As Accounting Supervisor, you must recommend annual salary increases for 2017. Y

Question

As Accounting Supervisor, you must recommend annual salary increases for 2017. You have “fresh” performance ratings for each of your employees and have had face-to-face discussions with each. Your company’s compensation function is currently using a “performance matrix” (e.g. ratings from 1 to 5) based on several different dimensions of the job. You have a 3% merit budget to award your team as you see fit, and this is consistent with what other companies are doing locally, as well as regionally and nationally.

1. Identify some of the pros and cons of employing a forced performance ranking matrix (i.e. Grading employees 1 through 5) in managing annual merit increases.

2. Provide sample dialog explaining the merit increase decision to a “top performer” and a “bottom performer.”

3. What can companies do to continue to attract, retain and motivate employees if they cannot provide a raise?

Explanation / Answer

Forced ranking method is a system of evaluation of forced distribution where managers are required to distribute the ratings to the employees. The companies breakdown the employee workforce into 3 different reasons: Top performers 20%, middle 70% and the below average bottom line 10%.

Pros:

Cons

2. Top performer – Put in all your efforts for rating ‘A’ to move to the Team Lead position.

Bottom performer – Work hard to get rating ‘B’ so that you qualify for the bonus. You are now just 2 points behind mark. Ensure to contribute to the team efforts.

3. The companies can motivate employees by ‘recognizing’ their work. Monetary incentives alone does not motivate employees. But recognition works really well. The company can announce the best performer before the entire department and award him/her with a souvenir/certificate of merit. These types of recognition can be used for the employee growth in future in the company itself. This is the best option for companies to attract, retain and motivate employees.

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