BY CLINTON KOKER
There’s a fine line between boosting employee morale with excellent reviews and staying within budget when it comes to rewarding such excellence. What’s a credit union to do? Read on for a degree of separation between the performance review and the merit increase that offers a viable solution.
It was a typical day at the office when the vice president of development stepped in and requested I recruit a programmer. Our busiest time of the year was upon us and we needed to replace a programmer who had resigned. Actually, busy is an understatement. You see, our company produced income tax software and the production time was short with tons of work to do, so work hours were about to jump from forty hours a week to sixty or seventy hours a week.
“Please find me someone who can write code in Fortran, Basic and C+. Also they will need to be high energy to get through the tax season. Oh, also find someone who is a very hard worker and an excellent programmer,” he requested.
Then, as if awaking from a dream, he simply said, “Wait, the programmer who is being replaced was average, so just hire the most average person you can.” Then he left. Of course he did not want to hire the most “average” programmer we could find. He wanted to hire the best programmer we could find. So why did he make this strange request?
A little perspective is needed to understand what he was telling me.
We had just implemented a pay-for-performance program. A merit increase matrix was created and budgets were developed from that matrix. We could easily establish, with great precision, where each employee fell within his or her salary range. The only other factor was planning what each individual’s performance evaluation level would be. To do that, we utilized everyone’s past performance ratings. After all, the company’s performance had been pretty constant, so it was reasonable to assume overall employee performance (productivity) would be consistent with pervious performance. We had a good budget, or so we thought.
What actually happened was quite different from what we planned/budgeted. Within the first quarter, we spent most of that year’s salary increase budget! The CFO was in a panic since we still had another three quarters to go and salary increases were about to go well beyond budget. “Why are we in this situation?” he asked.