Why Some People Are Allergic to ‘Peanut Butter Raises’

Both peanut butter and salary increases are widely loved, but put them together and you may get some grumbles.

“Peanut butter raises” are across-the-board pay bumps to employees, spread out thinly like a creamy condiment on bread. The term popped up all over business media this year after a report from Payscale, a compensation data company, suggested that some employers would be giving such raises instead of larger merit-based increases to a select few.

This metaphorical use of peanut butter has been lurking around corporate America for years: In 2006, Brad Garlinghouse, then a senior vice president at Yahoo, wrote an infamous memo criticizing the company’s strategy of “spreading peanut butter across the myriad opportunities that continue to evolve in the online world” — in his view, failing to focus on priorities or reward top performers with higher pay. “I hate peanut butter. We all should,” he wrote in what he called the Peanut Butter Manifesto.

How it’s pronounced

/pē-nət bə-tər/

Are peanut butter raises fair? It depends on whom you ask, said Nick Bloom, an economist at Stanford. Are they a best practice? Not really, he argued.

“Good management involves setting tough targets, evaluating employees against this and rewarding those that make their targets,” Mr. Bloom wrote in an email. “This means some folks will get paid and others won’t.”

Firms turn to peanut butter raises in two situations: when they can’t really distinguish strong performers from weak and when managers just want to take “the course of least resistance,” Mr. Bloom said. Generally, he added, a well-managed firm will pay its top performers well and keep an eye on the market.

Kevin J. Murphy, an expert on compensation at the University of Southern California’s business school, argued that peanut butter raises “send exactly the wrong signals,” telling top performers that their employers “just don’t care that much.”

Still, the idea that only stars should get pay bumps is not a law of physics. In previous generations, the notion that people across an organization — not just the top performers — should get consistent raises was common, said Peter Cappelli, a professor at the Wharton School.

But, he said, “that has changed over time,” starting in the winner-take-all, Jack Welch management era. Lately, executives who see themselves as top performers deserving high pay apply that framework to their employees.

Mr. Cappelli is skeptical that peanut butter raises will be a new norm in corporations — they actually strike him as a more generous approach than leaders are likely to take right now. In a tight job market, employers felt pressure to give everyone a little something, he said, but now, in a low-fire, low-hire job market, so few openings are available that bosses are not too worried that employees will quit to go elsewhere.

“Efforts to retain people have faded,” he said. Even peanut butter may be more than some should expect.

Framing raises around peanut butter “takes away some of the seriousness” of discussions about compensation, Mr. Murphy said. Peanut butter is cheap and ubiquitous. It is also associated with children, Mr. Cappelli noted, so it reads as a pejorative in a business setting. It’s not as though executives, he added, are referring to Grey Poupon or caviar raises.