In case you missed it, this is a continuation of last week’s blog post that kicked off the subject of giving raises. Everyone wants to become a master of this delicate balancing act– keeping satisfied and engaged employees who are happy with their compensation plans.  In the previous article, we left off at Step 2; let’s now continue on with Steps 3 and 4, setting guidelines and using real terms.

Step 3: Set guidelines.

Once the work is truly understood and we’ve picked a pay strategy (preferably the reasonable-target strategy), we can set some guidelines. Everyone wants to “get my money right” – the manager, employees and shareholders. “Years of experience” is the top influencer of the market value for a person or position. It would be too time consuming to benchmark every conceivable experience-level scenario (trust me, I tried).

Minimum experience levels can be quickly set and benchmarked. I find asking “really?” a few times helps glean reasonable minimum experience levels. For example, “Really? It is completely impossible for someone to do this job straight out of college?” If a manager concedes that technically it might be possible but only for grads with specific super-human capabilities, we can leave the minimum experience level at “two years in a similar role.” This number is used to paint the line for the low end of pay for this position. To get the high end just look at your stars and benchmark pay at an experience level a few years greater depending on the role, market and your budget. (See next week for free online benchmarking tools you can use.)

Step 4: Use real terms.

We’re not Swiss CEOs. Our bills don’t get paid by ratios, percentages or annual dollar amounts. Our expenses happen weekly and monthly. We are on the paycheck-to-paycheck plan and when “life happens” we use credit cards. And most of us don’t like doing math unnecessarily.

Which of the following statements do you think will be better for both John and his manager:

“John, you consistently met expectations this year but we’ve got a tight budget next year and I’m pleased say you’re getting a 3% raise. Keep up the good work.”

“John, you consistently met expectations this year. Your pay is in the middle of the range for this position, which means there is plenty of room to continue growing with us in the future. You’re getting a raise of $45 per pay period ($90 per month) before taxes and withholdings.”

Poor John might feel compelled to calculate the percentage because it’s the only number he has ever heard. We’ve mistakenly conditioned workers to associate any meaning with “3%” — it might be an insult  or a windfall. In either case it tells us nothing about the real impact on the employee’s life.

This year our organization is in the fortunate position to once again consider pay increases but we will do so differently. Many positions, but not all, will have a salary range and a rating for where their employee’s pay falls on it to support the manager in the second statement above. A few low-side outliers will be adjusted as necessary before the next step (and we hope for a productivity boost similar to that promised by “surprise raises”). Each department will be allotted a “raise bucket” expressed in pay-period dollars. Managers can pull dollars out of this bucket for per-paycheck raise amounts. That’s right, the manager begins with the end result of the raise in mind.

Over the next two weeks we’ll look at my favorite online tools that are free to use.

Catch the Webinar Replay

It’s powerful to know what your employees think! Learn to identify problems like poor supervision, communication breakdown, and mounting plans to leave your company before expensive turnover affects your business. Check out the 20-minute recording of employee engagement survey expert, Leila Zayed, of Best Companies Group and Best Employee Surveys, to learn:

• How employee engagement is defined
• Simple ways to boost engagement
• Do you have what it takes to be one of the Best Places to Work?