When the end of the fiscal year comes around most companies begin completing a merit increase process. Part of this process includes making a suggestion of the employee’s merit increase based upon things like their compa-ratio, range penetration and/or performance rating. For example, someone who has a range penetration of 44% but received an annual performance rating of 2 out of 5, may only be suggested a 2% merit increase.
The performance rating should be a good way to help discern each person’s merit increase, but it is flawed. Most of the people in on a team would have 3 out of 5 or 4 out of 5 and the manager is left to subjectively move merit increases around. Therefore, the manager ends up giving increases that don’t reflect the reality of each employee’s performance.
When a company uses Quix for their performance management tool, the ratings given to an employee are averaged to arrive at an average rating for any chosen time period. If the company’s fiscal year were from November 1st to October 31st, the compensation form could be populated with the average score for all the manager given ratings during this period. Instead of half the team being 3 out of 5, you’d instead see scores like 6.77, 5.91, 7.04, etc.
This is where the real power of Quix can be seen. If you knew this about each employee, you’d also know the average rating for all employees. Let’s say that rating is 6.46. Even though the score is technically above the scale's midpoint, the average at our company is above that number. At the same time the compensation team would be able to say from the available compensation budget, the average merit increase is 3.1%. We can now say that an average rating (6.46) is due a raise of (3.1%). From this baseline we can create a 100% even and objective distribution of merit increases.
As an example, the employee who averaged a 5.91 during the fiscal year is 8.5% below average for our company. The average merit increase of 3.1% would be reduced by that same 8.5% and this person’s merit would instead be 2.84%. The manager could be completely transparent if they wished in explaining the increase. The employee rated at 7.04 is 9% over the average rating so their merit would be 3.38%.
Every employee could have a specifically created merit recommendation that would be completely objective and transparent based upon their performance gathered throughout the year. This is another of the many benefits of gathering employee ratings frequently instead of just once or twice per year.
This is what Quix can provide. Quix is a mobile application that allows employees and managers to quickly rate themselves and their direct reports up to twice per day. This allows companies to build a more nuanced, complete picture of employee performance over time, identifying high-performers, problem employees, potential management issues and even biases that would otherwise go unnoticed and unaddressed. Contact Quix to learn more.