Several national surveys say pay raises will average just 3.5 percent in 2003 -- the third straight year of such modest increases. One survey, released last month by Deloitte & Touche, went a step further and probed the consequences.
Among the companies surveyed, three-fourths said the small raise pool makes it difficult to reward top performers. Nearly half said low work force morale is another result.
David Glueck, a director in Deloitte & Touche's performance management and compensation consulting practice, said he and his fellow consultants are most concerned about the perceived inability to reward top workers.
"This is the group where we'll get our future CEOs from," Glueck said. "If we don't retain and develop those workers, somebody else will. That's our message to our corporate clients: You have to reward or lose your top performers."
That's often easier said than done, Glueck admitted. Many organizations don't have effective employee evaluation methods in place, making it hard to even identify their top performers.
And, even if companies know exactly which "stars" they want to cultivate and keep, a 3.5 percent raise pool makes it difficult to make meaningful differentiations between the top performers and everyone else.
"If your actual raise range is 3 percent to 4 percent, the top performers (who get just a percentage point more than an average performer) will look around and say, `Well, I might as well spend more time at home with my family,' and they either stop working as hard or they leave," Glueck said.
On the other hand, he said, "you can't use the 3.5 percent pool to give the top 10 percent of your workers everything and give nothing to the other 90 percent. That's very demotivating for most of your workers, whom you need to get things done."
The national survey reached just 130 large companies, averaging 4,000 employees each, but Glueck said the job-retention and employee-morale problems that it uncovered are applicable to all organizations. Unfortunately, there are no quick-fix solutions for anyone, partly because the economy and the job market remain slow.
Without increased revenue to sweeten the raise pot, organizations must be more creative to keep their most valuable employees reasonably happy. Glueck suggested fast-track promotion opportunities, company-paid training and development programs, plum work assignments and flexible work scheduling as incentives.
The discomfiting news for solid workers who aren't given "star" status is that worrying about their happiness -- if not their ability to stay ahead of the pace of inflation -- takes a corporate backseat. The Deloitte & Touche survey and the consultants' follow-up advice to clients put a premium on taking care of top performers first.
Glueck made no apologies for that priority. It is the top tier of workers who will carry organizations into successful futures, he said. As for everyone else, nice raises may help morale but not have as big an effect on the organization, he said.
"Unfortunately, a large number of people in the workplace had very high expectations (for their raises) based on the strong economy in earlier years," Glueck said. "So they're very disappointed (in the last three years), even if their expectations were unrealistic."
Because the sour economy makes job changes so difficult, many of those "disappointed" workers are staying put -- thoroughly demotivated -- in their jobs. That's not a formula for vibrant workplaces or careers.
Perhaps some of the same incentives suggested for top performers could be offered to other solid workers, too. The resulting mutual benefit might be of great benefit to both worker and organization.