Why Compensation Should Reflect Future Value, Not Past Performance

Many organizations struggle with pay. Some use rigid salary bands, while others base all raises on annual reviews tied to last year’s goals. But in rapidly changing environments, yesterday’s metrics quickly become obsolete. High-performing companies look ahead—they pay for the difference a star contributor can make to next year’s results, not just their previous role. For example, when a new engineer brought rare skills that sped up a product launch, management boosted her salary above what market data suggested—but justified it based on the new revenues her work unlocked.

This philosophy also meant regularly checking for pay gaps, especially where old habits or historic bias crept in. When challenged about unequal pay for similar roles, transparency and open discussion helped everyone accept that some jobs matter more right now—and that top performance, not just loyalty or tenure, is rewarded.

Behavioral economics teaches us that financial incentives work best when they feel fair, connected to value, and are clearly explained. Market surveys matter, but seeing pay as a forward-looking investment—not a backward ‘thank you’—drives loyalty, innovation, and trust.

Instead of defaulting to industry averages or last year’s review, look at the potential value each key team member brings to the table right now. Be upfront about why some jobs or contributions command more pay—and welcome honest questions. Take time annually to seek out and fix any pay gaps for top contributors, regardless of how things were set years ago. Paying for the future you want, not just the past, builds the strongest, most dynamic teams.