The Rule: You will always feel you are underpaid.
Want to know why? Read on.
The following gets answered or at least thought about when the management wants to decide about salary appraisals:
1. Change in costs and revenue over the next year. For the uninitiated, the difference between two is called “Profit”. No company can survive without it.
2. Mitigating the change in the cost by choosing from multiple alternatives i.e. change in pricing or cost averaging.  Price sensitivity of its customers is an important factor here because the way Deccan Airlines (or Southwest Airlines) will conduct appraisals will be different from Kingfisher airlines (or United Air).
3. Compensation data with respect to the local geography amongst companies of same size. For us it means considering the disparity among salary structure for similar skills and experience across multiple locations.
4. Consideration for budgets for different departments. The appraisal budget will be different for different departments.
5. Performance Rating patterns emerged in bell curve (for your division, your unit and then deciding where you fall)
6. General outlook of the company towards future
It’s a tall order. While the management is figuring this out, here is a question for an average Joe whose salary is due to be appraised.
Choose an alternative from below:
1. Making a salary of 40000, when I say that others are making 30000
2. Making a salary of 50000, when I say that others are making 60000
Having a hard time answer? Do you see the point?
While the management has a ton of factor to consider, our average Joe is just bothered about how much his cousin Nick or friend Peter or colleague Tom is making.
Our average Joe will never be happy with his salary review because:
1. His expectation has got nothing to do with his own situation
2. Even if he gets what he wants, companies cannot control how the salary of others around him will change.
As for the management, this is a thankless job that someone got to do!
