Most Pay-for-Performance Programs Miss the Mark: McLean & Company

Mexico’s workforce faces rising turnover as employees prioritize work conditions, career growth, and well-being over pay, says McLean & Company. Businesses across manufacturing, logistics, finance, and tech must align compensation, recognition, leadership, and mental health initiatives to retain talent and maintain productivity amid regulatory changes like NOM-035.

Compensation strategies that link pay to performance often fail to deliver measurable improvements in employee engagement and retention, according to research by McLean & Company. At the same time, Mexico’s labor market faces rising turnover, burnout, and a generational shift that is redefining workforce expectations. Employers are increasingly challenged to balance performance incentives, recognition, and well-being to maintain productivity and competitiveness.

Pay and Recognition Gaps

McLean & Company’s report, Design a Purposeful Pay for Performance Program, highlights a critical disconnect: while 69% of HR departments consider total compensation important for achieving business and HR goals, only 25% believe they execute this effectively. The firm found that employees who perceive fair compensation for exceeding performance expectations are 2.7 times more likely to report engagement, and those satisfied with total compensation are 1.8 times more likely to remain with their organization over the next year.

“Pay for performance is never just about pay,” says Lexi Hambides, Director of HR Research and Advisory Services, McLean & Company. “It sends a powerful message about what the organization values, who it invests in, and how effort translates into opportunity.”

Experts in Mexico stress that traditional end-of-year bonuses no longer suffice to retain talent. Juan Valencia, Country Manager Mexico, Dcanje, says that 75% of Mexican workers report work-related stress, contributing to turnover rates approaching 30% in early 2026. “Recognition must evolve from an annual corporate event into a daily psychological lifeline for every employee,” he says. Daily acknowledgment of accomplishments, even in supporting roles, can reduce emotional exhaustion and protect organizational knowledge.

Similarly, Agustín Perelman, Co-Founder, Bonda, emphasizes the financial impact of mental health challenges. Productivity losses linked to stress and anxiety total MX$16 billion (US$915 million) annually in Mexico, he says. Organizations that embed preventive well-being initiatives — ranging from psychotherapy and meditation programs to flexible benefits — can improve retention, reduce absenteeism, and strengthen job satisfaction.

Structural Workforce Pressures

Beyond compensation, broader labor-market trends are shaping retention. Research from Computrabajo and Pandapé shows that 56% of Mexican professionals rank working conditions above salary when considering a job change, reflecting a post-pandemic reassessment of priorities. These analysts report that while formal employment is growing, much of this reflects the registration of platform workers rather than net new positions, and young professionals face fewer clear advancement opportunities.

Pato Bichara, Founder and CEO, Collective Academy, notes that Generation Z now accounts for 18% of the workforce and will reach 30% by 2030. Early-career employees have an average tenure of 1.1 years in their first five years, driven by structural gaps in job ladders and a lack of purposeful work. Bichara said, “The question is not whether Gen Z is ready to work. The question is whether we are ready to lead them,” says Bichara. Organizations that clarify career paths, integrate AI responsibly, and redesign work for meaning are better positioned to retain younger employees.

Leadership quality is a key determinant of workforce outcomes. A 2025 survey by employment platform OCC found that nine in 10 Mexican professionals reported experiencing poor leadership, with nearly 30% resigning due to negative management behaviors. Talent Lab, a consulting and organizational development firm operating across 26 countries, highlighted the role of leadership in employee stress. 

Moving Toward Holistic HR Strategies

The evidence suggests that employers must integrate compensation, recognition, leadership, and well-being into cohesive strategies. Carlos Herrero, CEO, Extragia de Comunicación y Medios, points to global examples of reward strategies, including Mercadona in Spain and Ricardo Salinas Pliego’s practices in Mexico, noting that meaningful financial recognition and benefits encourage loyalty and reinforce organizational culture. Similarly, Perelman and Valencia advocate daily and peer-to-peer recognition, which aligns with Mexico’s NOM-035 regulation on psychosocial risk management.

McLean & Company recommends a structured three-step approach: clarify compensation philosophy, align pay with strategic priorities, and embed fairness, transparency, and leadership capability in execution. Combining these structural measures with culture-driven initiatives can turn pay-for-performance from an administrative exercise into a measurable driver of engagement, retention, and organizational performance.

The convergence of compensation research, labor-market data, and generational insights suggests that success in 2026 will depend on organizations’ ability to manage human capital holistically. Companies that treat employees as strategic assets — through purposeful recognition, fair pay, career development, and well-being programs — are better positioned to maintain productivity, reduce turnover, and sustain growth amid Mexico’s evolving labor landscape.