A few days back, I had my annual performance appraisal due and was wondering what is happening all around me- some employees are getting much more than I am and some are still languishing.
In last one year, I had received one raise without an appraisal, even without asking for it. Must say it was a real pleasant surprise – it came in an email in month of June & was with effect from October last year. I reckon I got this raise to ensure that this October’s appraisal does not look too high in percentage terms.
but then am I getting, what I deserve?
What is the cost of replacing me?As a business guy I believe every one should get equal to the cost of replacing him/her. If one is not becoming more expensive to replace, he / she should not expect a raise. The business that does not follow this rule will loose out in the market place.Some of the real hard working & intelligent people are not getting as lesser than what people with lower capability are, because market dynamics, their skill set is in abundance today, and hence cost of replacing them is low.
Since whatever I remember from the HR stuff that I studied during my MBA was not sufficient to carry out a scientific / empirical analysis, I thought of evolving one. Here is what I evolved (Probably this will come in handy incase I need to fight for higher raise or maybe later at a more responsible position) :
Here we go,
Following parameters that need to be taken into account at the time of determining a raise:
1. Competence/ expertise in area of operation - This factor denotes conceptual clarity and is important for the knowledge driven industry where the success of business is a function of depth/ breadth of knowledge. Hence an industry which has scarcity of skilled people i.e. a an industry which has not reached a significant level of maturity, this factor has to be given high weightage. In a mature industry the competence of employee A vs. that of employee B would not be very disparate (one employee would be at 8 and the other at 8.5 in a scale of 1 to 10) . eg of subsegment of industry where this is important - IT Security.
2. Total Number of years of Experience - This factor denotes the maturity of the employee and is important where there is a client relationship engagement. Even if the experience is not from the same industry, a mature person can handle client engagements better than a new joinee. The weightage for this factor is, therefore dependent on the role.
3. Number of years in the same company / same department - This factor denotes the contextual familiarity. A person who has spent three years in the same company/ same department is likely to know a lot about the context / customer behavior/ limitations & capability of organization - hence is likely to make a better judgment / commitment to client.
4. Dependability: This factor denotes quality of work as well as passion. If you have to still vet a document / excel before sending it to client OR if you have to keep on reminding some one of deadlines - he is not dependable. Also it denotes commitment to organisation / to your work. If you understand that although there has been a demand from the customer for a deliverable at a very short notice, a dependable employee will understand the situation and deliver - even if by stretching himself to work late at night. Of course such dependability tests can not happen very often. This factor is very important for profiles that have bursty workload, ie there will be times when there is lot of work to be done at a short notice.
5. Potential : This factor denotes the ability to proactively learn new technologies/ drive new initiatives/ spot new markets or opportunities and exploit these to impact business in a significantly positive manner.
6. Certificates/ Qualification / Pedigree : These need to be given due respect as these represent latent knowledge that can be a significant use to the organization at some point of time.
7. Team Player : If all above are factors are present in good amount but the employee is not a team player, there are chances that the organization will not meet its objective. This factor is is not so important in roles that depend on individual brilliance more than the team output (eg consultant) , but can not be ignored in any case.
These seven factors need to be given weightage depending upon the nature of organization/department ( ie what business you are in, which of these attributes are critical to your business success).
The various employees than rated ( not ranked) on a scale of 1 to 10. The rating to be multiplied by the weightage of the factor ( ie if factor 1 is given a weightage of 12% then multiply the rating of employee by 0.12 to arrive at the weighted rating) Sum total of these weighted ratings across various parameters gives a measure of individual's worth to your department / organisation's success.
This has to be the basis of determining the raise.
There will be times when there will be a need to tweak this model.
The deviation from Ideal raise can be used to bring the salaries closer to market rate. This raise now has to be compared with the market rate to tweak it further. eg of a scenarios that would need tweaking: If some one has a high market rate, and raise as per your calculations is far below the market rate - but you still need him for a project ( eg the employee is not a team player/ not dependable however has the certifications that are needed for this project) - you can give him a tactical short term ONE TIME Bonus related to this project milestone and not increase his salary. This one time bonus will ensure that the employee is not leave you till the end of the project, and give you a time to find / groom a more suitable employee. There is also a possibility that the skill set that is having a very high market rate right now may not be as hot, six month down the line ( ie when your project ends) and hence you will be not only saving some amount but also being fair to your workforce. This one time Bonus related to project will also ensure that you as an employer will not be stranded with employee E kind of scenarios where the employee is getting more than the then market rate.
