Ed Llarena, Jr.
Owner/ Managing Partner
Pon1965
Construction
+1 Other

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A good performer but position and salary is not commensurate. Salary is more in the position category in the company. In this case, if his performance is C ( good), can he be put in D(average) because his increment should be only 5% & hence graded D , as increment % is linked to grading?. is this correct and if not what should be the process?.
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Hi!

The question is a bit confusing, but let me make some comments/ clarification:

"Performance Rating" is not the same as "Job Rating", which is normally done in Job Evaluation (JE) Programs and related to the Job Grades of a company's Salary Structure (in the Job Grading Methodology vs India's concept of salary structure which speaks about salary components like pf, etc).

Salary grades are generally determined by a JE methodology and would determine the size & classification of jobs (vs other jobs) and the compensation rate range that it is entitled as per company structure.

A "Performance Rating" is the supposed rating that an employee gets after an appraisal is made. The scores and ratings is dependent on the policy or guideline that governs the appraisal tool used. Generally, the scores and ratings are given equivalents relative to the reward or sanction that it is entitled. The equivalents are normally expressed in terms of fixed amounts or a % of an employee's existing salary. But it has nothing to do at all with the Job Grade of the employee.

Hope this helps.

Ed Llarena, Jr.

Managing Partner

Emilla International Consulting Services

Tel: 006352-201-0568/ 006-916-762-7218


Dear Ed,
Thanks for the clarification . But would like to elaborate.
My Present Grade is GM and my salary is Rs 3.2 million INR per annum.
The salary for the persons in the same grade (GM) in my orgn is Rs 2.5 mn per annum.
My performance was rated 4 out of 5 . where 5 is the highest rating.
The increment rate for Rating 4 is 15% of the Basic Pay in my orgn,
They wanted to give an increment of only 5% and hence changed the rating to 2 , where the increment rate is 5% for rating 2 .
As my salary is high for GM in my orgn, they wanted to give only 5% .
Wanted to know, if this is the right approach and if it is the current best practice followed in the industry ?.

Hi!

If your understanding and interpretation on your company's performance policy is correct, then you seem to have the right to raise the question that you shared with us here. The best approach and action for you is to discuss and clarify the matter with your top management, as this is a matter of policy interpretation.

Offhand, I could see a problem with the way the policy (as you say it) must have been formulated. Indeed, I have seen some companies adopt similar policies, and I have always advised them on the disadvantages/ implications of providing fixed entitlements to performance ratings.

As we all know, the financial performance of business organizations fluctuate year on year. Some years are good, while some are bad----or even very bad. But regardless of its financial performance, the company must conduct the annual appraisal, and provide rewards to those that performed well. But then, on a year where a company's financial performance is poor, it may not be in a position to provide a big budget for the appraisal reward. That's why, compensation managers are supposed to be properly guided by the 3rd and 4th basic compensation principles of "affordability" and "sustainability". Indeed, fixing the entitlement increment of 15% to a GM's salary for a rating of 4 (year on year) will compromise top management's decision making prerogative and discretion----- aside from the fact that it has a tremendous impact on a company's salary structure and financial bottom line!

As such, policies should be properly formulated and should be based on lots of foresight, experience, and analysis of its possible future implications, esp when it comes to salaries and financial rewards. The compensation principles are excellent guides in formulating good policies for an organization.

Best regards

Ed Llarena, Jr.

Managing Partner

Emilla International Consulting Services


Dear Ed,
Thanks and appreciate the clarifications. My limited view is that the performance evaluation and increment should not be linked.
In the said case, the increment of 5% is done, considering the performance of the company and that my salary which is high.
However, the performance can still be rated 4 and the increment can still be 5%.
In the said case, as the increment bracket is linked to the performance rating , although rated 4 , was brought down to 2 to fit the increment of 5% bracket, which de moralises the person and also , on record, it shows that my performance is bad , though it is to the contrary.
I am not averse to getting 5% increment, but unable to accept the rating of 2 , when it was 4 , which tarnishes my performance.
Want to know , if this is the right approach.
Hi!

Looks like your company's appraisal system is using the concept called "calibration"---- which is a management technique associated with the forced ranking appraisal methodology.

As we all know, in the forced ranking appraisal method, there is the so-called "calibration committee" that reviews all appraisal ratings (within departments & company wide) in order to create the so-called "performance curve" as per appraisal policy of the company. Under this scheme, any given rating is considered "tentative" and can be changed by the committee (with a majority or consensual vote of the members) in order to arrive at the company's pre-determined "ideal" or desired curve (performance ratio).

Hence, maybe your rating of "4" was the original rating that your immediate superior gave you. But upon review (and in comparison with others) by the calibration committee, they decided that you only deserve the rating 2 (and its equivalent of 5% increment). And, you were never informed by your immediate superior about your rating because keeping the result confidential is the nature of the scheme. It is also possible that your immediate superior is not aware of it because he was not a member of the committee.

I have participated in calibration committees and have seen how the system works. We had one classic example where a supervisor that was given an "outstanding" (5) rating by his immediate supervisor, but who, during the calibration process, got a rating of "unsatisfactory" (2). And, as per company policy, those who were rated excellent were supposed to get a one time bonus equivalent to their 2 mos basic salary. While those who were rated unsatisfactory were only entitled to a bonus of 50% of their monthly basic. And, because he was shown his original rating, the supervisor started to expect that he will be getting a bonus equivalent to 2 months. When payroll time came, he was shocked to see that only 50% of his monthly basic was credited to his account. The guy complained and it shocked the entire company as the secret workings of the calibration committee was revealed.

The above matter is my biggest objection to the forced ranking appraisal methodology. That's why I decided to develop a PMS that is objective, fair, and very transparent.

Hope this clarifies this matter more.

Best regards.

Ed Llarena, Jr.

Managing Partner

Emilla International Consulting Services


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