A new Towers Watson survey brings us updated information on the state of merit increases. The study, which features the January and February 2011 responses of 381 large and midsize U.S. organizations, confirms that merit increases are expected to average 3.0% across all employee groups. 2010 actual average increases, according to these organizations, ranged from 2.5% to 2.8% across different employee groups, for an overall average of 2.7%.
Survey respondents also revealed the actual distribution of available merit increase dollars across different performance levels:
The chart shows that performers who "met expectations" received just a tick below the overall average increase amount - on average. The highest performers, the reported 8% of employees who "far exceeded" their expectations, received an increase just 60% larger than their "met" counterparts. Employees who "exceeded expectations", reported to be about 25% of the population, received increases averaging just 36% above their "met" peers.
And so it is not surprising that we are looking beyond salary increases for ways to truly distinguish and reward performance on the job.
Postscript: In response to my friend Jim Brennan's question below (which I suspect may be mostly rhetorical, but never mind that), I pulled up a post featuring similar research done several years ago to compare the amount of differentiation then to now. It is interesting to note that back in 2007, when our increase budgets were slightly larger, we were (proportionately) paying slightly more to the "far exceeded" group (+63% versus +60%), but notably less (+29% versus +36%) to the "exceeded" group in relation to their middle performing counterparts. So ... a bit of shifting, but nothing really striking. Thoughts?
Great post, Ann. Your right, indeed, that we must find other ways than salary increases alone to distinguish performance. But we must not only find those other ways, we must also be sure we are communicating -- well and loudly -- these additional ways so everyone understands those who perform at a higher level are recognized for that.
Posted by: Derek Irvine, Globoforce | March 21, 2011 at 01:12 PM
Am I imagining things, or is that graphic relationship same as it usually is, year after year? The proportions resonate as hauntingly familiar.
Posted by: E James (Jim) Brennan | March 21, 2011 at 02:12 PM
Thanks, Derek - agreed!
Jim:
See postscript added above. A tiny bit of shifting, which could possibly just be within the margin for error between different studies done by different firms, but clearly not much difference.
Posted by: Ann Bares | March 22, 2011 at 04:54 AM