Performance management in the time of budget cuts, aka no merit increases…

The BC budget is getting a lot of play at the moment and it is all a bit dismal. Taxes are going up and budgets are getting slashed. In recent conversations with clients it has become all too common to hear them say “there will be no salary increases this year”. So my question is, if one has an effective performance management system that drives your merit increases, during times of zero salary increases does the following happen:

  • Your exceed employees become the ones you do everything you can to avoid laying off?
  • Your meets empoyees become thes ones that if you have to, you are willing to lay some off?
  • Your do not meet employees are terminated as soon as possible?

This may be perceived as overly simplistic as it does not take into account roles that may be more strategically important than others. But trying to assess the strategic importance of roles in times of crisis just adds another layer of complexity, subjectivity and ultimately time delay. If you are in HR and your performance management system does not enable you to make these kinds of assessments, well time to fix it. Fast. For employees working in environments with no salary increases, motivation is no longer about getting a raise,  it is about keeping your job. Get moving.

And by the way, any organization that says they are going to reduce costs without layoffs is simply lying, confused or clueless. Salary costs are by and large the largest budget line item for any business. Sooner or later, cuts will happen. You can either attempt to influence them or be caught in their path.

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