Amusing and helpful articles from Margaret O’Hanlon on how to work through very small merit increase budgets and the associated, sometimes awkward, conversations managers should be prepared to have with employees.
I’ll add one thing to this mix: consider taking your fiscal year merit pool and instead adding it to people’s target incentive targets (or to the larger bonus pool) as a way of having more skin in the game. It may not be as satisfying to people who prefer base salary increases (and who wouldn’t considering the ripple effect it has on total compensation and long term earnings) but it’s better than nothing, to be frank. You have to be very careful that you’re not forgetting your overall compensation philosophy or that you’re setting yourself up for undesirable behaviour or reactions from employees (ie, they simply do not believe this plan will pay out and therefore “check out”, therefore losing any motivational opportunity). Lastly, don’t do something like this if your measurement system can’t support it, if organizational goal setting and cascading isn’t a priority from your executive team, or if accountability is simply secondary to other issues.
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