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04/30/2009

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Great point Ann...not only would you not want to create a permanent solution to a temporary situation - non-cash rewards coupled with genuine, open and public recognition cost less and drive greater behavior.

Think twice about salary increases in "interesting times."

In times of great change such as now, real opportunities arrive for many employees to work outside and beyond the scope of their regular job. For those who rise to the occasion, they should be recognized for their contributions, though their real benefit is in learning more through the added work experience. This kind of challenge builds credentials for future jobs that wouldn't have occurred under normal business scenarios. And serves to exponentially accelerate one's career!

Paul:

That's a great catch phrase ... "permanent solution to a temporary situation" ... I like it and it makes the point!

Becky:

Good point and important angle - not to overlook the opportunity that comes with stretching.

Thanks - both - for the comments!

I agree..
It seems that when the topic of above expectation or extraordinary performance arises, managers first think of merit pay increases. I would go on to say, though, that we (compensation professionals and upper management) need to assure that there are other options readily available to the manager to utilize, and that we have communicated the use of these alternative options for cases such as rewarding those that go far and above the call of duty.

I have found (ironically) that in this day and time, it is incentive pay and recognition rewards that are slashed to the bone, if not totally eliminated. It goes counter to what we know to be the correct choice for times like today, when we need to reward those for exceptional performance (perhaps taking on the job of 2 or 3 people).

Adding to base pay in times like now - for short-term spikes in performance, is ill-advised, as was already stated. When the circumstances change, we also know that base pay that is high - relative to the range/band - is not lowered immediately, which puts a burden on the merit pay system. It may cause the outstanding performer to get low increases, because they are so high in the range/band. That in turn causes employee dissatisfaction. That is one thing we don't need - employee dissatisfaction with an outstanding employee that for the short term took on more than her/his share of workload. Then you are faced with more of a problem.

For this reason, the use of incentives and recognition plans that are temporary and re-earned are advised in short-term situations.

Even though the numbers justify it, some companies are resisting the use of incentives or gain-sharing at this time. I wonder if they think of them as fluff, on top of the merit plan. Some have stated that while they agree that performance needs to be rewarded, they still want to use a merit plan - and worse - spread it like peanut butter over their organizations, doling out 1-2% increases to everyone for fear of rocking the boat. I, as well as many others, have tried to convince CEOs that with that method, you do rock the apple cart of the outstanding employees. Still, I'm not seeing much of a change in mind-set. Maybe in time, with enough of us voicing a need for innovative solutions, a change will come to pass.

According to conventional wisdom as reflected by employees, any entitlement is permanent and, once enjoyed, becomes an infinite right.

True, Jim...
Therein lies the problem...
perception driven by employees, becomes the reality we all must work with.

Ann, I came across your blog a couple of weeks ago and have really enjoyed reading it.

I think one potential solution not mentioned yet is the use of equity as a way to reward (albeit on a long-term basis) those employees whose "body of work" over the year has ramped up considerably. With a chokehold on short-term cash incentives and salary increases, I would like to see a greater use of equity so that more employees can gain as stock prices climb out of the abyss.

Also, organizations are able to get more out of their people right now because of the "fear factor", without feeling they need to reward them any more than they are now...choosing to "reward" them by not putting them on the layoff list. While that may be somewhat acceptable in the short-term, as the general economy improves, employees will re-examine their effort/reward equation and look externally to get that back in balance. So organizations that reward and respond more creatively to addressing overburdened employees should come out ahead, especially in the game of retaining top talent.

Vita and Jim:

Great points on entitlements and variable pay. Like you, Vita, I am somewhat perplexed by the outright elimination of incentive and recognition plans in many instances, as they strike me as great tools for times like these.

Luke:

Good point and alternative - the times have created a window within which equity compensation may prove an attractive choice for rewarding employees who step up. I agree with you that the "reward of still having a job" card - while valid, is in danger of being overplayed here.

Glad that you found and like the blog - hope you will continue to come back and share your thoughts with all of us!

There's not always a systemic solution to a problem like motivating high performers in a down economy. I once spent 4 years in the same role with the same pay and no change in job title. All the while I was taking on more, gaining responsibility and learning quite a bit. Big surprise that I left for a higher paying job. But pay wasn't the reason I left. All that would have kept me there was one of our executives taking me out to lunch and saying, "Matt, we value you as an employee and hope that you can help us turn the company around using the leadership skills that you have. Once that happens, we see that you have future leadership potential and will look to promote you or design a role that reflects your increased responsibilities." Sometimes the answer is communication (not compensation).

Matt:

Really excellent point - thanks for sharing it here. We are often too quick to pinpoint compensation as the reason for a top performer leaving - and discount the importance of the "softer" things like communication.

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