“So c’mon, get to it. How much am I going to get?”
My employee is thinking that so loudly that I can practically hear it. OK, maybe I’m just imagining it, but I know it is far too true. I’m in the middle of a performance review with one of my dispatchers at my delivery company. I’m patiently discussing all his skills and identifying those that are super strong, average or needing a bit of work.
But, I still hear him thinking the same thing every employee thinks during a performance review. He’s only half-listening to me because the other half is trying to figure out how much of a pay hike he is going to get. So, let’s be real here. It’s more like only one-tenth of him is listening … and all my efforts to communicate are failing fast.
I actually came to this conclusion about twenty years ago so I never have that conversation any more. At my companies, we have de-linked pay raises from performance reviews. Pay raises now come periodically as warranted. We no longer link pay increases to the calendar. They do not automatically happen once per year and they are never awarded at the same time as a performance review.
I have some employees who have gotten three or four raises within a twelve-month period while others have gotten none. When a pay raise can come at any time (not just at predetermined intervals), there is greater incentive to take the actions that may result in raises.
Deftly smoothing over a problem with a big account, going the extra mile to insure a delivery is done on time, showing up early to organize your workspace—all these things are capable of being the one event that triggers a raise. Scientific studies in reinforcement have confirmed that Variable Ratio Reinforcement (essentially reinforcement that could occur at any time, rather than at fixed intervals) is the most productive and motivating. Bumping someone up in pay immediately after having displayed the kind of behavior that the employer desires, is extremely effective. So we do it as a matter of company policy. All the time.
Small Biz Rule #11: De-link raises and performance reviews to improve communication and results!
That changes the whole dynamics of the performance review. We tell all our employees in advance that they will have one formal performance review each year and, very likely, several other shorter, less formal coaching conferences on performance with their supervisor. We tell them that pay raises occur whenever we feel that individual performance warrants them. With the two issues de-linked, we have much more productive give-and-take sessions with our employees when we are discussing performance. There is actual communication going on! What a concept! Two people talking and actually listening to each other!
Another side effect of this policy is the decline of “Performance Review Comparisons” within the company. It used to be that anyone going in to the boss’s office for a review always came out with a smile or a frown (or sometimes just a perplexed look). Other employees would later corner them at the water cooler and ask how it went and then (and this is the BIG ONE), how much of a raise did they get?
The underlying logic was that if you thought that employee was a slacker and he got a $1 per hour raise, then you were sure you would get twice that amount (assuming you thought you were a superstar, like most folks tend to do!) So now, we just enhanced the lack of communication because everybody in the office was focused on the pay raise amount rather than the review information. Yikes, now nobody is listening!
De-Link today! Keep your word and award pay raises based on merit as the opportunities present themselves. Spend all your review time in actual communication and watch your performances improve. Will big corporations ever de-link? Of course not! De-linking decreases management control and micro-management capabilities and where’s the fun in that? No, only small business will de-link and then use that advantage to beat the socks off the big boys. Small Business! I love it!