Another outtake from the Hay Group presentation I recently attended, which highlighted findings from the firm's recent research on reward design and management, conducted in partnership with WorldatWork. This interesting bit of data focuses on pay differentiation - the willingness to truly differentiate pay increases based on performance.
Survey respondents were asked to characterize the difference in pay increases provided for top versus average performers at their organizations. Responses were as follows:
- We pay 1.5 times or less (difference in pay increase for top versus average performers) - 68% of companies (so if the average performers get 4%, the top performers get 6% or less at these organizations)
- We pay 2 times or more (difference in pay increase for top versus average performers) - 32% of companies (so if the average performers get 4%, the top performers get 8% or more at these organizations)
These findings do expose a general unwillingness - or inability - to truly differentiate pay at most organizations.
As you may know, Hay also conducts the annual "America's Most Admired Companies" research that is published in Fortune magazine. They decided to separate this group of companies from others in the research to observe any implications for pay differentiation. The result:
Percent of companies paying a "2 times or more" difference in pay increases to top performers -
- America's Most Admired Companies: 53%
- All other respondents: 30%
Conclusion: the "Most Admired Companies" find a way to make pay differentiation happen!