Performance Review Cycle and Beyond: Navigating Salary Bands and Leveling Strategy
Part of The PIRATE Way — Stories about scaling up engineering teams.
A Glimpse Into the Performance Review Cycle
In the immature stages of any organization, there needs to be a formal performance review process, and evaluations are often a continuous feedback loop. At some point, more structure is required, providing predictability to the team. I have often seen biannual performance review cycles. These allowed for peer feedback and calibrations and facilitated synchronized evaluations, minimizing sporadic promotion and raising discussions. It provided reflection, assessment, and recalibration moments, aligning individual achievements with organizational benchmarks.
The Structured Process
Transparency and communication are crucial in this sensitive undertaking. With the help of the Management Guild, guidance, support, and clarifications are offered throughout the multi-week review process, overseen by HR or an HRBP.
A typical cycle may include the following stages.
Peer Feedback
The process is initiated with an intensive week of peer feedback. Each team member selects a selection of colleagues they believe can provide insightful feedback on their performance, contributions, and areas for improvement. This choice isn’t unilateral; managers scrutinize these selections, adding or removing peers to ensure a comprehensive, balanced review. During this phase, selected peers devote time to complete detailed feedback forms. It’s a period of reflection and candid feedback, aiming to highlight strengths and identify areas for development.
Self-assessment
With peer feedback underway, phase two focuses on self-assessment. Each team member introspects their performance, reviewing their goals, achievements, and areas they fell short. It’s a personal journey, an opportunity to be honest about one’s strengths and weaknesses. It’s not just about looking back but also forward — setting new goals and outlining a tailored Individual Development Plan (IDP) for the coming period.
Manager Assessment
Managers step into the spotlight during the next phase. Armed with peer feedback and individual self-assessments, they embark on a comprehensive review. It’s a delicate balancing act — they must consider the individual’s self-perception and peers’ perspectives while injecting their observations and insights. Managers formulate recommendations on performance ratings, but these are not yet communicated to the team. It’s a phase of synthesis where varied perspectives are amalgamated into a holistic view of each team member’s performance.
Calibration
Calibration is a pivotal phase occurring as the next phase. All managers’ recommendations are pooled, and department leaders and the HR Business Partner (HRBP) commence the evaluative process. Each team member is assessed within their level, identifying outliers or contentious cases that warrant deeper discussion. It’s an exercise in equity, ensuring that evaluations are consistent and fair across the board. The process may involve revisiting specific assessments and promoting a robust dialogue to reach a consensus. The aim is to ensure that the distribution of performance ratings aligns with the expected normal distribution.
Communication
The final phase is dedicated to communication. The suspense and anticipation culminate in individual meetings where team members receive assessments. Managers communicate the outcomes, offering insights on the evaluation process, celebrating achievements, and addressing areas of improvement. It’s a moment of closure and new beginnings — the feedback provided becomes the cornerstone for the individual’s development journey in the subsequent months.
Navigating Sensitivities
Throughout this structured process, sensitivity and transparency are paramount. The Management Guild is pivotal, offering a support network for managers, especially those new to the process. It’s a time of heightened emotions — each phase, from peer feedback to communication of assessments, is navigated with a blend of openness, respect, and support. Over-communication is encouraged while over-promising is cautioned against. Every word, action, and decision is magnified, underlining the need for tact and empathy.
Closing Thoughts on the Structured Process
This five-phase journey is more than a procedural necessity; it’s a ritual that reaffirms the organization’s commitment to growth, development, and fairness. It is meticulously designed to ensure that every voice is heard, every achievement acknowledged, and every development need addressed. A cyclical dance of assessment and development propels individuals and the organization into a future of continuous evolution and achievement.
Salary Bands: Benchmarking and Beyond
A Pivotal Role in Employee Compensation
The Compensation and Benefits department, or in some instances, Talent Acquisition Leaders or HR in emerging companies, are central to establishing and adjusting employee compensation. Their role transcends administrative functions; they are vital in strategizing and ensuring that the organization’s salary offerings are not just competitive but are also perceived as fair and equitable by the workforce.
The Art of Market Benchmarking
The process of benchmarking is integral. It’s often facilitated by acquiring databases to gain insights into industry compensation trends. But it’s not just about gathering data; it’s about analyzing and interpreting it to align the organization’s compensation structure with a specific market percentile. This positioning is a balancing act, ensuring the organization is competitive in attracting top talents while maintaining fairness and sustainability in employee compensation.
In cases where the organization is yet emerging and needs a distinct Compensation and Benefits department, the onus often falls on Talent Acquisition Leaders or HR professionals. In such contexts, collaboration is vital. As an Engineering leader, you should work closely with them to discern if a lack of competitiveness in compensation is a primary driver for candidate rejection.
Decoupling Salary and Career Progression
A paradigm shift is unfolding in the realm of employee compensation. The rigid linkage between salary bands and career ladders dissolves, giving way to a more nuanced, flexible approach. Salary is not strictly tied to titles or hierarchical positions in this new construct. It reflects the individual’s organizational skills, contributions, and value.
This decoupling is not arbitrary; The traditional method of directly linking pay with job titles can sometimes lead to inequities and dissatisfaction. A study published in the Harvard Business Review has highlighted the importance of revisiting and revising pay structures to establish more equitable and inclusive compensation systems. Decoupling salary from job titles ensures that employees are rewarded for their skills, contributions, and experience rather than their position in the corporate hierarchy.
Compensation Transparency
Companies like Buffer have pioneered transparent salary formulas that consider role, experience, and location but are adaptable to individual achievements and skills. This allows for a customized approach to compensation, ensuring that employees feel valued for their unique contributions and aren’t constrained by rigid salary bands attached to job titles.
However, the decision to disclose salary or compensation bands publicly is anchored in a complex interplay of benefits and challenges.
The Upsides
- Fairness and Equity: Public salary bands cultivate an environment of fairness. When employees understand the benchmarks for compensation, it mitigates the risk of pay disparities, fostering a sense of equity and inclusion.
- Talent Attraction: Transparency can also be a magnet for talent. A clear outline of compensation parameters can expedite the recruitment process, with prospective employees having clarity on remuneration.
- Employee Engagement: According to a survey by PayScale, transparency around pay is directly linked to employee satisfaction and engagement. Employees who understand the pay process will likely be more satisfied and engaged.
The Challenges
- Internal Discontent: On the flip side, the public display of salary bands can sometimes spark internal discontent. Employees may draw direct comparisons, leading to dissatisfaction and potential discord.
- Competitive Disadvantage: There’s also a strategic element. Publicizing salary bands can potentially arm competitors with insights into your compensation strategy.
- Flexibility Constraints: Public structures can sometimes limit the company’s flexibility to negotiate and tailor compensation packages for individual employees, given the public benchmarks.
Your organization must weigh the potential for enhanced equity and attraction against internal discontent and competitive exposure risks. The choice is not binary and can be tailored; some organizations opt for internal transparency, where salary bands are disclosed to employees but not publicized externally.
Conclusion
Performance reviews, salary bands, and competency frameworks are interwoven elements of organizational dynamics. Their harmonious integration contributes to the symphony of organizational growth and excellence. Leaders and HR professionals are conductors and composers, orchestrating these elements into a melody of continuous development, adaptability, and success.
Every organization embarks on a unique journey where universal principles are refined into tailored practices. In performance review and compensation, the key is not replication but adaptation — transforming global insights into organizational wisdom. With each cycle, there’s an opportunity for refinement, evolution, and elevation — stepping stones to organizational excellence and employee fulfillment.
Remember: This is a blog post from the series “The PIRATE Way.”
