Question

A company decides to offer an average annual raise of 8%, although the current inflation rate is 10%. Each engineering manager decides on the best way to distribute the salary increase to his/her staff. However, if everyone gets an increase of 8%, then there will be no differentiation between strong and weak performers for the previous year. What should you do as an engineering manager? Book Title Engineering Management Author C. M. Chang ISBN 978-1-4987-3007-5

Answer 1

Every firm should differentiate the pay hikes/rises between strong and weak performers while maintaining an overall average as per their set goal for the year. The differentiation is important to keep the strong performers motivated and to help the weak performers understand their standing and improve in the coming year. As an engineering manager, I would measure the performance at an individual and team level and give more than the average annual raise for the strong performers viz around 10-12 %, 8-10 % for moderately strng performers, 7-8% for average performers and 5-7 % for weak performers. This way the overall average is maintained at 8% while the differentiation is ensured.