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Advice Line | Bob Lewis » When your salary is capped

November 30, 2007 | Comments: (0)

When your salary is capped



Dear Bob ...

Do many companies have the policy of down-rating annual raises when the rate is close to the band cap? I understand that one part of that is to motivate the employee to do enough to get promoted (stop complacency).

However, that backfires when there's no job band available to be promoted into. Then the employee is faced with acceptable reviews, with annual raises more like those given to employees with sub-par performance ratings (mixed message there), and no where to go but out.

- Capped

Dear Capped ...

Most do. It has nothing to do with motivation and everything to do with basing compensation on the labor marketplace. If a company were to continue to give salary increases for someone at top of band, the company would have a financial incentive to replace the employee with another who could provide equivalent services for less.

The smart ones recognize the de-motivating aspect of having compensation fail to reflect strong performance, and provide a one-time bonus since a salary increase isn't possible.

For more on this subject (if you missed the original columns), see "Poor Joe" and "Comp logic," Keep the Joint Running, 10/22/2007 and 10/29/2007.

- Bob

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Posted by Bob Lewis on November 30, 2007 07:32 AM


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Fair enough, Bob. One of your main themes which you touch on in "Poor Joe" is that raises are forever, so it's better (from the company's standpoint) to award bonuses.

But salary freezes as punishment for being "written up" are forever too, no? Some co-workers of mine have been handed a lump of coal in the form of no raise, since they've received a written reprimand and weren't articulate or bull-headed enough to beat the rap at HR. They may not have even been aware of the consequences until evals came around.

Granted, these "write-ups" were necessary to punish such evil deeds as taking too long of a break to finish a crossword puzzle, or lingering 15 minutes extra over lunch.

And the fact that staff members are directed to spend more and more personal time squinting at Blackberrys and logging in from home is no excuse, either. After all, change is necessary, as long as all changes are orchestrated by upper management.

But that lower base salary that these staffers are stuck with will remain that much (3-4%) lower not just this year, but for every year through the end of their careers.

If staff who have one good year shouldn't be rewarded forever for it, why then should they be punished forever for having one bad year?

And as far as "Poor Joe" himself? I'm a little more sympathetic to Torre than you are. To imply that Torre was insulted by the idea of pay per performance oversimplifies the issue a little bit; his reaction struck me as similar to what the Linux kernel team's might be if some fat cat offered them $5 mil to speed up the next release by a month. What's insulting is Steinbrenner's cluelessness about the code that motivates consummate pros like Torre. The idea that someone with his passion for the craft might phone it in unless he got some sugar for a playoff berth shows a lack of understanding of what makes him tick.

Certainly there are people in the game (especially players) who do need that kind of incentive to juice up performance. But part of being smart about compensation and retention is understanding who you're dealing with.

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