I use this framework to think about pay, promotions, and bonuses.

Path

If an employee is a potential future leader, I’ll want to fast track their promotions and pay scale. If they’re being groomed to succeed a current leader, their role should track closely to the person they’re succeeding, and pay raises should be in line with the person they will succeed.

It is the responsibility of senior managers to determine succession plans, and the tool they’d use to do it is an org chart.

Performance

Performance metrics (e.g., sales goals) and measurable behaviors (e.g., attendance, training) are vital to pay increases and in some ways are the primary factor employees have control over.

Mid-level managers are responsible for setting and reporting these goals. There are many goal-tracking tools employers could use for this.

Peers

The peer review by way of 360º reviews, collected comments, and even anecdotes, comprise the third component of establishing pay. How an employee’s performance is perceived by coworkers is vitally important to how they should be compensated.

All employees are responsible for participating in reviews. ClearGears is built for this aspect of figuring out employee compensation.

No One Person Can Do It All. Determining pay is a collaborative process. I generally want a compensation committee involving multiple tiers of employees. Recent hires, mid level managers, and senior managers should all be part of the conversation when it comes to discussing pay. It’s not an easy process, and really only gets harder as companies get larger. For all companies, best practices can be summarized thus:

  • Have a compensation committee.
  • Have the right tools. Org charts, goal tracking, and 360º employee reviews.
  • Be transparent. Let people know who is on committee and what factors are considered.
  • Manage expectations. Don’t disappoint people unless you’re trying to send a message.
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