My decision on a pay raise for each of my six consultants is shown below:

Employee
name
Terry
Wendy
James

Pay raise
Dollar
Percentag
increase
e increase
$7,520
8%
$9,740
~10%
$5,400
6%

Employee
name
Alex
Irene
Michael

Pay raise
Dollar
Percentage
increase
increase
$2,700
3%
$2,640
3%
$0
0%

The fundamental rationale for the pay raise allocation is to recognize employees for
their achievements and more importantly motivate my talented employees to stay and
perform at their best. While my decision is based upon multi-dimensional factors, two of
them are most important: the performance attributes and the motivation effect brought
on the employees. First, I cannot afford to give employee raises if its not really
warranted based on their performance. Performance-based pay raises have long been
a fair method in the workplace which allow for an easy justification of a salary increase
because every employee gets the performance rating based on standard criteria. Given
the performance rating among the four attributes during the annual review process, both
Terry and Wendy have done a phenomenal job as they are highly rated versus their
peers. Therefore, they both are frontrunners in the pay raise scale. Second, employees
are highly motivated by pride so it matters to understand what they require in the way of
incentives. For example, I allocated the highest percentage to Wendy because I am
afraid she may still go after the job offer outside my firm. The raise to Terry is secondary
to Wendy because he is quite well-off financially and the decent amount of increase
should keep his enthusiasm in workplace at a high level. Moreover, a pay raise as a
way of motivation is essentially an investment in the employees future success.
Therefore, I allocate the third highest raise to James in anticipation that he needs to be
motivated to thrive on managing his team and client in the new area and place high

value on the outcome. The least important factor to me is the goal performance. While it
is an effective way to set up reasonable goals which direct peoples attention and
enhance their effort, it is not fair to use it as a primary benchmark to allocate pay raise. I
value more on employees sustainable development and contribution than the resultoriented financial goals.

The consequences of the pay raise decision are really just twofold satisfaction or
dissatisfaction among the employees. On the positive side, pay raises can help the firm
retain the most qualified employees. If those excellent employees leave the firm, the
benefit of the investment in their training throughout the years is lost. On the negative
side, Michael who does not get any raise may feel upset. However, what I would like to
demonstrate to him is that the expectancy theory works in my firm. Anyone who wants
to get certain amount of pay raise needs to put substantial effort at work which is clearly
connected with certain outcomes.

By no means would I make the pay raise information public. It could be demotivating to
some people at low end of the pay raise and could spur unhealthy competition in
workplace which will engender resentment and envy. Besides, some people may draw
conclusion on incomplete information since everyones circumstances are different like
responsibility, education and financial situation. I would stress the importance of keeping
this information confidential, although they could discuss the issue with me directly if
they want.