You can't rely on cash alone, anyway, in these times. During this current long period of relatively flat or tiny incremental salary increases, human resources people have already squeezed as much as possible out of very small discretionary annual increase opportunities. Margaret O'Hanlon wrote eloquently earlier about the current weaknesses in annual pay increase programs. This is an excellent time to expand your thinking beyond the limited boundaries of payroll budgets.
When pay increase guidelines limit good workers to 3% and outstanding performers to 4%, the difference is hardly worth the lifestyle cost penalties accepted for an extra 1%. Why bother killing yourself for a hardly noticeable pittance delivered long after the performance that earned it and trickled out in each future paycheck? You can get a much bigger boost in earnings by switching jobs.
If other jobs exist with higher salaries, why don't people quit to take those higher-paying positions more often? The answer to that simple question is also the answer to the motivational dilemma. Money is not the only reward prized by workers. Consider some of the other elements of total reward systems that are in greater supply than cash. Some of them are also easier to apply and can win much more appreciation than a few extra dollars disappearing into a bank account.
It does seem impossible to achieve a credible pay for performance (merit) system with lean payroll budgets constrained by low increase authorizations. Merit is not properly recognized by a mere 1% differentiation. Such tiny distinctions are virtually imperceptible, below the level of notice. Let's consider some solutions.
Merit is actually being reflected in retention and movement today. If they are good, you keep them; otherwise they are shed, one way or another, with minimal muss and fuss. If they are outstanding, you prize them and should shower them with (hopefully appropriate) reinforcements. Money is frequently the least available to offer, the most expensive reward element and often the least effective.
The optimal reward is being treated as a treasure rather than as a resource to be exploited. Imaginative total reward options are always possible and sometimes vital. Let's think of some ...
- Valued talent should be encouraged to stick around by frequent positive feedback from the immediate supervisor.
- Can the employee's work schedule be adjusted for maximum ease and convenience? (THEIR ease and convenience, not yours.)
- Could this person's talents, skills and abilities be enhanced for mutual enrichment by another assignment that would please the worker while simultaneously increasing the positive leverage they can supply to organizational output results?
- Are there any training courses, professional societies, sabbatical programs or task-force memberships that would serve both parties well? What new experiences do they seek that will serve their long-term career interest?
- What goods and services does this employee purchase with after-tax income that you could provide while deducting the expense from your taxes?
- It might be informative to ask your tremendously valuable top performers what they would like as a reward. Bet it will not be the same thing from each of them, either.
Rewards can and should be personalized as much as possible, because your workers are all unique human beings with individual hopes and dreams. If compensation people are to succeed in our ambition to effectively manage and administer total reward programs, we should both recognize that fact and act accordingly.
Those who visit this site are probably the most likely to cope effectively with this challenge. What say you?
E. James (Jim) Brennan is an independent compensation advisor with extensive total rewards experience in most industries. After corporate HR posts and consulting CEO roles, he was Senior Associate of pay surveyor ERI before returning to consulting in 2015. A prolific writer (author of the Performance Management Workbook), speaker and frequent expert witness in reasonable executive compensation court cases, Jim also serves on the Advisory Board of the Compensation and Benefits Review.
"Dreams" by Noah Coffey, courtesy of Creative Commons