Pay Complacency Q&A

February 08, 2015

Our recent blog on Pay Complacency prompted three requests from readers for further information. The first, how would we recommend treating solid performers who have reached the top of their range but who continue to provide exceptional leadership. The Second, asks how as more companies move away from annual performance reviews do you ensure that assessment is consistent and moving everyone in the same direction? The third question, who was the scary, mean looking guy in the picture above the blog?

Salary Range Management

Your salary ranges and grade structure are completely artificial constructs, they are there to provide guidance and the world will not come to an end if we wander outside them. However, many companies particularly those who operate completely transparent pay structures would feel that internal equity was being somehow impugned if guidelines were continually ignored for the benefit of a few individuals no matter how well they were performing.

Firstly, we would suggest making sure that the individual's performance warrants the position in range. Has there really been superior performance over an extended period? Remember that progress in the range beyond the mid-point will typically be slower with rising performance expectations. While it may be too late to roll back prior awards it may provide context for the current review and discussion.

Examining the role itself would be the next step, to make sure that the position's responsibilities have not materially changed to an extent that the role would be evaluated at a higher level. This can sometimes happen when an individual takes on often inadvertently, over time a leadership capacity or key contributor position. Companies with highly engaged work teams are now including behaviors in job evaluations to accommodate this phenomenon and to recognize contributors with extensive knowledge of a particular function. These are the individuals that you would look for in a soft due diligence as part of an acquisition.

Depending how conscientious the employer is in managing range maximums another approach to rewarding exceptional performance is the discretionary incentive that is provided as a single amount and not consolidated into base salary. It may or may not be recognized for benefit accrual purposes and may for convenience be included as a discretionary supplement to the regular annual incentive. Increasingly as we figure out what engagement means and recognize that it breeds innovation there should always be room to reward it outside of the regular metrics driven incentive plan.

I personally oversee two organizations and can point to examples in each where we have made discretionary awards to individuals who have put the organization before themselves at the cost of reducing their annual metrics driven incentive.

Performance Reviews

Consistency of performance review requires the leadership team to be completely aligned in terms of culture and values and to be totally in sync with what they mean. Much hard work will have gone into exploring this as a leadership team before they feel confident enough to review performance in the moment, consistently.

An organization that abandons the formal one time review will likely transition over several cycles and will have ensured that all aspects of employee terms, conditions and communications are aligned with and support the behavioral expectations embedded into the values of the company to ensure that we all walk the talk.

Such organizations may have also invested in cross functional synergy workshops to examine examples of performance and ensure interpretations are understood and consistent. Multi-appraiser review processes will also be employed to eliminate a single manager from being able to conduct the review of performance and be responsible for an annual pay award.  

It is important to note that the standard box ticking performance appraisal process was introduced to overcome the challenges of inconsistency. To return to that world it is critical that managers are aligned and that employees recognize that. Any inconsistent treatment will quickly begin to affect engagement.

The Mean, Scary Guy

Was our Vice President HR upon learning that he had reached the top of his pay range;-0. 

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