To the Editor:
I commend Judy Capko for stating the need to establish staff-salary structures on a more thoughtful basis than gut feelings (“How to Keep Salaries on Track and Under Control,” April 1998). I would like to point out, however, that there are other models to choose from.
The model Capko discusses, let's call it model A, is clearly designed to serve as a cost-control tool. It gives you a rational way to examine whether you are paying higher than market salaries, based on the model's factors for establishing each job's internal worth.
Model A uses factors such as educational level, years of work experience and number of direct reports to determine salary grade assignment; therefore, model A rewards credentials, quantity of experience and hierarchy. But I regularly see employees with lesser credentials outperform coworkers with more credentials, and an employee's years of experience are often less relevant than his or her quality of experience. Furthermore, rewarding hierarchy encourages empire building while also working as a subtle but powerful force against intragroup teamwork and intergroup collaboration.
Model A also puts pressure on you to continue moving marginally performing staff up through each level on the basis of their years of experience. This type of salary structure is hard to defend to a staff member who is paid less because of fewer years of experience but is making a superior level of contribution to the practice than a higher-paid co-worker. Consequently, model A often results in higher turnover, with the best-performing staff being the first to leave.
The salary structure in “model A” does indeed reward excellent performance, but with financial prudence rather than emotion. In my experience, management and staff like model A because it offers individuals a clear understanding of what each position is worth and it does so in a fair and consistent manner, placing high performers at the top of the scale. Marginal employees should not advance in pay rate but should be placed on performance-improvement plans.
As for motivating employees and maintaining high morale, the real solution is leadership and management skills, not pay rates (as long as pay rates are fair).