At YES! Your Human Resources Solution, we know that from products to policies, every detail about your company reflects its brand: the expectations people have when they think of your company.  Your employees also speak strongly to your brand, as they are the faces of your company that interact with customers, vendors, and even people on the street.  They can be your brand’s greatest ambassadors or its worst enemies.  And few things are liable to turn loyal employees into bitter adversaries than unfair or arbitrary pay and promotion policies.

To protect your employees’ happiness and your company’s brand, watch out for these common pitfalls of pay and promotion policies:

• Conducting “misleading” promotion processes.  When a promotional opportunity opens, all qualified candidates are welcomed to throw their hat in the ring, right?  Not exactly.  The harsh reality is that many hiring managers already know the person they want for the job before the vacancy even posts.  They tell their chosen candidate, “Don’t worry—the job is yours, but we have to go through ‘the process.’”  If someone already has the job, why conduct a sham promotion process?  It may give the illusion that the company is acting fair and good.  But the even harsher reality is that internal candidates are often aware that a successor has already been chosen.  External candidates, however, are not aware.  A farce promotion process gets these candidates’ hopes up, only to waste their time.  If you were an external candidate applying for that job, would you suffer the stress of preparation, buy a new suit, and take a vacation day if you knew the position was already filled?  Exactly.  So if the manager already has the right candidate lined up, promote away.

• Promoting based on seniority.  Although it’s nice to reward loyalty, seniority should never, ever, be the sole reason for promoting an employee.  Twenty years of experience on the job probably means that candidate knows their current position, and possibly the industry, very well.  But time on the job doesn’t speak to overall competence or the soft skills necessary to be an effective manager.  Conducting a thorough promotion process will allow you to find the most qualified candidate to be a manager, not to determine the most loyal or long-term employee.  Plus, if you want to avoid flak from your employees and encourage a smooth transition of leadership, you’d better have the support to defend your selection.

• Setting an unreasonable cap on annual increases.  When it comes to raises, it’s important to remember that employees have strong opinions about the compensation they deserve versus the compensation they actually get.  Nobody wants to hear that they had a stellar year and deserve a 5-percent increase, but the company is only allowing 2-percent increases for everyone this year.  This kind of compensation system does not encourage employees to work at their best.  After all, who wants to work without getting proper recognition?  Setting a very low or inflexible cap on annual increases is a recipe for resentment.  But as budgets tend to be a reality, if a larger increase is just not in the cards, try to shift the focus to the employee’s total compensation: direct compensation, including salary, bonus and incentive, and vested stock options, plus the many non-salary items or indirect compensation items that employers offer at significant expense to them.  Whether through direct compensation or total compensation, at the end of the day, it benefits you to pay good employees what they’re worth—otherwise they’ll seek out someone who will.

When it comes to providing the right amount of compensation, how does your company measure up?  If you’re not confident your compensation practices are best practices, the team at YES! Your Human Resources Solution, Orange County’s premier Human Resources consultants, can help.  Just look at this real-life example of our team in action:

The incentive compensation at a health services company was becoming more of an entitlement than a motivator.  None of the numerous compensation plans were driving the desired results.  The YES! solution?  First we met with senior management to understand the background information.  Then we used this information to realign the company’s incentive compensation structure with its business goals.  We reduced the number of programs, introduced metrics to quantifiably measure the achievements, and simplified the calculations.  Finally, we recommended a plan and drafted communication for the rollout.

Now that you’ve seen us working hard for our clients, discover how your business can leverage the power of saying YES!  Backed by 20 years of experience and advanced HR and compensation certifications, our team will help your business build positive changes—even unexpected ones!  There’s no better time to build a solid HR foundation for the future.  Contact us today for a free consultation.