How does your company think about rewarding employee performance? Are you more of the "peanut butter" approach, or moving towards a more "pay for performance" model? https://lnkd.in/gmkNEjEZ
Do you actually have a pay for performance culture? Your CFO gives you a set budget–call it $10M across 2,000 employees–for the upcoming merit cycle. How do you spend it? Extreme 1 => a $10M raise all to one individual. Extreme 2 => an equal $5,000 raise to all 2,000 employees. Extreme 1 is not realistic, but it is the far extreme example of a “Pay for Performance” culture. Perhaps one engineer shipped a feature that generated $1 trillion in revenue for the company and the other 1,999 employees took a six-month-long vacation to the Dolomites. You could hypothetically give 100% of the merit cycle budget to this trillion dollar engineer. Extreme 2 is called the “peanut butter” approach. In short, you give the same pay increase to employees regardless of their performance level Neither extreme is likely to be optimal. The right answer for your company is somewhere in between and is contingent upon the desired culture you want to establish. _____________ How does your company compare to the market? Loosely, the market medians Q1 of 2024 according to Pave’s benchmarks were as follows: ✅ 87% of eligible employees received a salary raise (74% of all employees) ✅ 9.2%: median salary raise for those promoted ✅ 4.0%: median salary raise those not promoted who still received a raise Want to actually ensure that your company leans into “pay for performance” while not blowing through your budget? The answer in this context is to give fewer people larger raises. Of course, there are numerous implications to consider from pay equity, optics, and cultural perspectives. _____________ #pave #payforperformance #meritcycle #benchmarks