A SERIES OF ARTICLES FRoM THE 2011 EMEA CoMPENSATIoN ...

“The highest-performing men and women receive
nearly double the bonus opportunity that they did four
years ago”, says Penvern. “But in order to realise that
bonus opportunity, they need to run as fast as they can
in order to keep up with or stay ahead of the pack and
the market”.
While Penvern cites the value the company creates
in this performance culture, he believes that the
transparency of its bonus system is just as important.
THE LINK BETWEEN PAY FOR PERFORMANCE
AND ENGAGEMENT
“We used to have discretionary bonuses but found
with those that the correlation between pay and
performance was almost zero – surprisingly”, he recalls.
“This was a huge problem, as we know that the lower
the link between pay and performance, and the less
people can see this link, the worse our employee
engagement becomes.
“We also know that engagement predicts individual
performance, team performance and customer
satisfaction – the higher the first, the higher the
other three. These factors are also linked to the
leader’s performance – as his or her performance
improves, this drives up the average performance
score within the team. External research also shows
that engagement predicts performance, customer
satisfaction and financial results much more strongly
than the other way around”.
MEASURING SUCCESS
So, engagement is critically important to performance
and to bottom-line results, and a major factor in
driving engagement is pay for performance – and,
specifically, people’s belief that there is a link between
how they perform and how they are rewarded.
Penvern notes this is the real measure of the success
of the drive towards pay-for-performance. The
number of A.P. Moller–Maersk employees who agreed
with the employee engagement survey statement
“I believe that my pay and performance are linked”,
rose from 45% in 2008 to 57% in 2011, aligning A.P.
Moller–Maersk with the top 25% of companies that
use this as a criterion of engagement.
This proportion rises to 80% amongst employees
in the head office, where schemes for executives,
directors and professional staff are fully embedded.
Not surprisingly, the company is now looking to roll
out pay-for-performance schemes across the majority
of its businesses around the world, where it makes
business sense.
The lesson is clear. You build employee engagement
and drive performance both by having a clear and
transparent scheme that links pay and performance
and by communicating this consistently in order to
reinforce the belief that pay and performance are
linked. It’s critical to walk the talk, and if you succeed,
it is, as Penvern concludes“ a virtuous circle”.
Alex Penvern is A.P Moeller–Maersk Group’s Global Head of Compensation, Rewards and Executive HR. Based in
Copenhagen, he can be contacted at alex.penvern@maersk.com
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