A CEO made the decision that he wanted to "fix the pay issue once and for all" within his business. It was an international brand known for luxury and service, but many employees felt undervalued and unappreciated, and were dissatisfied with their current compensation. The solution was simple.

The solution

The CEO announced that the company was going to provide a 15 per cent raise for all 2,000 employees. This equated to an investment of more than $35 million dollars in annual payroll. The announcement was made six months prior to the next yearly employee survey. To the leadership team's dismay, the subsequent survey showed a decline in employees feeling recognized and rewarded of more than 7 per cent, which was statistically significant for a population that size. How could a significant increase in compensation leave employees feeling less rewarded?

The failure came in how it was communicated and presented to the organization. Many employees left comments on the employee survey along the lines of, "I'm a top performer on my team, and I received the same raise as everyone else". The truth was that in most cases, top performers were already paid more, so 15 per cent on their base salary was actually a larger amount than their co-workers received. However, this fact was clearly lost on many employees.

 

Review the details and evaluate what factors were not taken into account when making this decision.

How would you have approached this from an ER perspective? Support your analysis based on relevant theory and models.