Introduction
Companies are increasingly tying salary adjustments to employee performance, but the methods used to evaluate productivity remain traditional and subjective, according to the third edition of IAB México’s study in collaboration with ManpowerGroup, titled “Digital Talent Management.”
Salary Adjustments and Performance Evaluation
75% of companies in Mexico make salary adjustments primarily based on productivity and goal attainment. However, the means of measurement are still conventional; 54% still use 360-degree performance evaluations, which involve peer, leader, and subordinate assessments.
Tania Arita, Director of Recruitment at Talent Solutions of ManpowerGroup, stated in an interview: “Many companies lack clear objectives or KPIs to measure productivity, making it very subjective. When we manage by objectives, it becomes easier to grant performance-based salary increases. Many companies use 360 evaluations, where you’re assessed by your boss, colleagues, and subordinates. However, subjectivity still exists if KPIs aren’t well-defined.”
AI in Human Resources
While HR departments are beginning to leverage artificial intelligence (AI) for process improvements, its implementation is primarily focused on recruitment. Only 33% of companies apply AI to automate evaluations and strengthen team feedback.
According to Tania Arita, the lag in enhancing performance evaluation mechanisms implies that productivity-linked salary increases may not serve as a motivator or retention factor.
Despite the growing interest in linking salary adjustments to performance, traditional criteria such as inflation-based increases and internal promotions still prevail.
For digital talent, the scarcity of benefits and attractive compensation schemes is the second most relevant factor for talent acquisition and retention, according to the report’s findings.
However, only 38% of companies consider strengthening compensation and benefits as a retention and talent strategy.
“This demonstrates that specialized talent, attractive compensation packages, and the lack of professional development plans are significant areas for improvement in talent management,” the study indicates.
AI Adoption in Human Resources
In general, Human Resources is lagging behind in adopting artificial intelligence. 44% of companies have partial AI implementation in their talent management processes.
“One of the main challenges is talent retention; it’s not about seeking everything externally. How do we support the talent within the company? How do we train them? Predictive AI can help us anticipate who might leave, which key talent may depart and why. However, only 7% of companies currently use AI for retention processes,” explained Lourdes Padilla Tanco, Leader of Data & Research at IAB México.
The report shows that only 19% of companies use talent analysis platforms, 17% have performance management tools, and just 10% have a People Analytics and Big Data system in their Human Resources department.
Tania Arita emphasized that the challenge isn’t just improving AI implementation in Human Resources but also adapting the workforce to a more digital environment, as even among younger generations, there’s a skills gap in digital competencies, despite their development in a more technology-driven world.
Key Questions and Answers
- What is the main issue with current salary adjustments based on performance? Many companies lack clear objectives or KPIs to measure productivity, making the process subjective.
- How is AI being utilized in Human Resources? While some companies are beginning to use AI for recruitment, only a small percentage apply it to retention processes or have fully integrated People Analytics and Big Data systems.
- Why are traditional criteria still prevalent in salary adjustments? Despite the growing interest in linking salary increases to performance, traditional methods like inflation-based adjustments and internal promotions remain common.
- What are the key factors for retaining digital talent? Besides attractive compensation packages, the scarcity of benefits and development opportunities plays a significant role.
