A few years ago, while on a real-world business mentorship course, our mentor suggested that we structure the pay plan of our sales consultants in such a way that if the person excelled they would be able to out-earn the top brass in the company.
This idea struck a cord with me, but I never knew what to call the concept or thought it through, thankfully Buckingham & Coffman have explained the concept of broadbanding in their book first, break all the rules.
Some of the key tenets of broadbanding are as follows:
- It is an incentivisation and career path planning tool that managers use to focus employee energy at performing to the best of their ability within a role.
- Excellence in a role is valued & rewarded to a higher degree than average performance in a role.
- If you take on a new role that amounts to climbing the ladder, e.g. being promoted into management, you have to take a risk and pay cut due to the overlap between bands and since you will initially drop to the bottom of the band of the role higher up on the ladder.
- If you do climb the broadbanded ladder, e.g. into management, you stand a chance to significantly increase your pay if and only if you excel in that role since the ceiling of the band is higher.
- With excellence in your role, you can earn significanly more, up to hundreds of percentages more, than your manager or others higher up on the ladder.
- A broadbanded pay plan should take roles that are intrinsically more valuable than other into account. In other words, there is still some degree of hierarchy since some roles are simply more valuable than others.
I’m completely sold on the concept. I have always thought that it makes no sense, and is also unfair, to force say an excellent software engineer, who loves their job, to become a project manager, or any other manager, when they are worth their weight in gold in their role. It also makes no sense for their manager to possibly get paid more than them, simply because they have that title.
A key part of this of course is that one has to know what excellence in a role is, clearly define it, then identify it, to even be able to consider applying broadbanding. So in essence, while its a great concept, in my mind without the application of requisite performance management in an organization, at all levels, from entry level to board level, broadbanding does not stand a chance.