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Shortchanging individual contributors could jeopardize employee engagement

Andrea Derler, Visier
Andrea Derler
As Principal, Research and Value, at Visier, Dr. Andrea Derler collaborates closely with Visier’s experts in workforce analytics, its data science team and its customers to help produce data-based, practice-oriented and actionable insights for business and HR leaders. As an experienced researcher of human capital practices, Andrea’s expertise lies in the fields of organizational change and transformation, talent and leadership development, performance management, DEIB and organizational growth mindset.

Individual contributors (ICs) are being left behind when it comes to promotions, raises and career development. Without intervention, HR could see employee engagement suffer.

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Recent research from Northwestern’s Kellogg School of Management (conducted with Visier Community Data) shed light on the gap between people managers and individual contributors (professionals who don’t manage other employees). On average, ICs earn 33% less than people managers. The compensation gap is even more prevalent for more senior roles, jumping to a whopping 50%.

In some ways, this isn’t surprising. Organizations often devote considerable time and resources to people managers and are willing to pay a substantial leadership premium. But HR shouldn’t strive only to reward people managers. Instead, it should work to create an environment that rewards all employees (including ICs), demonstrating that the organization recognizes the value they provide.

Managing others isn’t the only career pathway

Discrepancies between individual contributors and people managers aren’t limited to compensation—managerial status also affects career progression. In fact, ICs are 32% less likely to receive a promotion than managers. Over time, they also experience pay-growth rates that are 20% lower than their managerial counterparts.

Clearly, the value ICs bring to the table isn’t recognized in the same way as the contributions of managers. However, the gap between ICs and managers isn’t malicious. Rewarding managers has historically been a vital component of showing appreciation for those directly overseeing others. The willingness to take on management responsibilities indicates an employee’s desire to progress within the organization, a sentiment HR teams are justified in rewarding. These rewards also provide a greater incentive for employees to deliver stronger results.

But what happens when management is seen as the only path to increased compensation, promotions and a sustainable career? For starters, it exerts unnecessary pressure on the growing number of employees (many of whom are Gen Zers or millennials) who lack the desire to climb the corporate ladder.

Failing to carve out a meaningful career path for ICs turns management into an obligation—or even worse, a status symbol. Consider the difference between a manager with a genuine passion for people management and one who is motivated solely by the prospect of a promotion. The latter’s reluctance to embrace management duties will ultimately prove detrimental to other team members.

How to build an environment that (also) rewards individual contributors

There are no one-size-fits-all solutions to building an environment where ICs are rewarded for the value they provide to the organization. The appropriate solution must align with your organization’s priorities and aim to address the places where disparities between people managers and ICs are manifesting in the business.

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Here are a few places to start:

  • Consider the value of an employee’s work to the organization. If improving retention and engagement for ICs is top of mind, consider how to better tie compensation to the value an IC provides to the organization. Managerial status should be considered only one of several factors when determining compensation. These decisions should revolve around the tangible impact they have on the business and their fellow employees. Evaluate the employees’ skill set, overall performance, and years of experience to gain a more holistic view of the value they generate.
  • Offer professional development opportunities for all employees. If motivating ICs is your focus, consider how you can support ICs in their professional development. If you provide training for management roles but not for software engineers, sales representatives or other specialists, you may need to reevaluate the professional development opportunities you offer, even if it means reserving budget for ICs to attend conferences or online courses. Likewise, it’s important to ensure ICs have clear career progression guidelines that describe how they can progress through the organization without transitioning to a management role.
  • Continuously assess employee engagement among ICs. Opportunities for skill development are vital for improving employee engagement, but consider the role that ICs’ managers play in shaping their experience. Organizations pay a premium for quality people management, and if that investment isn’t leading to engaged employees, it may be time to reconsider the training you provide managers.

As a part of this training, stress that every direct report has different ambitions; some may want to eventually pursue management, while others may prioritize developing their technical expertise. It’s the manager’s job to listen to employee feedback and tailor their management style around it.

The prerequisite for each of these focus areas is accurate people data. People analytics can uncover insights that drive better decision-making. Without it, you’ll never fully understand the extent to which your organization may be failing ICs.

With these insights in tow, you become better equipped to cultivate a more equitable work environment where success isn’t predicated on access or status. Rewarding all employees for their contributions is a sign of respect for their autonomy, sending a clear message that their efforts aren’t going unnoticed. This approach will deliver returns on productivity and employee engagement for years to come.