Exercise: How Should Merit Raises be Allocated?

Abstract

Classes in both Organization Behavior and Human Resource Administration typically focus on the topic of granting merit raises. This paper presents an exercise that can be used to examine the equity, expectancy, and learning theories of motivation (OB topics) and basic principles of wage and salary administration (HR topics). The exercise requires that students develop criteria for granting merit raises and apply those criteria to a particular situation. It also requires them to deal with the issues of pay inversion and overpaid employees. The theoretical foundation for this exercise is also discussed.