The Work is Reward Enough? Really?

One out of five companies claim to, on a very common or somewhat common basis, award promotions to employees without a salary increase, according to an OfficeTeam sponsored study of 508 HR Managers.

The survey asked: How common is it for your company to award promotions without salary increases? Respondents said:

• Very common - 3%
• Somewhat common - 19%
• Not common at all - 63%
• We do not offer promotions without raises - 14%
• Don't know/no answer - 1%

Can't help wondering if we're treading on thin ice here.

Back last December, my Compensation Cafe colleages and I participated in a holiday podcast where one of the questions we explored was "can learning and development really be considered forms of compensation?"  The conclusion we tentatively reached (at least within the confines of a 45 minute podcast conversation) was: Perhaps... but if and only if learning and development opportunities are linked to the ability to advance within the organization. 

I do subscribe to the view that employees must be willing to invest in their skills and put their capabilities on the line up front, if they want career advancement.  I don't subscribe to the idea that career advancement is an entitlement ... or that employees deserve a raise every time they take on a new project or responsibility.  But for an employer to actually award a higher level position with greater responsibility and not deliver any increase at all?  Unless the employee has exceptional development needs to address before they're likely to deliver any value in the role and there is a plan in place to bring their base income along as they grow into the responsibilities, I think promotions without promotional increases are a bad idea.

Interestingly, a slim majority of the 433 workers also surveyed in the OfficeTeam study indicated willingness to take this leap of faith - 55% of them responded "yes" when asked whether they would be willing to accept a promotion from their company that didn't include a raise.  And in a tough economy, it is reassuring to know that many employees are willing to step up to the plate and take on more responsibility.  But, as employers, we'd better be prepared to do right by them.  Motivated staff with a "can do" attitude will be ripe for poaching by another employer who is willing to pay the going rate - or more - for their increased capabilities and contribution.

And yes, I recognize that this study may reflect a certain number of smaller employers and HR managers of limited experience - but really, this isn't reward rocket science.

The work is rewarding enough?  Maybe in the short term, as times continue to be tough.  But this could also be the kind of short-sighted, cost saving tactic that comes back to bite us hard in the shorts later on.

Comments

[E James (Jim) Brennan]

Wouldn't surprise me if 20% of all employers surveyed frequently promoted people already paid well over the standard rate for their new "bigger, higher level" job. That's pretty close to the exact percentage who admitted promoting without pay increases. It also doesn't say that those new promotees don't get proportionately larger increases in their next round. Many a company will promote someone on a trial basis, making them an "acting whatever," while withholding any "permanent" pay adjustment until they have passed their Peter Principle test, after which the temporary assignment becomes officially permanent. Perhaps the promotional bump is deferred or melded into the overall merit increase. It could also reflect a "last person standing" syndrome in which survivors of staff reductions are eager & willing to accept a new bigger hybrid post rather than risk a layoff.

Or it could reflect a meaner, more parsimonius and less generous "new reality."

[Ann Bares]

Jim:

All real possible scenarios, I would agree - including the meaner, less generous reality that I have treated as default here.

Guess promotions, like so many other things, just ain't what they used to be...

[Blair Johanson]

This recent finding is probably time sensitive as pointed out by Jim's last sentence with the "last person standing" syndrome. Based on our work with clients, the number of employees pushing for higher pay adjustments and promotions is down compared to the pre-recession time period. This employer favored approach works for the short-term but it will have a negative effect on employee motivation and retention if prolonged beyond the economic recovery. The article covered in this week's Workspan out of the New York Times shows that employers' are spending more on equipment and software than their employees during the post recovery period, a 26% and 2% respective increase. Employees should begin to reap the benefits of the economic recovery once demand exceeds supply. This statement may not be totally true if the new equipment and software purchases are meant to reduce or replace employee labor.

[Chris Young]

Nice post Ann - thanks for sharing the research from OfficeTeam! One area I have had success with Client companies is using validated values assessments to uncover how strongly certain individuals are motivated by money. Promoting an employee that is highly motivated by money, but not increasing their compensation is never a long term recipe for success.

I have included your post in my Rainmaker 'Fab Five' blog picks of the week (http://www.maximizepossibility.com/employee_retention/2011/06/the-rainmaker-fab-five-blog-picks-of-the-week-3.html) to share this research and your thoughts on "work as reward" with my readers.

Be well!

[Ann Bares]

Good points, Blair. So much of it does hinge on demand and supply - especially as employer needs for talent change over time, demanding higher knowledge and additional skill investment by the workforce. Thanks for sharing your thoughts here!

Thanks, Chris - always cool to be featured in your 'Fab Five'!