More fact. People, almost universally do not work just for the money. Yes it’s important and some people have greater need for money than others but you won’t attract and keep people simply by throwing money at them. And if you do it for one, you will end up having to do it for everyone because regardless of you saying pay is “confidential” that’s crap; its virtually public domain so be really careful what precedent you set. But how do you decide what to pay. A few approaches:
· Egalitarian, everyone in a given role or at a given level is paid the same. Easy to administer, apparently fair and equitable, easy to defend. But is everyone equal?
· Everyone is an individual with individual needs and you pay according to what they say they need. So everyone is happy because they got what they asked for, but of course as soon as Bill sees what Sally is earning all thoughts of being happy go out the window and that wonderfully subversive notion of “relative deprivation” sets in and a mad scramble ensues to get paid as much as the best paid person.
· Salary banding and performance pay. Now we are getting a bit sophisticated. To set a valid salary band you need good market data and to move salaries on the basis of performance you need a performance management system that is robust enough to stand up to arguments and managed by managers strong enough to apply the right judgements. And before you even think it; that is not about a huge number of forms to be completed. It’s all about being clear about what somebody is being measured against and having regular conversations to help them meet those measures and providing support if they start to slip. On balance this is the most rational approach
· Low base and high variable pay. This relies on very good performance data that can be supported by results which is why it tends to apply in sales environments. You also need to be sure when you are hiring that people truly sign up to performance by results as a concept.
· Bend over, place your head where the sun doesn’t shine and hope for the best. Although of dubious physiological feasibility this is sadly the approach adopted by many organisations who then wonder why their pay bill has gone completely out of control.
Whatever approach you adopt needs to be consistent with the values and nature of the business. Sadly there isn’t a one size fits all model but whatever you adopt needs to be applied with rigour and fairness. Fail those tests and you WILL get runaway salary inflation.
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