Salary reviews: “That’s all I’m getting? A lousy 2%?”

by on February 3, 2010 · 6 Comments POSTED IN: HR Cafe
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Here’s what happens when a manager doesn’t understand the “first thing” about discussing money with employees.

Peter, a senior engineer, is still with ABC company 19 years after signing on as a junior engineer right out of college. In his review his boss is thinking that Peter’s one of the highest-paid employees on staff, that company performance was pretty average this year, and that Peter performed well but made no splashes.
But when Peter learns he’s getting a 2% raise he explodes. “I bust my butt year in and year out, now this is the fourth year in a row you guys have stiffed me on my raise.”

You’ll never have to clean up a train wreck like this if you understand the “first thing” about money talk in the workplace: The MANAGER must control the dialogue.

In the above example, I’m not talking about how the manager handled this particular conversation, which was doomed from the start. I’m talking about what needed to happen one year, two years, even five years prior to this conversation. During those years, Peter’s expectations were allowed to get serious out of whack. Why does this sort of thing happen? Often the reason is that managers don’t explain to people how salaries really work.

Here’s a framework that will help bosses manage expectations more effectively. We call it the M.U.L.A. Model

  • Let’s start with “M” — Market rates: Know the market rate for each job and be sure you’re paying competitively. Encourage employees to seek out their own salary research. When you do this, you create transparency around the whole issue of “what’s fair and what’s not” – and you eliminate the argument that “I’m getting shortchanged.” BONUS BENEFIT: This makes it unlikely that you’ll pay TOO MUCH for a given position.
  • The “U” stands for Un-linking pay and self-worth. Employees need to understand that pay increases are often determined by factors that have nothing to do with their intrinsic value. The truth is that base pay is hugely affected by things like company performance, availability of growth opportunities and market forces within the industry.
  • The “L” is about Leveling with employees – telling them the unvarnished truth about why they got the raise they got. For example, “You got a big raise because your responsibility increased.” Or “One contributor to your low increase is the fact that product defect rates in your department have soared, and you’re accountable for that.”
  • Finally the “A” stands for Anticipating next year’s discussion. “Set the stage” for next year’s salary review by giving the person realistic expectations going forward.

photo credit: Photos8.com

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6 Comments on This Post

  1. Cindy
    February 3, 2010 - 7:26 pm

    Interesting. So often people think that a good performance review will lead to a big raise, and vice versa. Often companies schedule the timing of reviews and the timing of pay increases at different times to help keep the two seperate.

  2. Cindy
    February 3, 2010 - 2:26 pm

    Interesting. So often people think that a good performance review will lead to a big raise, and vice versa. Often companies schedule the timing of reviews and the timing of pay increases at different times to help keep the two seperate.

  3. Cindy
    February 3, 2010 - 2:26 pm

    Interesting. So often people think that a good performance review will lead to a big raise, and vice versa. Often companies schedule the timing of reviews and the timing of pay increases at different times to help keep the two seperate.

  4. March 11, 2011 - 10:52 am

    Salary compression: How managers can ease the sting

  5. March 11, 2011 - 10:52 am

    Salary compression: How managers can ease the sting

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