2012 Salary Increases Up Slightly

Friday, September 16, 2011

In an August 22, 2011 press release, Towers Watson, a global professional services company which supports organizational performance improvement through human resources, risk and financial management, reported that U.S. companies expect annual salary increase to average 2.8% in 2012.  The survey, “Towers Watson Data Services Salary Budget Survey”, conducted midyear 2011 surveyed some 773 U.S. organizations across a wide section of industries and job classifications.  When the same survey was conducted in 2010, the 1,046 U.S. employers surveyed reported an average projected annual salary increase of 2.7% for 2011, representing a 40 basis point increase from the 2.3% raise workers were expected to receive in 2010.

Employee compensation, even in the best of times, is a challenging endeavor. Over the last several years many organization have significantly altered their reward systems. The commonly held belief is that employees are compensated for two fundamental reasons:

1. Base compensation: pay for the production of the basic products, services, and goods they produce. The daily grid of meeting the needs of the organization and its customers. Simple enough to say the least.

Base compensation can be thought of as that remuneration paid to the incumbent employee for the performance of their routine day-to-day tasks associated with the employee’s position. It excludes premium pay such as: overtime and shift pay, or incentive pay such as commissions, bonus payments, special knowledge/skill pay, standby-by/on-call/waiting pay, etc.

2. Incentive compensation is intended to motivate workers to increase the productivity of the organization’s operations. Not so simple.

Incentive compensation, on the other hand, attempts to change or alter baseline behavior from its current level to a higher or at least a different level. This higher or different level could be higher sales, higher profitable sales, lower rates of product defects, fewer worker accidents, higher customer services performance scores, etc.

The problem is that money is generally not a very good motivator in and of itself. It is highly effective at getting an employee’s initial attention, however after some time the luster of money fades once the worker is satiated. Frederick Herzberg, the pioneer of 'job enrichment', perceived that motivation came from within the job role in the form of “job satisfiers”. Abraham Maslow, who has been tagged the “Father of Modern Management Psychology”, saw motivation in terms of a “hierarchy of needs”.

While compensation surveys certainly help us to understand the trends and the ever changing landscape of employee rewards, they fail to address the underlying factors we need to motivate employees beyond just showing up for work. And while it may seem impossible to develop personalized reward systems designed to motivate thousands or tens of thousands workers, it is apparent that without a “motivated” worker there is little prospect of organizations achieving long-term economic gain.

If Herzberg, is in fact correct, that motivation is to be found within the job, those job satisfiers must be designed into the job. And if Maslow is correct that none of us are truly fulfilled until we are Self-Actualized, how are we to build those features into the job? How do organizations design jobs which meet the needs of all four constituencies: the organization, stakeholders, customers, and finally employees themselves?