Compensation systems – fair is in the eye of the beholder

Dear Joan,

I was hired two years ago in a management position. I have received exemplary reviews and have met all the goals set for my position. I have repeatedly made suggestions that have resulted in monetary savings and increased productivity. I get along well with the majority of my coworkers and my staff. I have gotten all positive feedback from above and below me.

 

My first year, my bonus was not as much as I expected. When I discussed this with my manager, he explained that I had not met all the goals set forth and this is because I was new. They thought I was doing great.

 

This year I met my goals 100 percent. Although it is a big “no-no,” my fellow managers discussed raises and bonuses. I know for a fact that these other managers did not meet all their goals and although our productivity results are fairly equal, mine are slightly better. I received a 4% raise and a $6100 bonus. They received a 4.1% raise/$6500 bonus and a 4.2% raise/$6700 bonus. These amounts are so small as to be insignificant, yet they mean something. What? These managers have worked at the company for over 15 years and I am a newcomer but the formula for the bonus figure doesn’t use this information. Is it political?

 

I am extremely bothered by this. I work extremely hard and I was told I would be recognized for hard work. I feel betrayed. We are not supposed to know each other’s figures, so I am not able to use this information to initiate a conversation with my manager and to be honest, I am not sure what it would accomplish anyhow. I truly cannot figure out why my fellow managers received symbolically larger amounts than I did.

 

My job pays well, has great benefits and offers a tremendous amount of flexibility. My family loves it here and my children would be devastated if we moved. However, if it were not for these points, I would begin to look elsewhere. I am feeling betrayed and I am concerned that I am going nowhere in my present position given the response to my hard work.

 

What meaning do you attach to the raises/bonuses and the fractionally larger amounts to other managers? Am I going nowhere fast?

 

Answer:

“Betrayed”? You must be kidding. I can buy “irked” or “confused” but betrayed? “Going nowhere?” What are you thinking? You have a job you love, great benefits, lots of flexibility, you get along with everyone, they love your work and your family is happy. Do you have any idea how many people would trade their life for yours?

 

Now, I can understand why you would question the difference in amounts, since you met all your goals, but let’s take a step back and get some perspective here. You have absolutely no way of knowing the details of your fellow manager’s productivity or their other value-added contributions. Frankly, I’m not surprised that two managers with 15 years experience got more than you did. (Imagine the impact if you got more than they did, or even if you all got the same amount.) And if you read into this more than is intended and catastrophize it, you will destroy your own motivation and performance.

 

Getting a 4% raise and a $6100 bonus probably seemed fantastic before you compared it to everyone else’s. No matter how sophisticated compensation systems get, I don't know any system that is viewed as perfectly fair by everyone. Every rating system—including those with complex formulas—include a component of subjectivity.

 

For example, some companies use a formula, where they give new employees a bigger percentage of merit pay based on their salaries. The rationale? They are trying to bring the salaries of new employees up faster than those of experienced employees. Is this fair? Not in the eyes of the experienced employees, who get smaller percentages and eventually get no raise at all when they hit the top of the pay scale. If experienced employees really perform above the standard, they may get a fixed amount bonus.

 

Or, how about the companies who recruit for hard-to-fill jobs and pay newcomers more than the experienced employees who are in the same jobs? This causes so much rancor, these companies end up having to make salary adjustments or pay out “retention bonuses.”

 

Let’s take the case of the companies that pay everyone the same amount across the board. One could argue that this is a fair approach. Well, not in the eyes of the star employees who are paid the same as the slackers. And boy, does this method breed slackers.

 

Shake this off. Go to your manager and tell him that you were pleased with your increase but you would like to know how the system works so you can earn even more next year. Then get over it and get on with having a great year.


Joan Lloyd is a Milwaukee based executive coach and organizational & leadership development strategist. She is known for her ability to help leaders and their teams achieve measurable, lasting improvements. Joan Lloyd & Associates, specializes in leadership development, organizational change and teambuilding, providing: executive coaching, CEO coaching & leader team coaching, 360-degree feedback processes, retreat facilitation and presentation skill coaching and small group labs. Contact Joan Lloyd & Associates at (414) 573-1616, mailto:info@joanlloyd.com, or www.JoanLloyd.com 
 
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