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The 5 Biggest Lies In HR... (#3 - We're Into Pay for Performance)

This is a post in a 5-part series targeting the 5 biggest lies in HR.  Lucky you.

That’s right. I’m here today not to give you the normal PR spin about how strategic the HR function can be, but instead to call B.S. on the biggest lies in HR. It’s not that HR people want to lie, it’s just that we’ve created our own prison: urban myths developed over last 20 years as the HR function has matured.

As a result, we’re trapped. We’ve spawned narratives that make the HR function appear like a cross between Mother Teresa and Stuart Smalley, while the team members we serve need more tough love, a cross between Jack Welch and Dennis Miller.

You know, that little thing called the truth, effectively washed down with a bit of leadership, personality and at times, humor.

Here's the third biggest lie in HR:

Lie #3: We’re into pay for performance. Everyone loves seeing a high performer get a ten percent raise just for being a star, unrelated to a promotion. It doesn’t happen enough, and the reason is pretty simple. In this Darwinian world we call global business, cost pressure is everywhere. As a result, we’ve got to budget for salary increases, and then live by the budget to make sure razor-thin margins stay intact. That means that in order to give Sally the superstar an eight percent increase at review time, we’ve got to give nothing to Johnny and Rickey, who are good cogs in the wheel but average at best.

The Truth: We (business leaders and HR pros) need average performers to make the business formula work. In a world where ninety percent of team members think they’re in the top ten percent of all performers, we’re screwed from the jump. We’d rather find unbudgeted money for the star than tell the average performers they’re getting nothing, which is what it takes to put pure pay-for-performance in place within a merit budget system. Our managers are unwilling to do that, and we’re unwilling as HR pros (perhaps rightfully so) to be Han Solo on the issue

So the next time you're b****ing about your 2.8% raise, ask youself this question - would you trade it for the truth on whether you're in the top 10%?  Do you feel lucky, punk?

If you’re a good HR pro and don’t feel like you subscribe to this lie, I’ve got one question for you:

If you don’t actively pitch the lies outlined above, do you actively preach the truth?

If the answer is no, you’ve got work to do before you’re part of the solution.



I think it goes even a little deeper than that. Our research shows that pay only has a limited impact on engagement.

Pay is one mechanism for retaining a star performer, but it's easy to over-empathise it's importance.

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