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1. So as I discussed the other day, as part of my attempts to become a stronger communicator I’m going to be creating a daily video of me talking about various HR/business topics. This most recent video was just an unscripted/uninterrupted thought stream on the subject of salary compression (after I wrote a few thoughts down about the subject below). As you’ll see in the video, I’m prone to bloviate (and perhaps use a few too many umms). Help me get better with comments/suggestions.Trying something different today… 1

Image Credit: <www.123rf.com

Image Credit: <www.123rf.com>

Salary compression is a reality of the market place. In a good economy, your top 10-15% performers (if they’re worth having) are going to get fielded offers at p75 or higher. Unless you are a pay leader, these offers will often represent significant raises, and sometimes the employees accepting them are going to be your younger/less senior employees, ergo, countering to retain can potentially create pay inequity within your employee population. In these instances, I think you just pay – within reason relative to the value the employee(s) could add – what you must to retain them. These are the people that you’re planning on moving up at least one more level anyway. Over time as they move into higher bands/grades they will find their way back to the center, making any compression issues temporary.

The tougher issue here is what to do with performers that are above average talents, but outside your top 20%. These are people that are adding value and that you don’t want to lose, but that have limited potential to climb further up the org chart. Consequently, if you create equity issues to retain a non-star employee you damage morale without putting in place a long term plan to hold on to the talent. Eventually, the employee is going to hit the top of their band/grade and then you may still still lose them if they seek external opportunities to grow their career.

As such, I think that outside of your top 15-20% of performers, offer matching when it creates compression issues is the wrong approach. Instead, organizations are (mostly) better served to let non-superstar talent go and replace it with high potentials on the bench. Even in the absence of a talent rich bench, if you have a good knowledge transfer process in place you can plug in marginal talent to replace many high performing individual contributors.

As always, please share your thoughts in the comments section below.