Annual Compensation Cycles Need to Take an Uber


I was reading this story about GE dumping its famous (and infamous) Jack Welch baby, the stack ranking and annual performance review. That is a worthwhile topic for another day, but I was struck by a comment in the article by GE’s head of human resources, Susan Peters:

“The world isn’t really on an annual cycle anymore for anything.”

So. True.

If there’s one thing that has surprised me in the past 4 years talking with the people who are responsible for managing compensation in their organizations, it’s been exactly this idea. Compensation used to be a once a year thing mostly because they had ‘always done it that way’ and it was simply the best that organizations could do given the constraints. They only had data that had been collected in ‘last year’s survey’ and it was about a year newer than the data they had used the year before, which is to say about two years old, not three. They didn’t have big data, much less fresh data to surface trends and make correlations pop out, and they certainly didn’t have cloud software tools to help them stay on top of market dynamics for pay.

Don’t get me wrong, I know that there’s a rhythm to the business calendar, and that certain things tend to happen yearly, but maybe it’s time to question why. Ten years ago the answer was the HR team and their technologies simply weren’t up to making pay changes more frequently. What’s the answer today?

You don’t have to do it that way anymore. Consider for a moment, the changes happening around us. If you live in any major city in America you are as likely to fire up Uber on your iPhone as you are to call a cab, even my parents (not spring chickens) booked their first AirBnB vacation recently rather than going to a hotel, and most of us watch ‘tv’ when we want to not when it’s ‘on’.

The world is moving faster, the traditional way of doing a lot of things is being upended, and that includes managing compensation. Talent markets are evolving very quickly. If you’re waiting 12 months to check in on what’s happening in some of your key geographies, or positions, you may be losing talent that has found a more market-informed company interested in the services of your key employees before you even realize you’re behind the market.

Want to learn more about real time compensation? Get a demo today.

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8 Comments on "Annual Compensation Cycles Need to Take an Uber"

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Carla Phillips
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When I click on “get a demo today”, the web page is not available. Is there any way I can get the demo other than clicking on the link? Thanks very much.

Joleen at PayScale
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Hi Carla! We are happy to hear that you are interested in a demo. Sorry about the broken link! It is now fixed within the post and you can also follow http://resources.payscale.com/hr-request-a-demo.html. Thank you!

Jonathan Lim
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Compensation review at fix cycle probably is the fairest. It gives every employee / company the equal time to deliver the progress. It also make fair benchmarking, which influence the outcome of review. Now the once-a-year cycle, fits to typical business cycle. Maybe also cycle of personal goal and financial commitment review. Faster cycle will strain resources. Slower cycle will be out of sync and invites unhappiness. Without a fix cycle could is interesting, but how to ensure fairness?

Syed Liaquat Hussain
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Annual Compensation Analysis

mm
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Jonathan Lim thanks for your comment. We would agree that fairness is an important aspect of any compensation program. What I’m pointing out in this post is there are other elements to optimize for as well, like being responsive to the competitive landscape and market dynamics. I think those objectives can co-exist in a smart, modern approach to compensation where you have the right tools at your disposal.

Tom Schultz
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I would promote that a year round cycle could exist HR works to change the mindset of managers and employees. Software should enable employees to understand how they are being paid by the companies current philosophy and employee experience. They should also be able to monitor their own goals and accomplishments which might be longer or shorter than a year. When an employee feels they should be promoted, they should be able to bring that topic up for discussion with their manager and HR with supporting performance, pay and philosphy guidelines. Alternatively these things should be constantly monitored by HR… Read more »
Sankar
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I support Mr Jonathan views. If the performance appraisal to fix to a short term task or goal, it will be unfair practices as all the goals of the business are not short term deliverables.

mm
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Sankar and Tom, thanks for sharing your points of view. I like the ‘promotable landscape’ concept.

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