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Non-conventional salary review process

Picture by bookgrlAs within most organizations, the salary review process is an important one at Pyxis. The process is important for the employee-shareholders so they know there is a process, they understand it and deem it to be fair. It is also important for the organization as a whole to retain the talented employee-shareholders and provide a compensation that compares favorably to the market.

Most traditional organizations would agree that the process is very important but there is a distinction on how the process is handled within Pyxis. At most traditional organizations I worked for (and with), the salary review process is tied to the performance appraisal process and to the budget allocated by Human Resources. At the end of each year, the employee receives a performance rating which determines the percentage of salary increase – people receive an average increase for an average rating and an above-average increase for an above-average performance. The guidelines are clear and applied to everyone the same way. The salary review process takes place between an employee and his/her manager.

We like to do things differently. I have already described that Pyxis is organized in communities.

In a business context, communities are similar to functional departments with some fundamental distinctions. In traditional setting, members of a functional department or of a project team work together to achieve a goal. With some exceptions, team members share nothing but their common goal and a common boss. By comparison, in addition to sharing a common goal members within a community also share common values and culture and they operate within agreed upon self-defined norms. Analytical-Mind.

The employee-shareholders are offered a few options when it comes to their salary review:

  • They can use the process put in place within their community (in this case, my only responsibility is to ensure fairness across communities).
  • They can suggest an alternate approach that respects fairness (in this case, my only responsibility is to ensure the fairness of the proposed process).
  • They can follow the approach recently used by Tremeur Balbous and Jean-François Proulx for their salary review.

The “Tremeur and Jean-François” approach

  • The employee-shareholder must complete and document a self-evaluation (a 360-degree feedback similar to this one is often used). He must evaluate its contribution to Pyxis for the year ending and propose a new salary for the coming year.
  • The employee-shareholder must then submit his self-evaluation to at least 3 other employee-shareholders with whom he worked during the year that ended in order to obtain their feedback and determine if the salary requested is appropriate and fair.
  • If the employee-shareholders consulted do not belong to the same community as that to which the applicant belongs, the requester needs to validate his requested salary with at least 2 members of the community of belonging.
  • Ideally, the community leader should be involved in the process since he is responsible for the financial framework of his community.
  • At the end of this process, the applicant holds a meeting with me to discuss his findings and request salary.

Factors having a positive impact on salary determination

  • Performance in his role;
  • Contribution to the success of his community;
  • Contribution to the success of Pyxis as a whole;
  • Revenues generated directly;
  • Income generated indirectly;
  • A marked increase in responsibilities – in the case where an employee justifies a pay increase by the marked increase in his responsibilities, the excess (beyond the base increase) is considered an additional increase. The additional increase will be removed in the event the employee ceases to assume the responsibilities for which he had obtained a further increase.

Does your organization use a non-conventional salary review process?

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4 Comments Post a comment
  1. One thing to think about. Is the purpose to allocate salary increases/bonuses or is the purpose to improve performance?

    If the purpose is to allocate salary increases or bonuses, it’s a nice way to put together justification and get feedback.

    If the purpose is to improve performance, it might be worth separating the performance analysis and discussion from the salary discussion. Part of improving performance is objective analysis of strengths, weaknesses, successes and failures. If people can’t objectively look at what went right and what went wrong and discuss and draw lessons from that, it’s difficult to make meaningful improvements in performance.

    However, if this discussion is linked to salary/bonuses, it is asking too much for people to be objective and discuss weaknesses. There is competition for scarce resources and people will only present things in the best possible light. You really cannot expect people to honestly bring up weaknesses or discuss failures if they are competing for raises/bonuses.

    It’s never a perfect set up, but the safer and more objective a performance review can be, the more honest and meaningful it can be.

    Love your stuff,

    Andy

    October 12, 2010
    • Hey Andrew, nice to read you again.

      I fully agree with you, the 2 have to be handled independently for better (and more meaningful) results. I should write about the performance assessment process in an upcoming post. Stay tuned 😉

      October 12, 2010

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