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Pay raises for time served or enhanced value?

Pay raises for time served or enhanced value?

Most organizations provide for pay raises on what I call “Time Served”. We all have seen these types of programs – after six months you will have an evaluation and an adjustment which is within a fairly tight range. What I have found is that great people are demotivated by time served compensation plans. Why? Time served plans are based on the lowest common denominator.

Great people, by nature, will increase their value much faster than the lowest common denominator. Do you remember back in school when the class was going much slower than the speed you could master the material? Bad employees are fine with time served plans because they ARE the lowest common denominator.

Great employees are motivated by value based plans because they can set their own timetable. However they want to be compensated at the time of the value add not some artificial time based program which has nothing in common with their timetable of value increase.

I see many organizations failing to retain their good to great employees during the entire training period. This is a huge problem as it is these very employees who are what the organization needs. At one of the companies where I was the VP of Human Resources, we identified why our technicians left during the 5 years while they were in training - their value to us was actually rising much faster than their pay raises. The following chart represents how this happened. Mid-way through the training period they would pass a company training class and soon after leave for a competitor offering $2-3 more an hour.

All that value and training lost and now giving value to the competition!! The competition had turned the awesome company training program into a competitive advantage for them!! The competition realized all the value with none of the cost!!

This was corrected by having a value based compensation program (“Value Pathing”) with objective criteria set by the company. Once our compensation program matched the rising value of our employees - our competitor had nothing to offer. Turnover for senior technicians dropped significantly and was never an issue again. As time moved along we were close to ZERO TURNOVER for our senior technicians.

The more you can show the path and the rewards the more the employees will stay with you. If you can show the rewards will indeed be given when they achieve the objectives of the path – you will reinforce the need for them to continue walking the path. The employees who complete the path will be standing on a mountaintop which provides the pay, benefits and status which they desire and YOU NEED!!

Would you like to talk about what your path looks like?