"How To Reward Top Performers", Chief Executive.Net Article Features Jeff Kaye, Co-CEO of Kaye/Bassman International
"How To Reward Top Performers", Chief Executive.Net Article Features Jeff Kaye, Co-CEO of Kaye/Bassman International
Dallas, Texas - 12/6/2011:
For the first time since 1980, U.S. salary budgets are trailing the inflation rate. But that isn’t stopping employers from heaping rewards on their best performers. Top performers’ base salary raises are now typically 1.5 to 2 times those of average performers, according to Hay Group. It reports that for companies on Fortune’s most admired list there’s a 2+ times differential.
Mercer says the gap is widening “significantly” and more than two thirds of businesses are working to further increase the differential. Though employers are concerned about compensation costs “they are more worried about losing their best employees to their competitors,” says Mercer’s Catherine Hartmann.
That’s because competition for critical skills employees is now fierce. Some 59% of U.S. companies report problems recruiting them, an increase from 52% last year and 28% in 2009, according to Towers Watson.
Businesses are using a kinder, gentler form of performance ranking today than the model pioneered by Jack Welch at GE in the 1980s, where managers in the bottom 10 percent each year were shown the door. Called “rank and yank” by its detractors, the system was picked up elsewhere, sometimes with a lofty name like Individual Dignity Entitlement, as at Motorola.
Its results were not always felicitous, though. There was litigation at Ford, where within a year CEO Jacques Nasser announced the policy would be modified and the bottom 10 percent were given reprieves. The practice was softened at GE as well, which now is putting more emphasis on teamwork. Most large companies rank their employees but most don’t automatically jettison the lowest tier.
Some companies use a rank and yank system for only two or three years, according to Kerry Chou of WorldatWork, which provides education, research and conferences on employment issues. “They pick off the low hanging fruit during the first year and perhaps the system’s retained for a second year but they soon stop using it to avoid cutting into muscle.”
“Businesses have to be careful not to tilt too far, says John Challenger, CEO of Challenger, Gray & Christmas. “They have to value the employees who are not the stars, those who have been loyal for years and those who are holders of the corporate memory. There has to be the right mix between employees who challenge the status quo and others.”
Even in its gentler form today, though, ranking stirs controversy. The competition it creates among employees runs counter to the collaborative environment businesses want to create. When rewards go only to top performers and not those in the middle, “it’s difficult to tell someone they don’t get a salary increase for doing an average job,” says Ed Rataj, who heads compensation consulting at CBIZ Human Capital Services. Employees dissatisfied with their rankings question the system’s fairness and might be prompted to leave. Some authorities interviewed for this article say the system’s much better suited for cultures that are metrics-focused than for others.
Given the mixed feelings about ranking, some businesses are reluctant to talk about using it. Some go so far as not publicly identifying the employees who reside in their top tiers.
Royal Bank of Canada has just created a set of new tools to help identify the employees who are its high potentials. Earlier this year Booz Allen Hamilton selected 38 high-potential managers who will take its six-month leadership development program. Neither company has publicly identified these employees, though. Only 60% of companies formally name their high potentials and only 28% tell those employees they’ve been labeled as such, according to Towers Watson.
Among the reasons for this is fear of having these employees recruited by competitors. The strategy may be counterproductive, though, because employees who know they’re valued are less likely to leave. Research at Cornell University found that 33% of high potential managers who didn’t know their status were looking for another job, while of those who did know only 14% were looking.
There are many benefits to making it known who the company’s top performers are, says Mark A. Szypko of Kenexa: The business helps create a performance culture. It identifies benchmarks against which all of employees can aspire. And it provides “psychic income” its top performers. “Recognition is one of the most important elements for encouraging retention, says James A. Hatch, who heads the human capital practice at the EisnerAmper accounting firm. “Knowing their status motivates high-performing managers to perform even better,” he says.
Jeff Kaye, co-CEO of the Kaye/Bassman search firm, strongly encourages openness about employees’ rankings. Transparency is always best, he comments, but the information must be explained. “Secrecy hurts but telling all without context is worse than secrecy.” At his firm, he says, “We have 100% of numbers open for everyone to see.”
Read the full story.About Kaye/Bassman
Founded in 1981, Kaye/Bassman has grown to become the largest single-site executive search and recruitment firm in the United States with the simple mission of impacting companies and enhancing careers by providing the finest in professional, executive, technical and scientific search. Kaye/Bassman provides strategic recruiting and executive search solutions in over 20 industry practice areas including construction recruiting, healthcare recruiting, banking executive search, energy recruitment and many more. Next Level Recruiting Training, a recruiting training organization, Next Level Exchange, a recruiting training best practices information exchange, and Next Level Marketing Communications are also Kaye/Bassman companies.
For additional information or a sample copy, contact:
Darren McDougal
Kaye/Bassman International
(972) 931-5242
(972) 931.9683
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http://www.kbic.com
Source: http://chiefexecutive.net/how-to-reward-top-performers
