Process of balancing Salary increments

25 May, 2012 / mvsblog

Year on year when I sit for the process of Providing increments for the employees of the organization I realize many things have to be managed. Manage resources, future Profits , growth , retention and also most of the time emotions.

Why Increments??

To compensate inflation , Anticipating more performance from the employee by his ability to manage anticipated growth and minimizing Risks.

Most of the time I come across questions like ” I have performed well last year ” and this increment is for last year performance. But many fail to appreciate  that the Appraisal review is done for last year performance and also find out employee ability to scale and perform more. has to find out plans and also commit what he is looking at for the coming year.For the organization to commit increment for anticipated performance.

During the process if we find the employee has acquired ability to scale , shown signs of management and also Attitude towards Learning and open mind we consider him for higher pay consideration.

How Organization considers the quantum ?

To give increments and sustain growth we have to see growth in Profits Y-o-Y , failing which we will have considerable stress on financials during our planning stage. Profits are important factor considered during this phase. Every employee in the systems wish to recognize the work when it comes to increment , even if they know that they have not done well.

During decision making is difficult when the performers also feel the heat because of  over all performance is down in the previous year . if there is good performance in the previous year complexity is less but expectation is too high.

Every individual in an organization should recognize that there work should result in either  Revenue or Profits. It can be straight short term  or longterm . It also direct or indirect . Every one in the organization utilizes companies resources to manage the revenue or profit.

Company sets in pattern depending on DNA on cost of sales or cost of delivery , every function will have metrics which is ratio on Revenue. To improve upon profits we have to bring down cost ratio  by few basis points. once the ratio is fixed we have absolute amount planned for the salary. During this exercise we would like to consider very realistic revenue projection . Since the cost is real and it will be incurred and revenue is anticipated. Great impact on companies profits will be felt if revenue is not achieved.

Balancing has to be done between all these parameters.

Why emotions play role in this Objective exercise?

Appraisal on Set objectives is always have an element of consideration for change in environment, period in which is considered and if changes not captured it will become more difficult during Increment period.  Most of this exercise has a time period of 12 months before next increment so managers have to prove to his team that he is able to pull out best deal from the organization. If not he also becomes a non performer and becomes more emotional. All non documented commitments , sentiments, being friendly will come to discussion during this process. It is always emotional discussion during this period and   most of the time over all organization performance will be un heard off.

we always consider other form of Renumeration like incentive , bonus , gifts , other surprises when they do more than anticipation to manage those emotions.

Leave Your Comments

2 responses to “Process of balancing Salary increments”

  1. //Every employee in the systems wish to recognize the work when it comes to increment , even if they know that they have not done well.//

    Very true Boss.. managing their emotional at the time of issuing the appraisal letters to other is very difficult. Because it may affect the current and upcoming performance of the so called non performer.

    Very good and informative article !

  2. One of the way we can manage emotions or rather reduce them is to make the assessment more and more objective. Another thing that can moderate emotions is regular reviews and standard treatment of performance and non-performance. this will reduce the scope for employees to speculate and bargain!

    All said appraisals are interesting only when the overall profits are upwards. Else it is always a challenge!

    Good views. Keep them coming. hopefully we will all contribute further!

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