Show Me The Shekels

John Whitaker Compensation/Cash Money, HR, HR (& Life!) Advice, John Whitaker, Organizational Development, Recruiting, Retention

My buddy KD just wrote a piece about the importance of the Employee Development Plan when targeting the performance “middle-class.” It makes a lot of sense; you have 20% of your people who don’t want development, 20% who manage their own development, and a huge population in the middle who are waiting to be captured by one camp or the other.

It’s not a point I would argue, but the mercenary in me will add this: don’t forget the motivational impact of money.

Show me the shekels, boss.

One of the more eye-opening consistencies I’ve seen over these many years is the inability of managers to make meaningful differentiation in compensation decisions. Why does that continue to perpetuate?

  • Over time we have become accustomed to a “Cost of Living” mentality that confused the purpose of a merit increase.
  • Bonus “targets” were seen as a guaranteed component of our annual income.
  • Long-term incentives were utilized more as an annual reward, rather than a strategic component of retention.

The result is a population of employees who expect increases from management. You can give your own department a quick litmus test—using the same Pareto guideline of 80/20, would you say your top performing 20% are receiving 80% of the rewards to which they are entitled? That’s really a question that needs no answer, right? Of course they aren’t.

It’s not an easy situation to correct, and we (as management AND as Human Resources professionals) continue to make things difficult for ourselves. How?

  • Goal-setting rarely gets the attention it deserves, leaving a lot of leeway for marginal performers to slide into the “Meets Expectations” net. It comes time to give a merit increase or bonus, and a manager feels “stuck”: “I can’t knock them for not hitting goals that weren’t specifically called out.
  • As managers, we also know that if we haven’t been diligent in addressing performance shortcomings, we’re putting ourselves at risk by surprising an employee with a poor rating (this little scenario happens more than we’d like to admit, and deserves a dedicated piece of its own—stay tuned.) In professional circles, this is known as the CYA method.
  • “Other” managers aren’t making significant differentiations in their awards; why should we be the trend-setter for unpopularity?
  • We feel bad… OR… we’re scared. The thought of being the bad guy/girl just doesn’t resonate very well with our desire to be magnanimous.

HRBP’s should be on this situation like stink on a monkey. One of the great tools we have for creating positive movement throughout the organization is the effective use of monetary rewards.

Use your money wisely. Meaningful differentiation in merit and bonus allotment is the proof in the pudding. Every “Meets Expectations” is not created equal. Merit raises have ranges. Bonuses are discretionary. Long-term incentives are designed to retain your key performers. Money matters.

Challenge your hiring managers to make the tough decisions and have the tough conversations. We can debate the merits of stack-ranking employees, but I’ve found it to be a helpful exercise to prompt the mindset needed in these situations.

Your 20% is watching.

FOT Note: This post is sponsored by the good folks at CareerBuilder.com, who care so much about the world of recruiting and human resources that they’ve become an annual sponsor at FOT.  Here’s where it gets good: As part of the CareerBuilder sponsorship, FOT contributors get to write anything we want on a monthly basis, and CareerBuilder doesn’t get to review it.  We’re also doing a monthly podcast called the “Post and Pray Podcast,” which is also sponsored by CareerBuilder.  Good times.