Organizations that continue to use across-the-board raises as an easy and effective way to control compensation costs and reward employees soon find out the truth. Yes, it may be easy- but it is not an effective means of controlling costs and rewarding employees, especially over the long term.
Employee pay is a key tool in fulfilling many corporate objectives. Among these are: attracting top performers; maintaining employee satisfaction; ensuring strategic alignment; increasing performance; and encouraging innovation. However, Robert Heneman, a noted compensation consultant says, “The ultimate goal of a pay system is to align the goals and interest of employees with the goals and interest of the organization.” How do across-the-board raises help achieve this?
First, it’s important to recognize that most top performers are driven by achievement. Since achievement is an internal motivator, organizations can harness its power- as well as the power of other internal motivators- by setting clear goals for individual and team performance. Management By Objective (MBO) is one way organizations have found to tap into the power of motivating employees to achieve. Across-the-board raises are not based on achievement, and so they miss out on harnessing the influence of a powerful internal motivator. Top performers would rather work in an organization that recognizes and rewards both their achievements and the effort that goes into them.
Over the last few years, several federal organizations have raised the salary range for many of their employees. This was done primarily as an effort to both attract and keep high achieving employees. Is this a workable strategy producing positive results? We think not. As stated previously, most high performers are motivated to achieve. Without a system that rewards their efforts, one of two things almost always happens: Either the high achiever leaves; or there is a noticeable drop-off in achievement. Instead of a race to the top with appropriate rewards for those who make it, across-the-board raises turn beneficial competition into a race for mediocrity.
Employee pay is a key tool in fulfilling many corporate objectives. Among these are: attracting top performers; maintaining employee satisfaction; ensuring strategic alignment; increasing performance; and encouraging innovation. However, Robert Heneman, a noted compensation consultant says, “The ultimate goal of a pay system is to align the goals and interest of employees with the goals and interest of the organization.” How do across-the-board raises help achieve this?
First, it’s important to recognize that most top performers are driven by achievement. Since achievement is an internal motivator, organizations can harness its power- as well as the power of other internal motivators- by setting clear goals for individual and team performance. Management By Objective (MBO) is one way organizations have found to tap into the power of motivating employees to achieve. Across-the-board raises are not based on achievement, and so they miss out on harnessing the influence of a powerful internal motivator. Top performers would rather work in an organization that recognizes and rewards both their achievements and the effort that goes into them.
Over the last few years, several federal organizations have raised the salary range for many of their employees. This was done primarily as an effort to both attract and keep high achieving employees. Is this a workable strategy producing positive results? We think not. As stated previously, most high performers are motivated to achieve. Without a system that rewards their efforts, one of two things almost always happens: Either the high achiever leaves; or there is a noticeable drop-off in achievement. Instead of a race to the top with appropriate rewards for those who make it, across-the-board raises turn beneficial competition into a race for mediocrity.
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