"They" say that lists are a key ingredient to the engaging and successful blog. Well, catchy titles and snappy prose are not exactly my forte (I am, after all, a compensation geek), but in the spirit of continuous improvement I offer here my list of the top six reasons to care about salary increase projections (which are all we compensation people can talk about this time of year - see WorldatWork's Ryan Johnson's post on this topic, also here and here).
And here they go...
Reason #6 - Its a Budgeting Mainstay. If your finance people aren't already camped on your doorstep asking (nay, demanding) what should be budgeted for salary increases next year, they will be soon. Whether or not your organization is in a position to mimic market salary growth practices, you'd better at least know what they are when you address this question.
Reason #5 - Be in The Know; Scoop the Press. As press releases from completed salary budget surveys begin to roll out over the coming weeks, media sources from the Wall Street Journal to your local newspaper will be carrying blurbs about what employees can expect for pay increases next year (juxtaposed, naturally, with corresponding stories on inflation and the continued rise in health care expenses). Employees will be reading these with great interest, of course. Know before they do.
Reason #4 - Age That Old Survey Data. Someday, when the coming revolution in the compensation survey business has played out, we will all have ever-fresh, up-to-the-minute pay data at our fingertips whenever we need it. In the meantime, actual and projected salary increase figures from salary budget surveys help us determine the rate at which to "age" old pay survey data to bring it approximatly current.
Reason #3 - Freshen Up That Matrix. Are you using a matrix to guide salary increase decisions? If designed well (and, by the way, you should revisit that design on an annual basis), that salary increase matrix rests on a fulcrum - and that fulcrum is the competitive salary increase, which most organizations intend to deliver to competent ("meets expectations") employees who are in the middle part of their assigned salary range. Shifts in competitive salary increase levels, even minor ones, may require you to re-tool your matrix to ensure that it is delivering what you intend.
Reason #2 - Get That Structure In Line. In addition to actual and projected salary increase information, salary budget surveys also provide data on the adjustments that organizations have made - and are projecting to make - to their salary range structures. This information is helpful if you are contemplating (as you should, on an annual basis) whether and by how much you should bump up your salary structures, assuming you aren't in a position to do a more detailed market benchmarking study. But beware of responding too literally to the structure adjustment numbers (which tend to run at about 75% of average salary increase amounts) when making your adjustment decision.
Reason #1 - Realize - Once Again - The Limits of Merit Pay. Having difficulty motivating and rewarding employees with a merit increase budget of under 4%? Of course you are! Even in organizations that do the heavy lifting necessary for effective performance appraisal and salary differentiation, it is hard to produce meaningful rewards under the circumstances that these kinds of budgets impose. This problem has been the driving force behind the surge in recognition and incentive plans. Just know that meaningful "pay-for-performance" can no longer (if it ever could) be one-dimensional (i.e. via salary increases alone), but will have to involve a thoughtfully coordinated portfolio of different programs.
Excellent post, Ann.
Like they say "beauty lies in the eyes of the beholder", reactions to comp increases depend on who has got what! For the guy with a great increase, the organization truly backs meritocracy while as for the guy with the least increase, managements suck.
Posted by: Prem Rao | August 02, 2007 at 01:54 AM