As states consider pay equity laws, consider this: Pay is more than money. It’s recognition. It’s motivation. Do across-the-board pay increases, without regard for other factors like job performance, make sense?
When everyone gets a similar pay increase, the message to the poorer performers is that they’re performing as well as anyone else. No need to change. The message to the better performers is that their effort and contribution is not appreciated.
You’re bolstering the poorer performers. You’re dispiriting your better performers.
Something to consider:
If your budget for this year’s pay increases is 3%, for example, consider force-ranking the performance of your people based on their results against the expectations.
Provide the top performers with 6%. Provide the poorest performers with 0%. For the same expense, send the right messages to each and turn your company results in a better direction.
Poorer performers may improve or leave. Better performers will be re-energized and should stay.
Both are good outcomes.
Stan Davis is the Founding Principal of Standish Executive Search, a New England-based firm that advises business owners, executives and boards who are positioning their companies for accelerated growth, change or succession.