Well commented Sajid. However, let me give my humorous side of explanation / comments considering the socio-economic
Let me also answer in between the question:
I work in an organization where performance appraisals & annual salary increments are considered as two separate activities. I find this quite interesting and intirguing at the same time. This is probably the first company that I have come across practicing this. I would request all members who have been working in Dubai or the UAE to throw some light on this matter. Is this a common practice in this market?
As far as my experience of working in the UAE is concerned, it is not unusual to consider the appraisals and annual salary increments as two separate acitivities. Salary increment happen in some companies in month of April, effective January and in some companies in January itself. Appraisal happens only in well structured companies mostly with their collaborating company or partners based in Europe, UK, US, etc.
It is due to the fact that HR Department is not well structured here (in most Middle East countries) and have several limitations with regard to efficient staff and mostly you may see either Office Services or Administration personnel handling HR role. This will deny the right structuring, career development opportunities, Training requirements etc which are very necessary for the growth of a company and it's manpower.
If it is then some questions come to my mind
1. What is performance appraisals used for?
Company to company objectives are varied and you may see at times (especially if you come here from a well HR structured company) Performance Appraisal as an opportunity to deny any well deserved promotion /pay rise. However, it is not the case always. There are companies who follow correct policies and procedures to implement performance appraisal plans.
2. What is the basis for suggesting a salary increment?
This depends on several factors, again depending from company to company and nature of it's business and roots. Some companies have a fixed plan of increment for employees - again - on a different scale or ratio basis according to the nature and role he is assigned. Here again, many times, if you are a hardcore HR person re-planted to this part of the world, you will be forced to see favored employees walking away with maximum scores/increment allotment ratios beyond HR prescribed AND management above HR who finally authorises this increment, re-fixing it to give higher or lower rates than the HR proposed ones. Office boys, Personal Drivers, PROs, and close associates etc who do several work for key/top management executives fall into this elite category and you may not be able to include or imagine to include in your control measures or policies. But I am sure this scenario is existent not only here.
3. Who is responsible for proposing the increment figures - the HR team or the Business team?
Many cases the company allocates a budget increment ratio or budget basket to the Business Team and other teams and they can propose their own share of percentage ratios for staff within to the HR to finalise and propose it to the management. Performance appraisal done by the Business Team is rated by the HR department and they may give their evaluation to the management to finalise this exercise.
4. If there is no linkage between the two, then how would a company justfy performance pay for employees?
This is also not an uncommon scenario. Many times we get to see fixed amount interest or fixed percentage increase irrespective of the performance and according to the company management decision. It may happen in industries where profit margin/growth rate is comparatively less, managments not keen on discussing / listening to staff issues related to raise in cost of living etc. As I wrote earlier, these things are part and parcel of Local situation of a company and their vision towards employee welfare connected with company growth. I have seen many case where increment as low as 150 Dirhams approved even at this time of escalated cost of living and at times approval of high increment even two or three times during the same year.
5. Are salary increments scientifically calculated based on company performance & general economic conditions?
Many times companies involve external consultants to assist them in salary revisions as per economic conditions. Many companies - again with outside Gulf roots - have well structured schemes as per their parent company staff policies and procedures and stick on to international rules and regulation to finalise the employee benefits each year. Those companies will also have real time target and growth / profit margins and these are analysed and discussed at appraisal time. At this time, they are also issued with new objectives, and key targets for the new financial year as per the company policy.
As you and many others realise, true HR practise is still a long way to go in this part of the world and it requires lots of efforts to make it a reality. I sincerely hope that interaction, useful discussions, knowledge sharing etc using non-profitable Self Help groups like Cite HR will prove beneficial for implementing beneficial measures to staff in future time.
Thank you for bringing out this topic.
15th July 2008 From United Arab Emirates, Abu Dhabi