Page 227 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

Chapter 5. Salary 213

Position in Salary Range
Performance Below Lower Middle Upper Above
Rating Minimum 1/3 1/3 1/3 Maximum
Outstanding 20% 16% 13% 10% 5%
5–8 mos 6–9 mos 8–12 mos 12–18 mos 18–24 mos
Distinguished 17% 13% 11% 8% 3%
5–10 mos 7–12 mos 9–15 mos 15–21 mos 25–36 mos
Superior 14% 11% 9% 6%
6–12 mos 8–15 mos 10–18 mos 18–24 mos

Very good 11% 9% 7%
7–14 mos 9–18 mos 11–21 mos

Good 8% 6% 5%
8–15 mos 10–20 mos 10–20 mos

Acceptable 6% 4%
9–18 mos 12–24 mos

Unacceptable

Table 5-28. Merit pay matrix—amount vs. timing

Performance Frequency of Annualized Effect of
Adjustment, Months 8% Increase

Outstanding 3–4 25–32%
Distinguished 5–8 12–19
Superior 9–12 8–11
Good 12–18 5–8
Marginal 18–24 5–5
Unacceptable 25–30 3–4

Table 5-29. Frequency of review varied by performance

Developing the Merit Budget
For companies using a common review date, it is a simple matter to model the population
(and each of its units) in terms of position in range and desired performance against a merit
grid (such as the one in Table 5-26) to develop salary increase funds or pools. These funds
constitute an allowable total amount of annualized salary dollars that are available for use.
For those units that distribute increases throughout the year, the same principle is involved,
but the data must be time-weighted in relation to the anticipated date of adjustment.