How do you give employees pay raises without rating and ranking them as part of a traditional performance review process? That’s a question I frequently get asked when I share with people that we abolished performance reviews with an approach, called Check-in, which focuses on ongoing dialogue between employees and managers.
The process of rating and ranking employees can be challenging, especially if you’ve built a high performing team, however, the resulting distribution curve can make it relatively simple for managers to determine salary increases. Most commonly, the employee’s rating or ranking (usually a band on a bell curve, or some other kind of score) determines the associated pay raise.
I am a strong believer of making things simple, but the traditional performance review process doesn’t empower managers nor holds them accountable for managing and rewarding individual performance. In my experience, the pay grid often defers compensation decisions to Human Resources. We should expect people managers to manage, which means being mindful about their people resources and determining the best ways to attract, retain, and recognize their teams.
If you move away from ratings and rankings, how do you make the rewards process fair and successful? Here’s my advice on how to approach it:
- Invest in and develop your people managers. You are not likely to give the keys to the new Tesla to a teenager, so before making significant changes to your performance process, you need to assess your management bench. We invested heavily in management development programs prior to our implementation of Check-in. We coached them on how to set expectations, give feedback and help employees grow their careers. Management skills are foundational to making this sort of change.
- Coach your managers to think like a business owner. Our managers are given access to an internal salary tool that shows where each employee falls in the salary range for his or her role. Managers have a pool of money allocated to their team that they can award in any way they see fit. We ask them to consider three things:
- How is the employee performing relative to established objectives? What kind of impact are they making and how critical is the role they are playing in the business?
- Does this employee have unique skills that are difficult to find in the market?
- Is this employee competitively paid?
We want people to think strategically about all the financial resources they have to work with and invest them as if it were their own business. That means looking beyond base salary to total compensation, including incentive awards and stock. We also ask them to think about ways to reward and motivate employees beyond compensation. How can development opportunities or flexibility lead to great performance?
- Build Resources. It’s critical to create rewards trainings that show managers how to make decisions with a variety of different employee scenarios – from a well-compensated employee who isn’t meeting some of his or her goals to a star performer who is low on the salary range. Additionally, we bolstered support through our Employee Resource Center, which is a team of dedicated employee experience experts who can be reached online, in person or via phone. This enabled managers to access coaching on compensation any time. The first year required significant investment, but as we developed capability in our managers, we found they were supporting other managers through the process.
You might jump to the conclusion that without a strong structure in place, our managers might just give equal raises and incentive awards to all employees to avoid conflict and tough conversations. That has been far from the case. Despite having no ratings or rankings, managers differentiate employees’ performance with pay to the same extent as we did when we had a more traditional system in place. Managers are also taking personal responsibility to have important discussions – positive or challenging – with individuals on their teams.
In many ways Check-in is a simple way of managing performance, but the rewards aspect does require an investment in building managerial capability. We’ve found we’re building leaders at all levels who are actively engaged with their teams and care about how they manage company resources. Breaking free of ratings and rankings has absolutely been the right move for Adobe and, most importantly, for our employees.
You may also like: