Is Stacking the Fairest Way to Distribute Review $$$?
Employee Leaderboards or—as HR hates to call it—Stacking
Let me start by saying that I am not a fan of stacking employee curves (15/70/15). As I’ve said before, I believe that employees have different strengths and weaknesses. You should be constantly coaching and working with your teams to help them grow. However, it is naive to think that, at the end of the day, all of your employees perform equally. I’ve heard managers say all their employees are rock stars. Maybe so, but are they Mick Jagger rock stars, or garage band rock stars?
Come that magical time of year for salary reviews, you face a conundrum of who gets how much. Most companies I have worked for have a set pool based on a percentage of the overall salaries of the company. Let’s say it’s 5%, so everybody gets 5% of their salary thrown into the magical pool of money.
Now if we really lived in the world where everyone is Mick Jagger, the easy thing to do is just give everyone 5% and call it a day. This also assumes that you hired everyone at market value, and that all roles in the company are paid equally amongst similar roles, so there’s no need for market adjustments or discrepancy correction. If this is the case, you can stop reading now. You get a high-five and you can get the hell out of here. Also, send me a message if you’re hiring.
Going back to the magical pool of finite money, you have to divvy it up some way. You could use performance reviews and take some calculation from that of overall score to determine the magical stacking curve. That can be dangerous, however, if you didn’t double-check to make sure that it was fairly appraised. If everyone is a rock star, they have different strengths and weaknesses. They’re all equal, though, so again give everyone 5% and call it a day.
When I tell managers to build a leaderboard of sorts for their employees, if they are really honest they will say ok this person is more Mick Jagger than this person. Managers often complete their assessments separate from a leaderboard. That’s is okay at first, but it’s important to have a reference to reel you back to reality: you don’t lead a team of Olympic unicorns. You have a team of high-performing human beings, or maybe just a good team.
Imagine you’re working on individual assessments and see:
- Raul makes okay money, when you look at the market, and gets good feedback from peers so you give them the 5%.
- But Raul isn’t as good as Cindy, who makes less money than the market and gets great feedback from her peers and so you give them 7%.
Remember, though, you’re working with percentages which translates to money—but someone who’s already making less needs a higher percentage than someone making more money to get a sizeable raise. When you compare Cindy and Raul, you see that Cindy is significantly better than Raul, but even at a 2% higher increase, she’s making less. You can always try to make a business case to separate out Cindy from the pool (losing that 5%) to bring her to market value. Give it your best shot, but if that isn’t allowed or is rejected, what do you do then? If you create your leaderboards and want to get a more “fair” salary for Cindy, you have to Steal from Peter to Pay Paul. Maybe you reduce Raul down to 4% and you give Cindy 10%.
I hope you’re never in that situation. In my experience, though, the reality is that you have to make challenging choices. Knowing how your team stacks up amongst themselves on a leaderboard is the easiest way, and fairest, to work through this challenge.
Is stacking the fairest way to distribute review $$$? Let me know in the comments below and also be sure to check out my podcast!