3 Reasons Why We Don’t Pay For Performance

Note: I’m talking about those of us who manage merit pay systems.

Some of us might get close to paying for performance, but no cigar.  Why not?  A lot of the time it is because of Ron’s 3 Laws of Compensation:

1. Managers are afraid not to give salary increases to those employees who don’t deserve them.  They just don’t want to tell one of their people that he doesn’t get a raise and they assume that inflation is around 3%, so they don’t want to grant any one of them a salary increase below 3%.  If the salary increase budget is 4%, then the salary differential between the star and the mediocre performer won’t be that much.

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