As Accounting Supervisor, you must recommend annual salary increases for 2017. You have “fresh” performance ratings for each of your employees and have had face-to-face discussions with each. Your company’s compensation function is currently using a “performance matrix” (e.g. ratings from 1 to 5) based on several different dimensions of the job. You have a 3% merit budget to award your team as you see fit, and this is consistent with what other companies are doing locally, as well as regionally and nationally.

1. Identify some of the pros and cons of employing a forced performance ranking matrix (i.e. Grading employees 1 through 5) in managing annual merit increases. Base your answer on evidence from the book.

2. Provide sample dialog explaining the merit increase decision to a “top performer” and a “bottom performer.”

3. What can companies do to continue to attract, retain and motivate employees if they cannot provide a raise?