Performance Review – How to Maximize Your Raise.


July 25, 2007 @ 8.00a.m – Written by January

Categories: Career

Half Year performance review is here again within my workplace. You need to see my colleagues scurrying up and down, searching for missing files, pictures and reports of achievements till date. I can imagine the usual misgivings and misconceptions that arise due to the inability of the Line Manager to cascade and ensure everyone understands the importance and relevance of the performance review to our career development within the organization.

 

I can hardly blame my Line Manager. I don’t think he has a full grasp of the review concept. What I can tell you is that the performance review session is a stressful time within my organization because it’s like attending an interview. This time management is considering why you should still be paid what you are currently earning or why you deserve a pay raise. As employees, we usually fail to prepare for this important event in our professional lives. I will be outlining what we can do to maximize our paychecks at the end of the month.

 

The most important element affecting your performance review and your pay raise is your performance. If you are not interested in increasing your performance, then you should not be reading this because you are giving up a large chunk of your paycheck. Let’s face it; it’s hard work being outstanding. If you are willing to put in the hard work and be recognized for your outstanding achievements, your paycheck will stand out from the rest.

 

Lately, I have been bombarded with the term “Compa-Ratio, Performance Rating, Market Anchor Ratio e.t.c and I have been wondering how all these terms have a direct relation to my take home pay at the end of each month. If you’re as confused as I am, be aware that you must understand the rating system that is applicable in your organization. There are two elements to the rating system: Your rating which is usually a 1-5 number, and your Compa-Ratio, which is usually expressed as a number between 0.80 to 1.25 (or as a percentage (80%-125%). These two numbers determine whether you’ll get a raise or not.

 

Your goal is to be rated a 4 or 5 because managers are instructed to rate their direct reports according to a specific distribution to prevent them from giving all employees 5’s. Compa-Ratio or Compensation Ratio is represents how well you are paid compared against an industry standard. Compa-Ratios are position specific. Each position has a salary range that includes a minimum, midpoint and a maximum. These three values represent industry averages for the position. The Compa-Ratio is calculated by dividing your base salary by the mid point industry average.

 

A Compa-Ratio of 100% or 1.00 means you are paid exactly what the industry average pays and are at the midpoint for your salary range, while a ratio of 0.75 means you are paid 25% below the industry average. You might think that you want to have a high ratio, meaning you are paid more than the market average, but this is the exact opposite of what you want. You want your salary to be below the midpoint average. Why? Because this ratio to a large extent determines whether you are allowed to get any raise at all and if so,

how much. Managers are given rules that dictate the raises they can give.

For example;

 

Compa-Ratio

Raise Action

1.15+

No raise, possibly bonus

1.00

Company average raise expected

0.80

Above average raise expected

 

If you are in a high compa-ratio, it is expected that you will get promoted into the next position. This will bring down your compa-ratio. If you are not promotable to the next position for any reason, you need to rectify that as soon as possible. That may mean finishing a degree or certification program, enrolling in a mentoring program, or picking up a needed skill. This is something you need to do whether your company pays for it or not. The worst thing you can do is sit at the top of your pay range and not be able to move into the next position. You will consistently get low to no raises and you will be the first to get laid off during down times. So take the initiative to fix whatever is keeping you out of the next higher position.

Tying your rating and your compa-ratio together is what determines your actual pay raise. If you are an exceptional employee with a low compa-ratio, you will get the lion’s share of the raise allocation. If you are an underperformer with a high compa-ratio, you will get slim to no raise. Knowing where you stand with these two numbers will tell you what you need to do. The key is doing it before your next performance review. Make it easy for your boss to move you into the position above you by having all the requirements for that position before you go into your review.

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