Labor costs are the largest expense for many organizations and so should be carefully and responsibly managed; every salary action should be taken seriously.  Nothing affects organization culture more than how people are paid.

Less experienced managers and leaders may use salary actions as a way to keep staff happy thinking, perhaps, that they are doing someone a favor or following an easier path. It turns out, though, that the easy way out can leave employees confused, just as dissatisfied, and questioning management motives and decisions.

A good strategy is to use salary actions to communicate important information to employees and to help supervisors and unit managers become better leaders.  It takes significant time and effort to design, develop, implement, and institutionalize an effective salary administration process (see Figure 1) but is well worth it.  This post presents steps responsible leaders can take to administer a fair and rational salary action process (see Figure 2).

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