3 Merit Raise Dilemmas

Which is better, grouping employees into slabs as per their title or level and then assign a percentage hike to each slot OR reviewing the performance of every member on the team and then assigning a specific raise as per the performance appraisal rating?

I wouldn’t go with either – unless I can modify them a little. If I were to group employees into slabs then I would base the slab criteria to be the appraisal ranking as stars in one slab, average performers in another slab, and non-performers in the third. Then I would assign a percentage hike to each of these slabs. This seems simplistic but fair. I wouldn’t agree to hikes as per the level – then what’s the motivation to perform. I wonder if a non-performance based hike; one that is based on seniority is even valid in today’s competitive scenario.

On the second method of reviewing and assigning a percentage for each person could be a statistical nightmare if the number of team members for whom you need to carry out such an exercise exceeds beyond your tolerance level. If you can manage to do such an exercise for a large number say, above 10 people then something needs to be said for this amazing ability. I think I would rank all my team members from the highest performer to the lowest performer. Divide them into groups and assign a percentage hike to each group.

Should there be a vast difference between the salaries of the manager and those of her reportees?

I believe that the manager should earn more than her reportees, else what is the manager’s motivation. I find it difficult to believe that a manager would be comfortable with a salary that is at par with that of her reportees. However the difference I believe should be modest, say a maximum of 20% difference. If the skill set or expertise or experience of the manager is lower than that of the reportee, even then I believe that the manager should earn more than the reportee because it takes a special kind of people skill to manage a reportee who is better than oneself.

Should a manager give up a part of her hike to ensure that the team gets an incrementally better hike?

It’s not fair that the manager take a cut in her salary in order to increase the hike of her reportee. If at all that happens, it should be the manager’s choice. I think that there should be a deferred reward that the manager is gunning for to give up the immediate raise, an incentivized sacrifice that is poised to pay higher dividends in the future.