From Overwhelming to Optimized: Simplify Your Merit Cycle Process

Have you ever gotten to the end of a merit cycle and thought, “Wow, that went perfectly!”? More than likely, you’re usually thinking, “I. Am. So. Glad. That’s. Over.” And then, without much time to reflect, you’re thrust into your next big project.

Merit cycles can be exhausting. They’re high stakes—impacting employees, organizational goals, and your company’s finances. But what if they didn’t have to be so overwhelming? What if you could approach your next merit cycle with more clarity, confidence, and efficiency?

If you’re gearing up for your next merit cycle or organizing one for the first time, take a moment to pause. Breathe. Let’s break down the process into four actionable steps to make it more efficient, effective, and even… manageable.

1. Figure Out Your Company’s Goals (and Your People Goals)

Every merit cycle should start with clear objectives. What are you trying to achieve? Without understanding the big-picture goals, it’s easy to lose focus amidst the details.

Ask yourself and your team these questions:

• Are we prioritizing retention? If so, for which key roles or individuals?
• Do we want to align pay increases with performance outcomes?
• Are there specific projects, initiatives, or strategic objectives we want to support?
• Who are the critical players driving business success that we need to invest in?

Tying your merit cycle to tangible company and people goals ensures the process isn’t just about numbers but also about strategy and impact. Starting here lays a strong foundation for everything that follows.

2. Determine Your Budget

Once you’ve identified your goals, it’s time to talk numbers. Budgeting is a crucial step because, let’s face it, you can’t give everyone everything they want—and that’s okay.

If you’re in HR, Finance might hand you a pre-determined number. But there’s a better approach: Run scenarios and present Finance with a data-backed recommendation. By analyzing different budget options, you can align your proposal with company goals and demonstrate strategic leadership.

Consider these questions:

• How much are we willing to invest in retention?
• What percentage increases will align with our compensation philosophy and market trends?
• How do our competitors and aspirational peers handle merit increases?

This is also the time to conduct market research. Understanding what’s happening externally ensures your budget aligns with industry standards, helping you stay competitive while managing internal expectations.

3. Make Sure Managers Are Informed and Aligned

Your managers are the bridge between strategy and execution. They’re the ones communicating decisions to employees, addressing concerns, and managing expectations. If they’re not prepared, even the best merit cycle plan can fall apart.

Ask yourself:

• Do managers understand the strategy behind this merit cycle?
• Have they been briefed on key terms, processes, and goals?
• Are they equipped to answer employee questions and handle objections?

Documentation is key here. Ensure managers have access to clear, concise materials that explain:

• How merit increases are calculated
• Why certain decisions are made
• What’s expected of them during the process

When managers are aligned and confident, they can help the process run smoothly and ensure employees feel heard and valued.

4. Have Your Inputs Ready

Finally, preparation is everything. The more organized you are upfront, the fewer headaches you’ll encounter as the cycle progresses. Here are some inputs to consider:

• Award Letters: Draft templates early so you can personalize and distribute them efficiently.
• Target Dates: Establish deadlines for each stage of the process, from collaboration to calibration to final approvals.
• Market Data: Ensure you have up-to-date compensation benchmarks to inform decisions.
• Employee Data: Confirm that salary histories, performance reviews, and other key data points are accurate and accessible.

By having all these elements ready to go, you’ll reduce last-minute scrambling and set yourself up for a smoother cycle.

My Final Thoughts

Merit cycles often feel like a necessary evil, but they don’t have to. By breaking the process into these four manageable steps, you can transform your next cycle from overwhelming to optimized. Each cycle is an opportunity to refine and improve, making the process better not just for HR and Finance teams but for your managers and employees as well.

If you’re looking for tools to simplify your merit cycle, streamline workflows, and save time, let’s chat. My team at CandorIQ has built solutions designed to make merit cycles more efficient and effective—and we’d love to help.

Here’s to a better merit cycle, this year and every year after.