The annual performance review is supposed to be a time to discuss and review performance, not salary.There are many companies that tie salary to performance reviews, and this is a huge mistake.
It ruins the whole performance review process, and creates a culture of fear and blame. My guess is that this is one of the biggest reasons why so many people hate performance reviews.
Performance reviews can be a great learning opportunity for employees, but if there is a salary involved, the employee isn’t paying attention to the feedback you’re giving them; they just want to know if they’re going to get a raise or not.
More often than not, tying salaries to performance reviews are used as an excuse to punish or even fire poor performers. Many companies think it’s a good idea to have a paper trail of why someone was punished or let go, for legal reasons.
I can understand that, but they’re still going about the performance review process the wrong way.
Companies love the pay-for-performance model, because it incentivizes employees to go above and beyond for them. I like the idea of rewarding good performance, and I like setting performance targets, but again, when you tie the performance review to salary, you create a bad experience.
There are other ways to negotiate a salary increase without necessarily relying on the performance review.
There are many questions you could ask in an employee engagement survey to see if employees feel like they’re being fairly compensated.
Why So Many Managers Like Pay For Performance
Most managers like pay for performance systems for 2 reasons
- It’s tradition
- It creates a “high performance” culture
The first point is the weirdest one to me, but I understand it. It’s hard to teach an old dog new tricks, and it’s easier to do what’s already there than to change the process.
This is the wrong mentality to have though, because if you want to create an environment of honest, valuable feedback, you need to remove money from the equation.
The second point is mostly based on flawed thinking about what truly motivates employees.
Yes, everyone wants a nice paycheck, but to build a high performance culture, you need more than just fancy bonuses. You need to be letting employees develop their passions.
Don’t Tie Compensation To Reviews
If you remove compensation from the question, you’ll have a much easier time conducting a proper feedback session.
Employees need feedback to grow, and are eager to learn from their mentors.
When salary is involved, employees get defensive, because there is an immense amount of pressure in the review process.
As leaders, we need to remove that stress, and focus more on developing employees.
I’ve heard arguments before that top performers need to be properly rewarded for their hard work. While I agree with that, what usually ends up happening is there are limits to how much someone can be rewarded financially, so no matter how amazing someone is, there is a limit to how much you can reward them.
Here’s a CultureTalk that we had discussing the appropriate way to handle employee feedback:
So then, the question becomes, how do we discuss salaries without performance reviews?
How To Negotiate A Salary
Here are some tips to keep in mind if you’re discussing salaries, that has nothing to do with performance reviews.
1. Do Some Research
First and foremost, find out what other people in the industry are making. Your company might be underpaying you, which is an easy way to ask for a raise.
2. Give Concrete Evidence
As an example, if you suggested an idea that is now generating the company an extra $100,000/year in revenue, I think it’s fair if you ask for a small raise. (sidenote: I’ve done this)
3. Take On More Responsibility
Volunteer to do extra projects if you can handle it. This will be a good way to show that you’re adding value, and deserve to be compensated.
4. Think Outside The Box
Maybe instead of asking for a straight salary increase, ask for other ways your employer could help you, like paying to take courses or sending you to a conference you’ve always wanted to go to.
How Would You Negotiate A Salary?
Feel free to share your tips with me on Twitter @JacobShriar or @Officevibe.
How Can You Negotiate Salary Without Performance Reviews?
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