I work for a medium-sized recruitment firm as a manager of the technical jobs section. The firm has a pay system in which all employees receive the same pay increase annually. I believe this is demoralising and hits the motivation and commitment of my best employees hardest - I think some are wondering ‘what’s in this for me?’ A transparent system based on merit is, I believe, a better proposition. But senior management do not seem to agree. What is your opinion?
DB, Dubai
Being fairly remunerated and compensated is one of the elements in keeping employees motivated. A clear compensation and benefits policy driven by Human Resource Management helps give benefits to employees based on their performance, potentially bringing out the best in what employees have to offer the organisation. The annual pay increase system is just one component of the overall compensation and benefit approach of a company.
To add a different perspective, take some of the research and literature around remuneration and employee motivation into account and you’ll notice that salary alone is not always the instrumental driver in staff motivation and performance. Clinical psychologist Frederick Herzberg did research more than half a century ago, which showed that employees are motivated to work harder through less tangible, intrinsic motivators such as more responsibility, achievement, advancement and development. Extrinsic motivators, such as salary and benefits may lead to dissatisfaction when they are not present, but they are unlikely to keep employees motivated in the long run.
Daniel Pink, author and motivation expert, claims that science knows that incentives don’t work in terms of motivating employees, and that businesses need to catch up to this. He promotes an approach that relies on giving employees three key things: autonomy over their work, a feeling that they can achieve mastery and a larger sense of purpose.
The reputation of the company, the job profile itself, the overall package of salary, benefits and incentives are part of what attract people to work for a specific organisation. However, people also look at the culture, meaning and purpose of the organisation, the nature of leadership, the work environment and their ability to contribute and feel valued.
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So, keeping this in mind, let’s revert back to the situation you are describing. Companies have different processes and policies in place with regards to pay increases. Factors that may influence how companies approach pay increases include the success of the company overall, starting salaries, market benchmarking, employee performance and achievement of goals. For example, the Dubai Government Human Resources Management Law no (27) 2006 states that "annual salary increments shall be based on the employee’s performance as measured by the performance management system and not on the basis of seniority. To be entitled to this increment, an employee must receive a rating not less than Good".
It’s not unusual for organisations to apply an across the board salary increase percentage to align remuneration with cost of living inflation, and in strong business development based environments, to additionally offer incentive schemes to recognise individual performances. That being said, in more complex environments where collaboration across a team or a reliance on interdepartmental cooperation is necessary and important for new client acquisition or retaining existing clients, there is also a business case for more collective based team incentives, as individual incentives in these situations can sometimes drive the wrong behavioural patterns.
It seems that your firm's culture is rooted in an across the board increase system, which realistically may not be within your scope to address. However, it would be good to have a better understanding of your firm’s approach to performance review and management.
Doctor’s prescription:
Consider what you are able to influence to better recognise and motivate your best employees. It may require these employees to take on more responsibilities to enable a further increase in salary. Likewise, there may be bonus schemes or benefits available to acknowledge the achievements and hard work of these employees. To meet your employees needs on a more intrinsic level, provide additional variety and a wider range of more complex or challenging tasks to make work more interesting. Furthermore, empower them to make more autonomous decisions around their own work. Your personal leadership effectiveness with your team will have a greater impact on their overall motivation than being able to negotiate variable or individual salary increases.