Salary reviews strike fear into employees, and employers alike. It can often feel like there are a lot of unknowns, making it hard to navigate decisions about salary changes.
How satisfied are our people in their roles?
How important is it to retain them?
What are their prospects for career progression?
Where do they want to be in 12 months’ time?
Is a pay rise in order?
By engaging with your team members, and understanding what does and doesn’t motivate them, you may discover that they are more interested in a change to their role, or recognition for achievement than a salary increase. In fact, research tells us that intrinsic motivation (feeling valued, accomplishing goals) actually has more impact on job performance than extrinsic motivation (like pay rises or benefits).
Ultimately, the remuneration process shouldn’t just be boiled down to a single performance review number or outcome. There is a lot more to motivating sustained performance than that, and all these factors should be considered accordingly. This is why it’s so important to not be in the dark on all the personal factors that combine to motivate sustained performance.
According to Deloitte, here are some performance framework basics you will need to have in place to drive sustained performance:
- Regular check-ins between managers and direct reports, so coaching around development is happening monthly.
- Alignment between individual employee goals and overall business objectives.
- On the spot feedback and recognition when organisational goals are achieved.
Now let’s explore how to use this framework to better leverage your team’s intrinsic motivation, leading to a happier, more productive and progressive team culture.
Key Insight – Performance and remuneration discussions should be kept separate
Directly linking performance outcomes with remuneration increases will ultimately lead to unsustainable base remuneration levels.
Why? At some point, regardless of performance outcomes, you won’t be able to keep increasing an individual’s pay level. These discussions should therefore be separated so that performance conversations can take place regularly.
What’s more, whilst a small increase in pay in-line with CPI increases is more sustainable, a $50/week increase isn’t likely to impact upon an employees motivation or encourage positive future performance.
It is also worth recognising that for many, conversations around salaries can cause emotional responses that serve to inhibit meaningful and honest performance conversations. Having separate performance discussions will allow for valuable open discussions on how each employee has been tracking and what growth and development opportunities lie ahead.
Salaries should be benchmarked with the market ahead of time
Before salary reviews take place, it is wise to review employees’ base salaries are on par with industry standards. This way, you can ensure all compensation is fair and transparent, based upon the roles being completed, this will remove a lot of contention out of salary discussions.
Deloitte suggests employees are paid within 10% of your organisation’s target salary band point as a base (eg. say the 70-75% percentile). This should then be reviewed each year in line with market changes and CPI increases.
Steps to Leverage Intrinsic Motivation
Intrinsic Motivator #1: Recognition
To appeal to this, you need to help your leadership team track and celebrate achievements. Dynamic goal setting is a great way to achieve this supported with regular reviews creating links between specific goal achievement and appropriate rewards. intelliHR goals are designed to celebrate little wins, and immediately notify managers to encourage recognition.
Rewards should be in the form of a Short Term Incentive, and might include public celebration, non-financial incentive (day off, tickets to an event etc), or financial reward (bonus). The important thing is that the reward is directly linked to the performance, not abstractly through an annual salary review.
This approach leverages the value of providing real time feedback to your team. If you receive or give feedback related to performance, or have performance discussions, not only should these be recorded accurately but also followed up on to ensure the best chance of a good outcome. Capturing these discussions along with any feedback makes it easy to refer back to when completing reviews covering a period of time, helping to remove recency bias.
Intrinsic Motivator #2: Contribution
This motivator can also be leveraged by setting employee goals. Goal setting is often underestimated. It’s perceived as a simple task, but it takes skill and strategy to develop relevant goals that will deliver aligned outcomes. Your people want goals that are meaningful and measurable, so they can keep tabs on how they’re tracking, and collaborate with the managers while executing them. Aligning individual goals or cascading team goals with organisational direction also helps team members understand how they contribute to the bigger picture, developing opportunities for them to increase their sense of belonging and ownership, all of which contribute to stronger motivation.
For high performing employees, use goals to set stretch targets. Once these goals are in place and supported by a tool to track progress, it will be much easier to determine where employees are at and (where appropriate) reward these outcomes via agreed short term incentives.
Need a tool to help set and track goals in your business? Try our Goals feature.
Intrinsic Motivator #3: Career Progression
Research from Deloitte found that a strong performance framework, regular check-ins and short-term incentives can be used in combination to drive performance, and this solution is actually more effective than fixed salary increases. For many team members, shifting the focus towards enabling personal and role growth and development rather than focusing on the monetary reward may lead to happier and more motivated team members.
To achieve this first you have to ask your team, having access to insights from continuous feedback or undertaking a focused survey is a good way to determine the key motivators for different employees, you should be prepared to be flexible to each team member’s needs.
Intrinsic Motivator #4: Personal Mastery
Roles should be somewhat malleable, allowing them to be moulded to individual talents and strengths, with responsibilities that better support organisational needs. The manager and their direct report should be encouraged to reassess if roles can be reshaped to better suit the individual’s skills or personal goals. In some cases this could evolve into a new more valuable role.
Research by Bersin shows that optimal performance is achieved by delivering meaningful work that leverages an employee’s personal strengths and aspirations. Rather than simply evaluate people against goals, use their goals to shape an employee’s role, giving them the best chance to succeed.
This role realignment will often be driven by a new and emerging goal focus, this offers opportunities to support changes with relevant training, and also the opportunity for an individual to train others, again both representing strong sources of intrinsic motivation.
Drive a positive training culture in your organisation by using Training Analytics to understand which teams are investing in different types of training. Leverage employees that have completed certain high level training as experts in your business.
False promises do more harm than good
There is nothing worse than leaving employees disappointed because of potential rewards that were promised but never delivered on. It’s vital to set clear expectations and policies around how salary reviews will work and talk openly and honestly about when they will occur and how they will be rewarded.
You’ll want to remain realistic around rewards and what you can give out, but also ensure the rewards you offer match the effort your employees are putting in for you.
This brings us back to why it’s so vital to have visibility over performance, so you know where to set the bar. If you have high performing, loyal and committed people working for you, you’ll want to take steps to encourage this to continue. Likewise, you don’t want to offering rewards that aren’t feasible if people underperform.
Feeling inspired to take your salary reviews up a notch? If you’re not sure where to start, or need help implementing some of these ideas, get in touch to see how intelliHR can help.