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This is a great article Ann.

It's really difficult to withhold increases to solid performers in order to give nice increases to high performers ---- but I think we will see more of that in the future.

A step beyond ----To survive I believe companies will need to differentiate more and more in favor of employees who have key skills and employees who are high performers.

And as a last resort ---- if money is really tight --- give the money to those with key skills even if other employees have higher performance.

If a company's high performers are Accountants and average performers have key skills -- the answer should be obvious. Give the money to those with key skills.


Thanks - much appreciated.


You've pinpointed the essence of the issue - really, the future of merit increases with any meaning at all will depend upon the willingness of leaders to withhold increases to solid performers in order to give nice increases to high performers. Not all organizations will buy into this (I struggle with it myself) - but those who cannot may need to move to a different base pay management approach.

I do agree with your "last resort" - we may no longer be able to use pay increases as a reward for performance. We may have to cede that territory to variable pay and use pay increases solely as an investment in driving skill development.

Thanks for the comments!

The alternative is to treat the merit budget as - in essence - a COLA, and use variable pay programs as the principal means of performance reward.

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