Thursday, June 20, 2013

Level the Playing Field... NOT

So, you're in a company where processes around pay (and other money matters) are all tightly controlled. Control is one thing, if it's done for the right reasons. But, as if every worker is capable of the same quantity and quality of work, big HR teams typically generate compensation, merit increase, and bonus systems that provide very little incentive for workers to excel. No, money is not usually the biggest motivator for most folks, but it matters. And, if you’re going to bother with increases or bonuses at all, why not give them appropriately, based on someone’s true contributions.

Nevertheless, it is common to see a merit increase system that awards the average employee with something like a 2% salary increase, while the top guys get 3%! Wow, a whole percent more! At the other end, the lowest guys on your totem pole will probably get only 1%. How sad.

These kind of differentials only encourage everyone to “move to the center” of the performance curve. “It doesn’t matter if I really excel, the 1% extra raise doesn’t add up to anything.” Yes, you have other tools to
use: praise, better assignments, promotions, etc... But if the tool is there, why not use it as intended? And don't pretend that the range of increases is "secret", and that folks won't really know what's going on. They talk. They know.

I actually had one HR leader tell me that the reason they liked to keep things egalitarian was so that some managers wouldn’t use “favoritism” as a mechanism for determining increases. Huh? I absolutely want my favorite guys to get the biggest increases. Of course, I mean “favorite” in the sense of “this guy will almost kill himself to get his work done and always does a fantastic job.” If what the HR leader meant by “favorite” was “the guy I like going to lunch with or my longtime friend,” then there is a completely different problem in need of a solution.

If it is within your control, take the top 10-20% of your folks, and do everything within your power to treat them excessively well. They are your livelihood. If it's not all within your control, at least work with your HR department to sculpt a set of policies that scream, “These people are the keys to our future success. We must make it impossible for them to be unhappy over something as simple as compensation.”

Your own HR team may feel that an extra percent or 2 over what the “average” folks are getting is sufficient to get that message across. It is your job to make them understand how false that really is. If 3% increases are this year’s “norm,” then your topmost guys may deserve 6-10%. If this year’s bonus standards are for most folks to get 10% of their salaries, your best guys should be getting double that, or more.

In fact, why does anyone not in the top 20-40% of all players deserve any bonus? A bonus should be for work performed beyond the call of duty. A bonus should be reserved for the guys who are dragging everyone else in your organization across the finish line. Bonuses should be for the people that everyone else aspires to be, and that everyone else wants to work with on projects. Pool up the bonus money and only award it to the top guys. The others will know how much work those guys did anyway, and they’ll be happy that the top folks are being incented to stay and help them be better at what they themselves do. And maybe it will help incent others to get to that bonus level.

You may find yourself ultimately stifled by policy, but it's your duty to try to enact the change.

1 comment:

  1. We refer to handing out standard bonuses as spreading the money like peanut butter. We strive to award bonus money more judiciously,and in bigger chunks. I guess we have chunky peanut butter.