There are rumblings underfoot among compensation and HR professionals concerning the once sacrosanct annual merit increase and whether the time may have come to (really) shake things up.
Should we be moving away from the one-size-fits-all, same-for-(nearly)every-employee merit matrix to something more differentiated, more strategic? Is it time to reconsider the "once each year" timing and look at other, particularly longer, alternatives? Should we finally get serious about shifting some portion of this annual increase in fixed base over to some sort of variable opportunity?
Do we stick with the tried and true? Tinker around the edges? Ditch the whole deal in favor of something more agile and aligned with business reality?
I'm hearing a lot of conversation and getting a lot of questions, but not yet noticing a lot of action being taken. And so, in an effort to help all of us get a better bead on this, I'm kicking off a quick survey to see whether we can collectively get a sense of the movement.
Please take a quick minute to click through the link below and respond to the short questionnaire... and please also share it with a colleague or two.
Click here to take surveyI'll share the results here. Will also happily provide a brief written report (.pdf) with any participants who request it on the questionnaire.
Thanks!
Creative Commons image "fault lines from helicopter" by wharman
Ann, I *love* this idea, but don't think we're anywhere close to getting rid of annual merit and rolling it up into some sort of variable comp. For one, the 2%-4% (broadly speaking) that most people get are much too small to make this something the business at most companies would buy into.
Secondly, at this point merit increases have become an entitlement. Moving away from the annual nature of them would require some serious change management.
That said, very good read and thanks for the survey.
Keep writing.
Best,
Rory
Posted by: Rory Trotter | March 06, 2013 at 08:06 PM
Rory:
Thanks for weighing in. Even a few months ago, I would have said the same thing ... nowhere close to moving away from annual merits ... but I am hearing the question come up in a lot of places. Too many to ignore. Particularly, I am hearing the question coming from operational leaders -- not from HR. Which makes me curious to see how much talking, and much action, is actually happening out there.
Be sure to follow the link to the survey and weigh in!
Posted by: Ann Bares | March 06, 2013 at 08:12 PM
I hear similar: very radical ideas and yet I still don't see movement toward a significant change. My hunch is, as Rory suggests, the behemoth of change management required may just be the thing keeping people from effecting the change. That and the discomfort it causes: we know people generally don't like change, even though they sure complain about the present!
I personally do think it's time for a significant change, and to use that pool to truly differentiate high performer compensation from that of 'satisfactory performers'. I agree with Rory that the merit has (for a long time) been an entitlement. That becomes an extremely expensive proposition for employers, with the chance for lower returns on their investments.
I look forward to seeing the results of your survey.
Posted by: Mercedes McBride-Walker | March 07, 2013 at 11:42 PM
I think there is an acknowledgement that the classic performance/position in range matrix approach does necessarily work, at least in the short term. However, employees, as with companies, are generally annual cycle creatures. I would think that we can do much more than "tinkering around the edges" without throwing out the process and timing.
I do believe that employees have been guided (inadvertently) by managers to focus on the increase and to pay less attention to the growth and improvement process. We are losing a lot of communication and leverage opportunity if we are serious about continuing improvement.
Additionally, unless you are in a radical thinking organization, e.g. Google, or a very large corporation with patience and resources, it will be easier to develop a dramatic change inside a comfortable timeframe and familiar process steps.
Posted by: Bill Priced | March 10, 2013 at 03:01 PM
Love it - took the survey.Thanks as always for thought-provoking ponderings, Ann.
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