Evaluate First, then Give Raise

Q: I own a small company, and as we approach the end of a good year for business, I want to give pay raises to some of my employees. Obviously, I want those raises to go to the best workers, and to exclude the marginal performers. The problem is I don’t do formal evaluations, so I don’t have a cut-off scale to decide who gets a raise and who doesn’t. Any suggestions? Also, what’s the best way to explain to employees why some were chosen and some weren’t?

A: It’s good to hear that your business is doing well and that you’ll be sharing that by giving raises to some of your employees. What’s not so good is hearing that you don’t have a system to evaluate employee performance and you don’t have a policy for giving raises.

As a result, your employees don’t really know if they’re measuring up to your performance standards or what to expect regarding raises, if anything. Therefore, in the absence of evaluations, no matter how you decide, or how you explain it, those who get raises and those who didn’t will both think your decisions where arbitrary. So, for your situation there are no easy answers.

But I do have suggestions on how to better prepare for 2012, so that raises become a true opportunity to reward and motivate. Employees respond best to a fair playing field. They like being evaluated objectively and knowing there’s a process that determines whether raises are awarded, and by what amount. So here’s my advice:

Start doing formal evaluations. Do research, get help. Or download templates and forms online. Create your own simple score card. Set up a schedule, and announce the plan in writing early next year. Stick to it.

Write and distribute a pay plan. Describe what business conditions are considered when deciding to budget for raises or not; how evaluation scores and other criteria (profits, job market, internal equity) affects the amount given to an individual; and how often compensation is reviewed.

Once employees know the plan for evaluations and pay raises they’ll have more incentive to improve their performance, and exceed your expectations. Here’s to an even better 2012!

Published in The Gainesville Sun December 25, 2011