (hands), physical skills (feet), and mental skills (head). Each of these three Pillars develops at a different speed and each plays a more important role at different times in the athlete's development.

What are the six basic elements of performance management? ›

Given below are the required six elements of a performance management program.
  • Performance criteria. ...
  • Measuring performance. ...
  • Performance appraisal interviews. ...
  • Employee Feedback. ...
  • Employee record. ...
  • HR management involvement and decisions.

What are the main objectives for pay-for-performance? ›

Goals for the Pay-for-Performance System

Motivate people to join the organization. Motivate employees to perform at the top of their skill set. Motivate employees to stay.

What are performance based skills? ›

Performance-based learning and performance-based assessment is a system of learning and assessment that allows students to demonstrate their knowledge and skills in a learning environment that embraces their higher-order thinking skills, as well as relating it to real-world situations (Performance-Based Learning and ...

What are the 6 types of performance tasks? ›

Types of Performance Task
  • Types of Performance Task.
  •  Solving a Problem. ...
  •  Completing an Inquiry. ...
  •  Determining a position. ...
  •  Demonstration Task. ...
  •  Developing Exhibits. ...
  •  Presentation Task. ...
  •  Capstone Performance.

What are the four types of performance based assessment? ›

There are three types of performance-based assessment from which to choose: products, performances, or process-oriented assessments (McTighe & Ferrara, 1998). A product refers to something produced by students providing concrete examples of the application of knowledge.

How do you prepare a performance-based assessment? ›

How can teachers create performance-based assessments for their students?
  1. Identify goals of the performance-based assessment. ...
  2. Select the appropriate course standards. ...
  3. Review assessments and identify learning gaps. ...
  4. Design the scenario. ...
  5. Gather or create materials. ...
  6. Develop a learning plan.
Dec 7, 2015

What is the first step in planning for a performance-based assessment? ›

The first step in creating a performance assessment is defining the target -- determining what is it you are going to assess. This can generally be accomplished by reviewing the standards and objectives. For example, the following benchmarks clearly require assessments other than objective quizzes.

What are the five important points of performance assessment? ›

An effective performance evaluation system has standardized evaluation forms, performance measures, feedback guidelines and disciplinary procedures.
  • Develop an evaluation form.
  • Identify performance measures.
  • Set guidelines for feedback.
  • Give balanced feedback. ...
  • Outline expectations for improvement.

What are the advantages and disadvantages of performance-related pay? ›

Performance-related pay might enhance productivity, efficiency and loyalty rates, but only in the short-term. A good example of this is when a business offers their employees an annual bonus and a handful leave immediately after receiving it. Offering more money for higher performers is only a quick-fix.

Does performance pay increase job satisfaction? ›

Performance pay appears to be associated with lower levels of satisfaction with job security.

What is a weakness of performance based assessment? ›

One major disadvantage with performance assessments is that they are typically very time consuming for students and teachers. This means that fewer assessments can be gathered so if they are not carefully devised fewer learning goals will be assessed which can reduce content validity.

How do you design a pay structure? ›

There are several steps to designing a pay structure: job analysis; job evaluation; pay survey analysis; pay policy development; and pay structure formation.

How do you create a pay structure? ›

You can establish pay structures by generating job grades, setting a market pay line, and establishing pay ranges. A job grade is a collection of distinct but comparable occupations. Establishing work grades enables comparable occupations to be compensated similarly.

What are the four components of a pay program? ›

A pay program may include the following four components: base pay, wage and salary add-ons, incentive payments, and benefits and services. Base pay refers to the cash that an employer pays for the work performed.

What is the best salary structure? ›

The Basic component is the primary component and the core of the salary structure. It is usually the largest component of the CTC making up for 50% of the total CTC.
Note: The salary structures is updated effective FY 2021-2022.
DA5% of CTC
HRA50% of Basic + DA if metro and 40% if non-metro
11 more rows

How big of a range should you give for salary? ›

A good rule of thumb is to keep the lower end of your range at least 10 percent above your current salary, or the number you determine is a reasonable salary for the position. For example, if you currently earn $50,000, you may say that your range is $55,000 to $65,000.


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3. Coaching Poor Performance
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4. Performance-based pay for teachers, says study
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