Regardless of tough times, poor company results or average employee performance, most employees feel entitled to an annual raise. This is because most employees have not been shown the connection between pay increase and value created in the workplace.
Even as management, we are still employees. That means we are aware that the only we qualify for a raise is to add value to our organization. Showing up each day (though a good start) does not justify a pay increase. Doing the job the same way day-in-and-day-out does not justify a pay increase.
What can, however, justify a change in pay is actively making a difference in the workplace (in efficiency, in effectiveness or in doing something extraordinary).
- Efficiency improvements include reducing the time spent on a task or reducing the costs in the business while improving the results.
- Effectiveness improvements include knowing what (internal and external) customers expect (knowing and doing “done right”) and constantly developing ways to deliver flawless performance – every time – no exceptions.
- Extraordinary relates to the personal choice to stand out in what and how work is done – to do the extras.
These behaviors create value. These behaviors can justify pay increases.
Managements also have a role in perpetuating employees’ expectations for annual pay raises. They frequently take the easy way out by giving all employees the same increase percentage. Nothing dilutes the important connection between value contribution and pay more than applying the same raise percentage (if any) to all employees. Each pay adjustment (again, if any) should be customized around the particular employee’s ability to add value and make a difference. Sometime this additional value is not empirical – instead of a specific dollar amount, it may show up as an exceptional amount of effort, innovation, tenacity in tough times, learning new roles, teaching others, or taking on more responsibility. The point is pay is for value provided.
Here is the coaching about raises and performance I offer to both employees and managers:
Employees: Don’t come to a payroll review without specific examples of how you have added value and made a difference. If you can’t identify it, neither can management. And if you can’t identify how you made a difference, why are you entitled to greater pay?
Management: Know who your strong and weak performers are. Reward each employee based on his/her ability to be committed, think through the day, grow and develop, positively influence the bottom line, have a personal standard of excellence, make the company better and live the company’s core values.
Teach employees how to provide and measure the value they provide. Help them connect value/effort provided and pay. After all, employee compensation is nothing more than an investment (in the employee), and from that investment, we expect a return. You wouldn’t invest in something that has little or no return – why should your company?
This entry was posted on Monday, September 3rd, 2012 at 8:01 am and is filed under For Managers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.