Beyond Bonuses: McLean & Company Research Reveals Why Most Pay-for-Performance Programs Fail, and What HR Can Do About It

Findings from McLean & Company’s research reveal that while organizations widely recognize the importance of connecting performance to compensation, few believe they execute it effectively. The global HR research and advisory firm’s “Design a Purposeful Pay for Performance Program” outlines a clear, practical roadmap to help HR leaders create a customized pay for performance approach aligned to their organization’s goals, transforming compensation from an annual process into a powerful driver of engagement, differentiation, and business success.

TORONTO, Feb. 27, 2026 /PRNewswire/ – Compensation is one of the most visible signals an organization sends about what it values. Yet many pay for performance (P4P) programs fail to clearly connect rewards to results, weakening their ability to motivate employees and reinforce strategic priorities. To help HR leaders close this gap, McLean & Company has released updated research, Design a Purposeful Pay for Performance Program, designed to support the intentional, aligned design of P4P programs that build trust, strengthen retention, and drive meaningful performance outcomes.

The firm reports that while 69% of HR departments believe total employee compensation is important to achieving business and HR goals, only 25% believe they are very effective in this area (McLean and Company Management & Governance Diagnostic, 2023-2025). This disconnect highlights a critical opportunity for HR to elevate compensation strategy beyond administration and into strategic impact. Moreover, according to McLean & Company’s Engagement Survey data (2022–2025), employees who are satisfied with their total compensation are 1.8 times more likely to expect to remain with their organization one year from now. Additionally, employees who believe they will be compensated fairly if their performance exceeds expectations are 2.7 times more likely to be engaged. Together, these findings outline a clear theme: When employees see a credible, fair link between their contributions and how they are rewarded, engagement strengthens, trust deepens, and retention becomes a measurable outcome.

“Pay for performance is never just about pay,” says Lexi Hambides, Director, HR Research & Advisory Services. “It sends a powerful message about what the organization values, who it invests in, and how effort translates into opportunity. When that connection is clear, organizations see improvements in motivation, retention, and engagement.”

Many organizations encounter predictable barriers. One-size-fits-all program designs often fail to reflect organizational culture or financial realities, while budget constraints can limit meaningful differentiation between top and average performers, weakening motivational impact. At the same time, insufficient performance data, unclear objectives, and limited leadership sponsorship erode trust in the process. Without intentional design and strong alignment, even well-funded P4P programs struggle to deliver the results they promise.

Purposeful Design Is Essential to Pay for Performance Success

McLean & Company’s research stresses that effective P4P requires intentional choices about compensation structure. Base pay signals long-term investment but reduces cost flexibility, while variable pay offers agility but less predictability. The right balance must reflect the organization’s strategy, culture, and financial context.

Through a practical three-step framework, Design a Purposeful Pay for Performance Program helps HR leaders clarify their compensation philosophy, align rewards to strategic priorities, and embed fairness, transparency, and leader capability into execution. The HR research and advisory firm advises HR leaders that when designed with intention, P4P becomes a measurable driver of engagement, retention, and business performance.

Organizations interested in exploring related areas such as performance management or broader HR strategy may also benefit from McLean & Company’s Performance Management Workshop and Strategic HR Essentials training program.

For media inquiries or to connect with McLean & Company analysts for exclusive, research-backed insights on compensation strategy, performance management, and employee engagement, please contact Communications Manager Katie Tame at [email protected].

Media Inquiries for McLean & Company HR Analysts and Industry Experts

For media inquiries or to connect with McLean & Company analysts for exclusive, research-backed insights on human resources, crisis management, and building resilient, future-ready teams, please contact communications manager Katie Tame at [email protected].

About McLean & Company

McLean & Company pairs evidence-based research and immediately applicable tools with deep HR expertise to position organizations to meet today’s needs and prepare for the future. The global HR research and advisory firm’s member organizations enjoy comprehensive resources, full-service diagnostics, workshops, action plans, and advisory services for all levels of HR professionals, from executive leadership and HR leaders to HR team members, that help shape workplaces where everyone thrives.

McLean & Company is a division of Info-Tech Research Group.

Media professionals can register for unrestricted access to research across IT, HR, and software and hundreds of industry analysts through the firm’s Media Insiders program. To gain access, contact [email protected].

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SOURCE McLean & Company