Case: Pay for Performance Enhances Employee Management at Scripps Health
Scripps Health is a long-standing and prominent nonprofit health-based organization that is based in the greater San Diego area. The organization experienced a severe financial downturn that led to increased employee discontent and turnover, as well as the exit of the firm's CEO. In an effort to fix these problems, CEO and President Chris Van Gorder implemented a new strategic plan that was used to enhance how the employees were treated.
The new strategic plan contained several components that encouraged employees to work more effectively in their jobs. For example, administrators were to utilize a more participatory leadership approach to create "buy-in" among staff members, and a natural extension of this approach was the development of a physician leadership cabinet that improved how personnel interacted with each other, and that strengthened firm coordination through widespread communication. Top managers also focused on improving individual satisfaction and productivity by enhancing work efficiency levels.
A major part of these more streamlined operations stemmed from implementation of a beneficial performance management plan. In particular, this plan outlined how managerial talent would be developed, employees would be recognized for a job well done, and motivation would be orchestrated through a competitive compensation approach.
Reorganizing the compensation policies of the organization was one of the primary areas targeted for improvement by the firm's leadership. Part of this redesign process involved periodic reviews of job content, the use of annual appraisals to enhance communication, and the assessment of experience and education to properly adjust compensation amounts. Further, the organization strives to offer competitive compensation that rests at the 65th percentile of the relevant labor markets, which positions the firm squarely in the middle between the top and bottom levels of competitive compensation. The company also tests the pay markets twice a year so that it can remain competitive with regard to compensation. Finally, workers can tap into extra money based on ratings given vis-à-vis the annual performance appraisal sessions; if employees do well on their performance reviews, they can earn as much 5% of their salaries as merit-based compensation.
QUESTIONS
- Discuss how this case illustrates how compensation can be used as a method for improving employee satisfaction and motivation.
- Identify some of the ways that performance-based pay systems should be developed based on the experiences at Scripps Health.