Who Gets How Much
Dec 11, 1995
This is the time of the year that the majority of firms in the A/E/P and environmental consulting industry decide who gets how much in the way of pay increases and/or bonuses— in other words, how the spoils of 1995 will be doled out.
The way we tend to do things is to have the owners of the business sit around a big table with the entire employee roster before them. Alongside each employee’s name on the roster is their hourly pay rate, date of last pay change, and what they got for a bonus last year. Somebody (usually the CEO or managing partner) decides what the “targeted” pay increase should be and how much money, in total, can be paid out in bonuses.
Once that’s done, and each owner/manager has consumed his quotient of decaffeinated coffee and sweet rolls, we’re off! Each person’s name on the list is called out, and the group, in its infinite wisdom, decides what that person’s raise and bonus will be.
Usually the talk around the table goes something like this: “Junior Jackson (a four-year experienced engineer) is at $14.58 per hour. Whaddya think we ought to raise him to?”
One of the more aggressive communicators at the table volunteers: “I think we ought to bump him up 75 cents an hour— that’s about 5%. He’s O.K., but isn’t setting the world on fire.”
Then another of the owner/managers speaks up: “Junior did an excellent job for me on the ABC project. I vote we give him a buck.”
Then another principal says: “He worked for me on the such-and-such project, and did a horrible job. Joe Blow had to redo everything he did. I say we give him only 60 cents.”
In the end, Junior gets 75 cents per hour, and we then move on to his bonus. Once again, someone speaks up: “I say we give Junior $750. That’s about right for someone at his level.”
Another member of the table then asks: “What did we give him last year?”
The response comes: “We gave him $650.”
Another question: “What are we giving Bobby Joe Smith? He’s at about the same experience level as Junior.”
The response: “We gave him $800 last year. But Bobby Joe works a lot harder than Junior, and besides that, he wears a decent looking tie every day. Bobby Joe could be sittin’ around this table some day, whereas Junior is probably never gonna be any more than a good yeoman engineer.”
Then, the managing partner, after listening intently to the banter around the table says, with a tone of finality: “Let’s give him only $700, since at least some of us aren’t too high on him.”
The decision is made to give Junior the $700, and then the next case is taken up. And so goes the day, with an expected break midday to eat the ubiquitous turkey sandwich on a croissant with some aged potato salad in a plastic cup, and a chance to return all urgent phone calls that came in that morning from clients who are expecting something they haven’t gotten yet. Finally, by late afternoon, the entire list has been made, checked twice, and everyone slaps each other on the back and goes home in their company-issued Hunter Green Ford Explorers.
Sound familiar? I wouldn’t be surprised if it did. But the question is: “Is this really the best way to do things?” Unless you are very small (less than 20 employees), my guess is that it isn’t. And while it may be too late this year to do anything differently, I would suggest that next year you consider making the following changes:
Budget total pay increases. Don’t set “target” pay increases. This practice tends to result in average pay increases for everyone, with a few that are outside the range. The result is that total pay ends up rising by 6% or 8%, when it probably shouldn’t be going up more than 3½% or 4%.
Dole out raise budgets to unit managers. You can’t possibly know what everyone is doing. Give some power to your supervisors by putting them in control of their own little pot of rewards.
Set up a bonus formula. Pay out bonuses more frequently than once a year. Determine the pot based on overall accrual-based company profitability adjusted for cash collections and possibly work-in-process write-offs as well.
Clean out the dead wood. We know companies in this business that operate more like accountants and lawyers than A/E firms in the way they relentlessly cull the weakest members of the staff. “Up or out” is the way to characterize their management philosophy when it comes to career development. In fact, we have some clients who actually rank-order their staffs each year and cut out the bottom-ranked X% as a forced method of making sure this happens.
The moral of the story: Don’t be wedded to the traditions of the past if they no longer serve the needs of the business environment we are operating in today. That’s just not smart.
Originally published 12/11/1995
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