Many organizations profess to have a pay for performance compensation plan in place. What does that mean exactly? Does it recognize and reward the right employees? 

What the definition should be is that the right employee is whoever has performed well above the majority of other employees during the performance cycle. Those employees that the organization can rightly call high achievers. And those employees whose resignation would cause their manager to lose sleep at night. Everyone else should be treated differently.

So What’s the Problem?
Well, that’s not how things work in many organizations. There are a number of other considerations besides performance alone. The result is that perhaps the right employee does not get rewarded. Or what they are given is not much more than what is also given to the average employee.

Why does this happen? Several potential culprits follow:

  • Not much money to go around: This is a common argument when merit budgets are tight. That is to say that when a manager cannot make much of a distinction when granting increases, the manger cannot make much of a distinction with rewards either. Proponents often say, “Let’s just push the easy button and give everyone the same raise.”
  • Everyone deserves something: Advocates of this strategy suggest that if an employee has not been fired then they should get something for sitting around for 12 months. They proclaim, “Hasn’t inflation increased for everyone?”
  • Someone might quit: An employee quitting is often a manager’s worst fear and in this case, may lead to an interest in providing pay increases that would retain staff. Surely they suggest, “If an employee quits it’s more work for the manager and the potential for criticism from their boss.
  • I want to be liked: “I want to be liked” is an attitude often prevalent among new managers, who want to build a collaborative team. They can be reluctant to make performance assessments and pay increases for their team. Many would blame human resources for not providing enough funds.
  • They avoid career-impacting decisions: Some managers would prefer someone else play judge and jury with an employees’ career.

Making the Hard Decisions

Rewarding the right employee becomes essentially about the manager being willing and able to make discretionary decisions about an employee’s job performance and effectiveness as an employee of the organization.
Because the budget for pay increases is always going to be tight, there will never be enough money for everyone. So an effective manager has to choose how to spend available reward dollars in a way that generates the best return for the organization.In some cases, this means that an average employee may not receive a merit increase this year, even if performance has been ok / satisfactory / meets expectations.

Making these decisions is not easy. Nor is it supposed to be.
My colleague, Rich Sperling, and I have spoken and written extensively on the topic of taking care of top performers and high-potential employees.  Contact me and we will be pleased to share our thoughts with you.
Contact Us
Please contact me at (847) 864-8979 or at nlappley@lappley.com to discuss discriminating pay among employees based on performance.  And forward this email to anyone who may also be interested in this topic.
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